El Salvador Secures $1.4 Billion Loan from IMF Amid Bitcoin Policy Adjustments

El Salvador has reached a $1.4 billion loan agreement with the International Monetary Fund (IMF) following commitments to scale back some of its contentious bitcoin policies. This marks a significant shift for the country, which in 2021 became the first in the world to adopt bitcoin as legal tender.


Bitcoin Policies Revised

The IMF announced that the potential risks associated with El Salvador’s bitcoin adoption had eased due to recent legal reforms. These changes include:

  • Voluntary Bitcoin Acceptance: Businesses will no longer be required to accept bitcoin as payment, making it optional for the private sector.
  • Limited Public Sector Involvement: The public sector’s use of bitcoin will be confined to specific activities, reducing its role in government transactions and holdings.

“The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies,” the IMF stated, highlighting the importance of these adjustments for securing the loan.

Also Read: Here’s Why IMF Doesn’t Want El Salvador Using Bitcoin As Official Currency


A Boost for El Salvador’s Economy

The loan agreement aims to support El Salvador’s economy but still requires approval from the IMF’s executive board. The IMF had previously opposed President Nayib Bukele’s pro-bitcoin policies, warning they could hinder financial assistance. Despite this, the loan deal signals a compromise, with reforms addressing the IMF’s concerns.


Bitcoin’s Surge and Political Implications

Bitcoin’s value briefly surpassed $108,000 this week, contributing to President Bukele’s celebration on social media. Earlier in November, Bukele noted that El Salvador’s cryptocurrency holdings had more than doubled in value. He also accused political opponents of causing many Salvadorans to miss out on bitcoin’s gains.

The cryptocurrency’s rally has been attributed to factors such as Donald Trump’s US election victory on November 5, with his administration expected to adopt a more crypto-friendly stance compared to President Joe Biden’s policies. However, on Thursday, bitcoin retreated along with global stock markets following the US Federal Reserve’s announcement of a slower pace of interest rate cuts in 2025.


IMF’s Perspective on Bitcoin

The IMF has consistently cautioned against the risks associated with adopting bitcoin as legal tender, citing concerns over financial stability, fiscal health, and money laundering. While El Salvador has made progress in addressing these risks, the IMF’s continued focus on policy reforms underscores the complexities of integrating cryptocurrencies into a national economy.

El Salvador’s loan agreement with the IMF represents a significant step in stabilizing its economy while balancing its ambitious bitcoin experiment. As the country moves forward, it remains to be seen how these policy adjustments will impact its broader financial and economic landscape.


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