El Salvador, the first nation to adopt Bitcoin as legal tender, is reportedly scaling back its Bitcoin mandate in exchange for a $1.3 billion loan agreement with the International Monetary Fund (IMF), according to a report by the Financial Times.
The deal would allow businesses to accept Bitcoin voluntarily rather than mandating its use as payment.
Sources familiar with the matter revealed that the agreement could be finalized within the next two to three weeks. If approved, it is expected to unlock an additional $1 billion in funding from both the World Bank and the Inter-American Development Bank over the coming years.
The move comes after prolonged resistance from the IMF, which has repeatedly criticized El Salvador’s Bitcoin adoption, warning of risks to financial stability and monetary systems.
The IMF has been vocal against El Salvador’s Bitcoin Law since its inception in September 2021. It raised concerns over customer confusion when choosing between Bitcoin and fiat currencies and warned that such dual-pricing systems could lead to inefficiencies.
In February 2023, the IMF reiterated these concerns, stating that Bitcoin’s benefits had “not materialized” and advising El Salvador to address potential risks. At that time, Bitcoin was trading at $21,600, a fraction of its current price.
El Salvador’s Bitcoin investments
Since its landmark Bitcoin adoption, El Salvador has acquired 5,942 BTC as of November 2024, committing to purchasing one Bitcoin daily. With Bitcoin’s price recently surpassing $100,000, the country’s unrealized gains on its holdings have exceeded $300 million.
While El Salvador has heavily promoted Bitcoin as a national asset under President Nayib Bukele, the IMF deal signals a pivot to secure much-needed international funding. Discussions regarding the $1.3 billion loan and revisions to the Bitcoin Law have been ongoing since October 2024.
This compromise may ease international scrutiny while allowing El Salvador to maintain its position as a crypto-friendly nation, albeit with less stringent Bitcoin requirements for businesses.
