IMF Sets Strict Bitcoin Limits in El Salvador’s $1.4B Loan Agreement

As part of a $1.4 billion loan deal, the International Monetary Fund (IMF) is strengthening its hold on El Salvador’s Bitcoin strategy. According to new requirements in the IMF’s Staff Country Report, the nation must cease using public funds to purchase Bitcoin, dissolve the Fidebitcoin trust by July 2025, and stop using the Chivo wallet system.

El Salvador must also submit audited financial statements for government agencies involved in cryptocurrency and make all Bitcoin wallet addresses publicly available. With these actions, the country’s pro-Bitcoin policies have undergone a dramatic change.

Bitcoin’s Role Under Scrutiny

El Salvador, led by President Nayib Bukele, became the first country to adopt Bitcoin as legal tender in 2021. The government has since invested in Bitcoin and encouraged its use across the economy. However, the IMF remains skeptical about the impact of these efforts.

“Although crypto-assets have the potential to make payments cheaper and faster, widespread adoption could threaten macroeconomic stability and raise fiscal risks,” the report states. The IMF argues that Bitcoin’s high volatility and limited trust among users have hindered its role as a mainstream payment method.

“The use of Bitcoin as means of payment has been minimal, reflecting Bitcoin’s high price volatility and limited trust in the technology. Meanwhile, the financial sector has no exposure to Bitcoin, and payment of taxes in Bitcoin, which will be prohibited following legal reforms, have been insignificant.”

The report confirms that the Salvadoran government has agreed to suspend further Bitcoin purchases. The IMF considers this a crucial step in strengthening public financial management and ensuring economic stability.

“Another important objective of the program is to have no net accumulation of domestic payments arrears (payments obligations overdue by 90 days or more) as part of the process of strengthening public financial management in El Salvador. Hence, we commit not to accumulate net domestic payments arrears by the central government.”

While El Salvador has embraced Bitcoin as part of its financial strategy, the IMF’s latest conditions could significantly impact the country’s crypto policies moving forward.