El Salvador plans to make some changes to its approach to Bitcoin in order to secure a $1.3 billion loan from the International Monetary Fund (IMF).
According to a Monday report from FT, citing sources close to the matter, the country is close to reaching an agreement with the IMF on the loan program, which requires modifications to its Bitcoin legal tender law and deficit reductions.
Under the proposed terms, El Salvador’s government would change the legal requirement that mandates businesses to accept Bitcoin as payment, making it optional instead. The government would also commit to reducing its budget deficit by 3.5% of GDP over three years through spending cuts and tax increases, while boosting reserves from $11 billion to $15 billion.
The deal could be finalized within two to three weeks and would potentially unlock an additional $2 billion in lending from the World Bank and Inter-American Development Bank over the coming years, the report noted.
Since El Salvador became the world’s first country to recognize Bitcoin as legal tender, the IMF has repeatedly warned of the financial risks associated with its use, raising concerns about financial stability, integrity, and consumer protection.
The latest development follows the IMF’s recent recommendation for El Salvador to narrow the scope of its Bitcoin law, as reported by Bloomberg. The adjustment would involve enhancing regulatory oversight and reducing public sector exposure to cryptocurrency. The IMF’s strategy aims to bolster macroeconomic stability and promote sustainable growth in the country.
Under the leadership of President Nayib Bukele, a noted Bitcoin bull who was recently re-elected with 85% of the vote, El Salvador is poised to advance its ambitious pro-Bitcoin agenda.
With Bitcoin topping $100,000 last month, Bukele announced that the government’s Bitcoin reserves were worth more than $600 million, representing a 127% increase.
Despite the government’s push for Bitcoin, most Salvadorans have avoided using Bitcoin for daily transactions. The US dollar is still the country’s preferred legal tender. Briefing.
