Bitcoin and its adoption by the government of El Salvador have become a negative factor in the country’s negotiations with the IMF. According to reports, the institution demands changes to El Salvador’s Bitcoin law to receive a $1.4 billion credit line for expediting public debt payments and other obligations.
El Salvador’s Bitcoin Allegiance Is Getting in the Way of IMF Credits
Bitcoin has become a relevant geoeconomic factor for El Salvador, as it is currently part of the talks between the country’s government and the International Monetary Fund (IMF). According to reports, the negotiations between these parties would be at a standstill, as the IMF demands changes in the country’s posture on Bitcoin and cryptocurrencies.
Talks had been suspended since two years ago when President Nayib Bukele did not agree to review the Bitcoin Law, which established bitcoin as legal tender in the country in 2021.
Bukele’s government would be aiming to score a credit line for $1.4 billion to help expedite debt payments and other obligations. Nonetheless, the IMF has sent clear messages on this issue: IMF Director of Comms Julie Kozack stated that the risks associated with Bitcoin were a “key element” in the discussions with Salvadoran authorities.
However, even when the institution has expressed its worries about bitcoin to Salvadoran authorities, Bukele has doubled down on his crypto policies since he was reelected in February. In March, Bukele stated that the country would keep buying 1 BTC per day until it becomes unaffordable with fiat currencies.
Other funding alternatives based on Bitcoin, like the Volcano bonds announced in November 2021, have been delayed several times. This idea might have been rehashed, as reports indicate that Bukele is seeking fresh funding by issuing a similar instrument targeting the U.S. banking sector, leveraged on bitcoin’s recovered prices.
Negotiations between the Salvadoran authorities and the IMF will restart on April 15, with Ibrajim Bukele, President Bukele’s brother, as the head of the Salvadoran mission.
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