El Salvador Scales Back Bitcoin Experiment as Part of $1.4B IMF Agreement

As part of the deal, the country will make Bitcoin acceptance by merchants voluntary, scale back government involvement in Bitcoin-related projects, and restrict public sector use of the cryptocurrency.

El Salvador has agreed to scale back its Bitcoin involvement and restrict public sector use of the cryptocurrency as part of a $1.4 billion deal with the International Monetary Fund (IMF).

The agreement, announced by the IMF on December 18, will see the country implement measures aimed at reducing its debt-to-gdp ratio and addressing the risks associated with El Salvador's Bitcoin experiment.

As part of the deal, El Salvador will make Bitcoin acceptance by merchants voluntary, reduce government involvement in Bitcoin-related projects, and restrict public sector use of the cryptocurrency.

The IMF has expressed concerns about the potential risks of El Salvador's Bitcoin project, including the speculative nature of cryptocurrencies, the lack of consumer protection, and the volatility of the Bitcoin market.

The country's adoption of Bitcoin as legal tender in June 2021 has been a subject of much debate, with some praising the move and others highlighting its potential drawbacks.

El Salvador's government has purchased 5,968 Bitcoin since making it legal tender, and the cryptocurrency is now held by around 46% of the country's adult population, according to a recent study.

However, surveys indicate that the majority of Salvadorans do not use Bitcoin for transactions. A study conducted in October found that 92% of Salvadorans do not use Bitcoin for transactions, an increase from the 88% reported in a similar survey in 2023.

The IMF agreement is seen as a culmination of four years of negotiations, with the IMF having previously urged El Salvador to abandon its Bitcoin plans.

The agreement will still need to be approved by the IMF Executive Board, but it marks a significant shift in El Salvador's Bitcoin policy.