El Salvador has laid the groundwork for a substantial $1.4 billion loan agreement with the IMF, necessitating the country to adopt measures that support economic development, which includes altering its Bitcoin policies. government To ensure the effective use of the $1.4 billion loan from the IMF, El Salvador must implement crucial changes, such as modifying its current approach to Bitcoin.
Continuing its daily Bitcoin purchases, El Salvador's holdings now include 5,969 BTC, valued at around $600 million.
Stacking!
Pending approval from the IMF Executive Board, El Salvador will need to adopt strategies to cut government spending and improve its financial standing by approximately 3.5% of GDP over the next three years, with the intention of stabilizing its debt-to-GDP ratio, expected to peak at 85% in 2024.
As part of its deal with the IMF, El Salvador will place limits on the government's use of Bitcoin and restrict public involvement in Bitcoin-related activities to ensure financial stability.
Businesses and individuals in El Salvador will no longer be obligated to accept Bitcoin, as the law changes to make its acceptance voluntary, aiming to minimize the risks highlighted by the IMF.
Under President Nayib Bukele's leadership, El Salvador became the first country to legalize Bitcoin in September 2021, allowing it to be used alongside the U.S. dollar in daily transactions.
Initially, the IMF urged El Salvador to revoke Bitcoin's legal tender status, but their current focus is on improving the regulatory framework surrounding cryptocurrency.
The IMF has consistently sounded alarms about the possible risks that Bitcoin legalization poses to financial stability, suggesting limitations on public sector exposure to the cryptocurrency are necessary.
In recent meetings, the IMF continued to underscore the potential risks of Bitcoin, emphasizing the need for better transparency and measures to ensure fiscal and financial stability.
The momentum behind Bitcoin's legal acceptance in El Salvador has waned, with the cryptocurrency experiencing limited practical uptake since 2021.
Despite efforts to promote Bitcoin usage with tools like the Chivo wallet, economic, social, and technological hurdles have stalled widespread adoption among El Salvador's populace.
Reports reveal a lack of sustained interest in the Chivo app intended for Bitcoin transactions, as 61% of users reportedly discontinued its use after spending their initial $30 Bitcoin bonus.
By 2022, surveys indicated that only about 20% of businesses in El Salvador accepted Bitcoin, with limited overall impact on tourism and economic growth, despite initial intentions.
Nevertheless, El Salvador persists in its daily purchase strategy, acquiring one Bitcoin each day as part of its long-term vision, as articulated by President Bukele.
According to Arkham Intelligence, El Salvador's Bitcoin holdings have reached 5,969 BTC, worth approximately $600 million, reinforcing the country's investment wisdom as market values rise.
With roots in Ann Arbor, Michigan, Nicholas Say has spanned the globe, living in Uruguay for many years before moving to the Far East, contributing his writing expertise widely with a focus on future tech advancements.
