El Salvador, the world’s first country to adopt Bitcoin as legal tender, is considering significant reforms to its cryptocurrency policies to secure a loan from the International Monetary Fund (IMF).
Over $1.2B Loan Deal
El Salvador is working toward securing a $1.3 billion loan arrangement with the IMF, conditional on adjustments to its Bitcoin law, according to a report by the Financial Times, which cited sources familiar with the story.
The deal is also expected to unlock another $1 billion of lending from the World Bank and $1 billion from the Inter-American Development Bank over the next few years.
If finalized, the agreement would require El Salvador’s government to eliminate the legal obligation for businesses to accept Bitcoin as a form of payment, making its use optional.
According to one of the people familiar with the story, the government also pledged to cut the budget deficit by 3.5% of GDP within three years through a combination of expenditure reductions and tax increases, enact an anti-corruption law, and boost reserves from $11 billion to $15 billion.
El Salvador Accumulating BTC
The IMF has consistently opposed El Salvador’s embrace of Bitcoin, cautioning the government and President Nayib Bukele about the financial stability challenges linked to the decision to make Bitcoin a legal tender in September 2021.
In February 2023, the IMF called on El Salvador to mitigate risks associated with Bitcoin, stating that the anticipated benefits of its adoption had not been realized. During this period, bitcoin was valued at approximately $21,600, according to data from CoinGecko.
Since implementing its Bitcoin Law in September 2021, El Salvador has been actively acquiring BTC, with its initial purchase of 200 BTC occurring on September 6, 2021. The government has maintained its Bitcoin purchasing strategy, committing to purchase one bitcoin per day, and has accumulated a total of 5,942 BTC by November 2024.
Following bitcoin’s surge to record highs above $100,000 in early December 2024, El Salvador’s unrealized profits from its BTC acquisitions skyrocketed to over $300 million.
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