[NEWS] El Salvador reaches agreement with IMF on loans, accepts abolition of domestic wallets and transaction restrictions

On the 18th, the International Monetary Fund (IMF) announced that it had reached an agreement with the country's authorities on the terms of a loan to El Salvador. If the IMF board formally approves the loan, El Salvador will be able to receive a total of approximately 3.5 billion dollars (approximately 550 billion yen) from the IMF, as well as from the World Bank and other sources.

In order to receive this loan, El Salvador accepted some of the IMF's claims regarding the Bitcoin (BTC) policy that it has been promoting so far.

First, as previously reported, the obligation for companies to accept Bitcoin payments has been abolished, and each business can now choose to introduce it voluntarily.

In addition, restrictions are expected to be imposed on the purchase of Bitcoin by the public sector and related economic activities and transactions. Specific transaction volume restrictions have not been disclosed at this time.

In addition, the wallet "Chivo" supported by the El Salvadoran government will be gradually scaled down and will be abolished or sold in the future. In relation to this, it is calling for greater transparency, regulation and oversight of digital assets to be strengthened in order to ensure financial stability, consumer and investor protection, and financial soundness.

In addition, it is calling for taxes in El Salvador to be paid only in US dollars.

The IMF has previously criticized El Salvador's policies, such as recognizing Bitcoin as legal tender, and has expressed concern, citing significant risks to financial stability and soundness in particular.

El Salvador has been promoting policies that emphasize Bitcoin, but this agreement with the IMF will bring about major changes. On the other hand, although transaction restrictions are expected to be imposed, there is a possibility that the basic policy will continue, such as continuing to purchase Bitcoin every day.

However, although the government, led by President Bukele of El Salvador, is promoting Bitcoin, the reality is that it has not taken root among the people. According to data from the Central Reserve Bank, the central bank of El Salvador, only 1.1% of all remittances sent to the country from January to August this year were Bitcoin. In addition, a survey by Central American University revealed that 88% of El Salvadorans had not used Bitcoin in 2023.

Based on these internal circumstances and requests from the IMF, El Salvador is expected to review its Bitcoin policy in the future.

Reference: IMF announcement
Image: Shutterstock

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