El Salvador caused a global sensation in 2021 when it became the first country to introduce $BTC (-0.1%) introduced it as a legal tender. This decision under President Nayib Bukele aimed to position the country as a pioneer in Bitcoin adoption. Now, however, under a new agreement with the International Monetary Fund (IMF), Bitcoin is de facto losing this status.
Details of the IMF agreement:
On December 18, 2024, an agreement was concluded between El Salvador and the IMF that includes an Extended Fund Facility (EFF) program in the amount of 1.4 billion US dollars. This program is intended to mobilize additional financial support from the World Bank, the Inter-American Development Bank and other regional development banks, resulting in a total financing package of over USD 3.5 billion during the program period. The aim of the agreement is to strengthen El Salvador's financial stability and economic resilience.
The main points of the program are:
- Reducing the budget deficit and ensuring the sustainability of public debt.
- Improved reporting, implementation of anti-corruption measures and reforms to strengthen governance.
- Increasing banks' liquidity reserves to better manage risk.
- Restrictions on Bitcoin and related projects:
- Use of Bitcoin in the private sector remains voluntary.
- State involvement is greatly reduced; the Chivo wallet is abolished.
- Bitcoin can no longer be used to pay taxes.
El Salvador has thus finally given in to international pressure.
However, apart from the fact that Bitcoin loses its status as legal tender, not much has changed for El Salvadorans. The obligation to accept Bitcoin in businesses has not been pursued in the past anyway and was practically voluntary - although required by law. The vast majority still pay in US dollars anyway and those who want to pay with Bitcoin can still do so if the merchant accepts it.
Furthermore, El Salvador still buys one Bitcoin a day as a state reserve. It is not yet known whether this will continue.
What do you think of El Salvador's decision?
Sources:
https://www.blocktrainer.de/blog/bitcoin-kein-gesetzliches-zahlungsmittel-mehr
Ende der Bitcoin-Nation El Salvador für 1.4 Mrd. USD IWF-Kredit - Crypto Valley Journal
El Salvador reduziert Bitcoin-Verpflichtungen im Rahmen eines IWF-Kreditabkommens
