In summary
- El Salvador is close to an agreement with the IMF that will eliminate the obligation to accept Bitcoin as payment for businesses.
- The pact will unlock $2 billion in loans from the World Bank and IDB to support structural reforms.
- The Bitcoin experiment promoted by Nayib Bukele faces criticism and low local adoption, according to recent surveys.
El Salvador is close to securing a deal with the International Monetary Fund (IMF)—but must change some parts of its controversial Bitcoin law in exchange, according to a news report.
The small Central American country will secure multibillion-dollar financing as part of a deal with the IMF in the coming weeks, the Financial Times reported Monday, citing people close to the talks.
In exchange, the government will stop forcing businesses to accept Bitcoin, the newspaper added, and instead they will be able to voluntarily accept the asset for payments.
The agreement would unlock a total of $2 billion in loans from the World Bank and the Inter-American Development Bank, intended to “support macroeconomic adjustment and structural reforms.”
Neither the IMF nor a Salvadoran government spokesperson immediately responded to Decrypt’s questions.
The IMF said in a statement to Decrypt that it is currently in the country holding talks with the Salvadoran government to reach an agreement on a new program supported by the fund.
El Salvador has been in talks with the IMF for years about a program to help the country’s economy grow.
The impoverished—and previously crime-ridden—country made Bitcoin legal tender alongside the dollar in 2021, forcing businesses to accept the Cryptocurrency if they had the technological means to do so.
But the IMF criticized the measure at the time, citing “a series of macroeconomic, financial and legal problems.” He has since called on the country to abandon the law entirely.
The Bitcoin law was the idea of Salvadoran President Nayib Bukele. The eccentric leader—who has mocked the IMF on X (formerly known as Twitter)—has also used the country’s coffers to buy Bitcoin.
Salvadorans were given $30 in cryptocurrency in 2021 through a state-sponsored cryptocurrency wallet.
But President Bukele, who reduced the country’s alarming homicide rate by imprisoning 2% of the population, said in an August interview with Time magazine that the Bitcoin experiment had fallen short due to lower-than-expected adoption.
The millennial leader is very popular in his country, but surveys show that citizens are less enthusiastic about Bitcoin, which coincides with lagging adoption.
Edited by Andrew Hayward
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