The IMF demands the head of bitcoin to help El Salvador

On March 3, 2025, the International Monetary Fund (IMF) approved an extended facility of 1.4 billion dollars for El Salvador

On March 3, 2025, the International Monetary Fund (IMF) approved an extended facility of 1.4 billion dollars for El Salvador, to be paid in tranches over a 38-month period, it is stated in a press release. This decision follows negotiations during which El Salvador agreed to modify its bitcoin policy to address the IMF’s concerns. However, the IMF prohibits the accumulation of bitcoin and many other measures.

In 2021, under the impetus of President Nayib Bukele, El Salvador became the first country to adopt bitcoin as legal tender. However, this initiative raised concerns among international financial institutions, notably the IMF, regarding potential risks to financial stability and consumer protection from decentralized finance.

Indeed, the Central American country has also agreed to implement a comprehensive economic reform program, focusing on fiscal sustainability, social safety net, and financial sector resilience. The IMF will continue to monitor El Salvador’s progress in these areas.

In January 2025, El Salvador modified its bitcoin law to comply with the terms of the 1.4 billion dollar financing agreement with the IMF.

The new legislation, published in the Official Gazette on January 27, 2025, introduces several changes to the original bitcoin law passed in 2021.

Among the key amendments, Article 12 of the previous law, which mandated the government to invest 10 percent of the country’s treasury reserves in bitcoin, has been deleted. This clause had sparked controversy and raised concerns among some economists and financial institutions.

The new legislation also includes a provision for the creation of a special purpose vehicle (SPV) to manage the bitcoin holdings of the government. This measure is intended to segregate the cryptocurrency investments from other government funds and ensure greater transparency in their administration.

Furthermore, the new legislation introduces several technical adjustments and clarifications to the original bitcoin law, aiming to optimize its implementation and integration into the existing legal framework of El Salvador.

In addition to modifying the bitcoin law, El Salvador is also making other adjustments to address the IMF’s concerns. These include:

* Strengthening social safety net programs to mitigate the impact of economic reforms on vulnerable groups.

* Further increasing revenue mobilization efforts to ensure fiscal sustainability over the long term.

* Continuing to improve the financial sector's resilience through bank supervision and anti-money laundering measures.

The agreement with the IMF is seen as a crucial step to bolster investor confidence and ensure the country’s economic stability.

Moreover, this extended facility could pave the way for further funding from other institutions such as the World Bank and the Inter-American Development Bank to support El Salvador’s development programs.

Despite these adjustments, bitcoin retains its status as legal tender in El Salvador and the government continues to believe in the potential of cryptocurrencies. However, in response to the IMF’s concerns, the country is now adopting a more cautious and balanced approach, seeking to leverage the benefits of BTC while mitigating the associated risks.

The agreement between El Salvador and the IMF thus illustrates the challenges faced by countries seeking to integrate bitcoin or cryptocurrencies in general into their national financial systems. It remains to be seen whether El Salvador will implement these new clauses or if the country will defy the IMF as it did in December 2024, by purchasing 1 million euros in BTC.