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El Salvador May Need to Adjust Its Bitcoin Policy for IMF’s $1.4 Billion Loan
The government of El Salvador has finally reached a long-awaited loan deal with the International Monetary Fund (IMF) worth $1.4 billion, but this agreement comes with a significant condition: adjusting its Bitcoin strategy. In September 2021, the country made history by declaring Bitcoin as legal tender, sparking widespread controversy and skepticism within the global financial community.
The IMF has always been critical of El Salvador’s Bitcoin policy, citing environmental concerns and risks associated with cryptocurrency transactions. The deal requires El Salvador to significantly curtail its involvement in Bitcoin-related economic activities and transactions. According to a statement from the IMF, public sector engagement in Bitcoin will be strictly confined. This means that the government’s participation in the Chivo crypto e-wallet, which was launched as part of the country’s Bitcoin strategy, will need to slow down or cease altogether.
The agreement also stipulates that taxes must only be paid in U.S. dollars, effectively restricting the use of Bitcoin for tax payments. Furthermore, legal reforms will make the acceptance of Bitcoin by the private sector voluntary, rather than mandatory.
In addition to the $1.4 billion loan, the IMF has promised access to an additional $3.5 billion over the program period from development banks such as the World Bank and other regional institutions.
El Salvador’s decision to make Bitcoin legal tender was met with skepticism by many financial experts and international organizations. The World Bank previously rejected El Salvador’s request for assistance in implementing its Bitcoin Law, citing environmental concerns related to cryptocurrency mining. It remains unclear whether President Nayib Bukele is willing to compromise on this stance in order to secure the loan.
Despite this setback, the country still holds a significant amount of Bitcoin, with an impressive 5.969K BTC (approximately $603 million) worth of the digital currency already acquired. This has raised questions about whether El Salvador is prepared to scale back its ambitions for Bitcoin in exchange for the promised funds.
In related news, the United States government is exploring the possibility of creating a strategic reserve of Bitcoin, which may further undermine El Salvador’s position and create an opportunity for it to reevaluate its stance on the cryptocurrency.
Source: www.cryptonewsz.com
