El Salvador, the first country in the world to adopt the Bitcoin as legal tender, has passed a bill that could lead to a review and potential reduction of the strategy de adoption of cryptocurrency in the country, according to information published by Reuters. The measure comes after a agreement of US$1,4 billion with the International Monetary Fund (IMF), made in December, which requires the country to limit various activities related to Bitcoin.
According to the publication, approved by Congress with 55 votes in favor and only two against, the bill foresees the change of regulations on the acceptance of cryptocurrencies such as Bitcoin by the private sector, from mandatory to voluntary. The change represents a significant adjustment in El Salvador's initial approach towards Bitcoin, which had become a symbol of President Nayib Bukele's boldness in challenging the traditional financial system.
It is worth remembering that, in a recent continuous movement, El Salvador continued to buy more Bitcoin despite an agreement that restricted such actions. Recently, El Salvador added more Bitcoins to its strategic reserve, despite an agreement with the IMF. The action was disclosed by the country's National Bitcoin Office.
At the time of publication, the price of Bitcoin was quoted at US$104.998, up 2.9% in the last 24 hours.
Agreement between El Salvador and the IMF
El Salvador has reached an agreement with the International Monetary Fund (IMF) for a $1,4 billion loan aimed at the country’s economic reforms. And to secure this money, the country had to make some concessions. One of them was in relation to Bitcoin. In its official statement, the IMF highlighted:
“The Salvadoran authorities and a team of IMF staff have reached a staff-level agreement on a 40-month extended arrangement under the Extended Fund Facility (EFF) for approximately US$1,4 billion (equivalent to SDR 1.033,9 million, or 360 percent of the quota) to address the balance of payments needs and support the government’s economic reforms. The agreement is subject to approval by the IMF Executive Board and is contingent on the implementation of previously agreed actions.”
In the agreement, El Salvador agreed to adjust its Bitcoin policies. What does this mean in practice? Bitcoin will not cease to be legal tender in El Salvador, but its use will be much more restricted. Private companies will no longer be required to accept the cryptocurrency as a form of payment, and the government will also reduce its involvement in Bitcoin-related activities. In addition, all tax payments will now be made in US dollars.
El Salvador’s decision to rethink its Bitcoin strategy raises questions about the future of cryptocurrency in the country and the impact of agreements with international financial institutions on cryptocurrency adoption policies. While Bitcoin remains legal tender in El Salvador, the shift to a voluntary acceptance model could signal a shift in priorities, with the country seeking financial stability and support from the IMF.