El Salvador is in the process of securing a $3.5 billion deal with the International Monetary Fund, but is making some concessions around bitcoin (BTC) to secure the funding.
Stacey Herbert, director of the Bitcoin Office in El Salvador, posted on Thursday that the government-issued Chivo wallet — launched in 2021 in a bid to spread bitcoin adoption across the country — will be “sold or destroyed” as part of the deal. Other bitcoin wallets operated by private companies “will continue to serve El Salvador,” Herbert said.
The IMF stated on Wednesday that, under the agreement, El Salvador will also make the private sector’s acceptance of bitcoin voluntary, and taxes will be paid only in US dollars (not bitcoin). “For the public sector, engagement in economic activities related to bitcoin and transactions in and purchases of bitcoin will be closed,” the document also said, without going into further detail.
However, Herbert wrote in his post that El Salvador will continue to add bitcoin to its reserves — possibly, even, at an “accelerated pace.” The Central American country currently buys one bitcoin per day; at press time, it had 5,968.77 bitcoins, worth nearly $596 million. Herbert said many of El Salvador’s bitcoin-related projects, including the development of bitcoin capital markets and the offering of bitcoin educational programs, will continue to take place. Nor will the cryptocurrency’s legal tender status be affected.
The IMF has been skeptical about El Salvador’s bitcoin initiatives since President Nayib Bukele made bitcoin legal tender in the country in September 2021, giving it the same status as the US dollar, the official currency. of the country. In 2022, the agency warned that El Salvador incurs “significant risks associated with the use of Bitcoin as legal tender, especially due to its high price volatility.”
“The potential risks of the Bitcoin project will be significantly reduced in accordance with the Fund’s rules,” the IMF said on Wednesday.
Salvadorans were offered $30 in bitcoin to sign up to Chivo, but national adoption never really took off. By mid-2022, more than 60% of recipients have yet to make a transaction, according to the National Bureau of Economic Research. A survey from Central American University in January found that 88% of surveyed Salvadorans would not use bitcoin by 2023.
The IMF itself will provide only $1.4 billion as part of the El Salvador deal. Funds from the World Bank, Inter-American Development Bank and regional development banks are expected to bring the total amount to $3.5 billion as part of the same program.
