El Salvador signed a loan agreement worth $1.4 billion with the International Monetary Fund on Wednesday. It may not turn out to be as sweet-sounding as the agreement sounds.
According to an intergovernmental statement, the provisions of the agreement suggest that El Salvador will have to reduce certain aspects in its Bitcoin strategy if it is approved.
Details of the initial deal was Sources have previously told that the event occurred earlier this month. Decrypt Plan is focused on “supporting macroeconomic adjustment and structural reforms.”
Under the new agreement, El Salvador will make Bitcoin acceptance voluntary for the private sector and restrict the public sector's involvement in crypto activities. In addition, the government will gradually decrease its involvement in the Chivo digital-wallet program.
This agreement sets out a comprehensive agenda for reform, which includes measures to enhance anti-corruption and banking regulatory frameworks to international standards in order to increase financial stability and improve governance.
"The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies," In a statement, IMF Vice Director Luis Cubeddu wrote. Mission chief Raphael Espinoza also signed the document.
This agreement will unlock funding from other development banks and could bring the total package of financing to more than $3.5 billion.
El Salvador must implement several reforms in order to qualify for the funds. These include improving its primary balance by about 3.5% of GDP over three years to address the country's debt, which peaked at 85% of GDP in 2024.
Meanwhile, the country's taxes will still be paid in U.S. dollars, with its government planning out enhancements to transparency and supervision for digital assets.
The IMF's executive board is expected to review the program for approval by early February, pending El Salvador's implementation of the agreed reforms.
Bitcoin in El Salvador
El Salvador’s president Nayib Bulele declared in 2021, that the country will be a democratic nation. Bitcoins as legal tenderThe reactions to Bitcoin were mixed. Although some Bitcoiners noted how the movement felt, most were very bullish. You can also use.
Credit ratings and warnings were also downgraded by Moody's The following are some examples of how to get started: Fitch Ratings.
World Bank and IMF, two financial institutions that have responded in a negative manner.
Citing environmental concerns, the World Bank rejected El Salvador's request for assistance with implementing its Bitcoin Law.
The IMF is expected to release its first report in early 2022. The following is a list of urged El Salvador to stop using Bitcoin as legal tender. The fund Reaffirmation In October of this year, the government announced its position.
The country's Chivo wallet program, launched with a $30 Bitcoin incentive that attracted over 3 million sign-ups, has seen limited long-term adoption.
In August, Bukele was elected President. admitted The program and the adoption of Bitcoin in the country were less popular than the regime had expected.
Sebastian Sinclair is the editor