The El Salvador government recently signed a $1.4B financing deal with the IMF. The deal includes measures aimed at reducing the country’s Bitcoin exposure. Despite the agreement, El Salvador has continued to increase its Bitcoin portfolio.
The El Salvador government has continued its effort to bolster the country’s economy with Bitcoin. The International Monetary Fund (IMF) however, has expressed concern for the country’s financial stability as cryptocurrencies are known for their volatility.
In 2024, the El Salvador government agreed to scale back on its Bitcoin ambitions in exchange for a much-needed billion-dollar loan. The deal with the IMF included measures such as businesses in El Salvador no longer being mandated to accept Bitcoin and the payment of taxes in US dollars and not cryptocurrency.
However, El Salvador President, Nayib Bukele is now reneging on the deal and sticking to his Bitcoin strategy.
In 2024, the IMF released a statement saying that in exchange for the financial aid program to support the government’s economic overhaul agenda, the El Salvador government agreed to implement measures to mitigate bitcoin-related risks.
The decision to make Bitcoin a legal tender in the country was met with cheers from crypto enthusiasts, but it caused a delay in the country receiving financial support from the IMF as there were concerns about the volatility of crypto assets. The IMF believed that the introduction of Bitcoin as a legal tender would cause further decline in the finances of El Salvador, an already impoverished and indebted nation.
The government of the country did not share these concerns and set its Bitcoin ambitions in motion, purchasing one Bitcoin daily since November 2022.
While the country’s adoption of Bitcoin became more accepted over time, problems like the volatility of digital assets and the lack of understanding of Bitcoin and cryptocurrencies has led most of the population to opt for the US dollar for their transactions. This, of course, did not deter the government from building its Bitcoin reserve.
Data indicates that the El Salvador government now holds approximately 6,101 BTC, valued at around $527 million at current market prices. The country’s latest acquisition of 19 BTC is a lump sum accumulated over multiple previous purchases made in January and February, even after the IMF agreement was finalized.
The IMF’s financial aid agreement with El Salvador includes specific measures to limit the government’s involvement with Bitcoin. These measures include a ban on new acquisitions, so it was expected that the country would stop its Bitcoin acquisition. However, El Salvador’s President Nayib Bukele is clearly ignoring these restrictions. Bukele posted on social media platform X that the country’s Bitcoin purchases would continue.
“This all stops in April. stops in June. This all stops in December. No, it’s not stopping. If it didn’t stop when the world ostracized us and most ‘bitcoiners’ abandoned us, it won’t stop now, and it won’t stop in the future. Proof of work > proof of whining,” He said.
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