Bitcoin vs IMF Funds: El Salvador Faces a Tough Choice Again
As part of a $1.4 billion deal, the IMF has urged El Salvador to limit Bitcoin acquisitions by public institutions.
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The fund seeks to minimize risks linked to the Salvadoran government's active crypto investments. If the deal is finalized, the public sector will be barred from purchasing, holding, and issuing debt instruments or tokenized instruments linked to Bitcoin. These measures aim to stabilize El Salvador’s financial system by reducing volatility.
Méndez Bertolo, the IMF’s executive director for El Salvador, recently stated that the proposed measures are intended to improve governance, enhance transparency, and strengthen the country’s economic stability. He also emphasized that these steps would help reduce risks associated with crypto market volatility.
Previously, IMF efforts led to El Salvador dropping the mandate requiring private businesses to accept BTC.
The authorities enacted amendments to the Bitcoin Law that clarify the legal nature of Bitcoin and remove from the law the essential features of legal tender. Acceptance of Bitcoin will be voluntary, tax payments will be made in US dollars, and the role of the public sector in the Bitcoin project will be confined,
Bertolo added.
El Salvador’s Response
The IMF’s demand to limit Bitcoin transactions is nothing new. The country has already faced criticism for its bold approach to integrating BTC into the national economy. Now, after making some headway, the IMF seems determined to push further, pressuring the government to tighten control over Bitcoin by revising its entire approach to digital assets.
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Despite IMF pressure, El Salvador’s President Nayib Bukele continues to follow his own path. He recently announced another Bitcoin purchase, raising the country’s total reserves to 6,100 BTC. The decision drew mixed reactions. While it reinforces his commitment to El Salvador’s crypto strategy, it also openly defies the IMF’s conditions.
Crypto advocates believe that President Bukele will reject the IMF’s demand, as he has long been working to establish a unique economic model that blends innovation with traditional financial instruments. Samson Mow, a well-known supporter of state-backed Bitcoin investments, questioned the IMF’s vague wording. He suggested that it allows for interpretation and potential maneuvering by the government.
A Global Precedent
The IMF’s push to reshape El Salvador’s Bitcoin policy sets an important precedent for other developing nations looking to adopt similar models. Global financial institutions will continue to resist crypto initiatives, seeing them as a challenge to the traditional system and a source of financial instability due to their high volatility.
At the same time, any country integrating digital assets must uphold transparency and implement regulations that align with international standards. As recent developments show, crypto remains highly volatile, especially amid geopolitical and economic uncertainty.
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