El Salvador agrees to restrict state-backed cryptocurrency operations in order to secure a $3.5 billion financing package from international financial institutions, partially freeing President Nayib Boucre from his ambitious digital currency policy. showed a retreat.
The International Monetary Fund, which is contributing $1.4 billion to the initiative, announced Wednesday that El Salvador will make accepting Bitcoin voluntary for businesses and require companies to pay taxes only in US dollars.
As part of the agreement, the government will sell Chivo, a digital wallet platform launched in 2021 as a cornerstone of the country's cryptocurrency strategy. Private cryptocurrency services will continue to operate domestically.
🇸🇻El Salvador secures $3.5 funding deal
➡️Bitcoin remains a legal currency
➡️El Salvador will continue purchasing Bitcoin (likely at an accelerated pace) as part of its strategic Bitcoin reserve
➡️Bitcoin capital market continues to build. For example, recent tokenized issuances…
— Stacy Herbert🇸🇻🚀 (@stacyherbert) December 19, 2024
The initial incentive offered citizens $30 in Bitcoin, but adoption remained low. A recent study by Central American University showed that 88% of citizens surveyed reported not trading in cryptocurrencies in 2023.
Under the terms of the IMF agreement, the country will retain Bitcoin's legal tender status while limiting public sector involvement in crypto activities.
Stacey Herbert, director of the Bitcoin Bureau, said the government will continue to make daily cryptocurrency purchases, with current holdings of about 6,000 bits (nearly $596 million).
The financing package includes additional support from the World Bank and regional development banks, supplementing the IMF contribution.
The agreement follows two years of IMF warnings about the risks associated with El Salvador's cryptocurrency program, particularly Bitcoin's price volatility.
Herbert suggested that despite the new restrictions on government involvement, some efforts will continue, including cryptocurrency market development and education programs.
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