El Salvador and the International Monetary Fund have made significant strides in their ongoing dialogues regarding Bitcoin policies and economic reforms, as the nation aims to secure a $1.4 billion loan package.
Summary
- El Salvador and the IMF report advancements in discussions surrounding the sale of the state-operated Chivo wallet.
- These discussions are linked to unlocking additional funding within the $1.4 billion IMF program, which requires El Salvador to reduce public sector involvement in Bitcoin.
An official statement issued on Dec. 23 indicated that negotiations between El Salvador and the IMF regarding the sale of the government-operated Chivo wallet, alongside broader conversations on the Bitcoin initiative, have made “substantial progress.”
“Discussions regarding the sale of the government e-wallet Chivo are significantly advanced, and the negotiations related to the Bitcoin project are ongoing, focusing on improving transparency, protecting public resources, and minimizing risks,” stated the IMF’s Mission Chief for El Salvador.
The ongoing negotiations are crucial for El Salvador, as the country seeks to access the next tranche of funding to bolster its economy under the IMF program.
For context, El Salvador initially sought a multi-billion-dollar Extended Fund Facility from the IMF in early 2021, but negotiations quickly faltered after it adopted Bitcoin as legal tender later that year.
The IMF promptly warned that recognizing a volatile cryptocurrency as official currency posed considerable risks to financial stability, fiscal health, and consumer safety. In subsequent years, the institution consistently encouraged the Bukele administration to abolish Bitcoin’s legal tender status as a prerequisite for future funding discussions.
After nearly four years of talks, El Salvador and the IMF reached a staff-level agreement in late 2024, enabling the country to scale back its Bitcoin strategy in return for access to the $1.4 billion loan.
As part of the arrangement, El Salvador committed to making Bitcoin acceptance voluntary for businesses and to reduce its direct public-sector involvement in areas like tax payments and crypto infrastructure management.
In a separate statement released last week, the IMF confirmed that measures are being taken to mitigate Bitcoin-related risks. The IMF later commended El Salvador’s reform commitments, forecasting a 4% growth in the country’s GDP for this year.
“The economy is growing at a faster-than-expected pace due to improved confidence, record remittances, and robust investments. Real GDP growth is projected to be around 4 percent this year, with very favorable prospects for the following year,” remarked the IMF.
Meanwhile, El Salvador continues to expand its Bitcoin holdings. The government recently completed its largest purchase to date, acquiring 1,090 Bitcoin in a single day.
As of now, the total number of Bitcoin held by the country stands at 7,475.4 BTC, valued at approximately $653.38 million based on current market rates, according to data from Bitbo.
In August, El Salvador enacted a new Investment Banking Law, paving the way for specialized firms to offer Bitcoin and other digital assets as part of their primary financial services.
In addition, the government continues promoting El Salvador as a global crypto hub, successfully attracting companies like Tether, the issuer of USDT, which recently moved its headquarters to San Salvador, El Salvador.
