IMF Forces El Salvador to Cease Bitcoin Purchases as Part of Extended Loan Agreement

The International Monetary Fund (IMF) has introduced new conditions to limit El Salvador's engagement with Bitcoin under an extended $1.4 billion loan agreement. In a new memorandum on Monday, the IMF outlined several conditions, including a ban on voluntary Bitcoin accumulation by the public sector. The restrictions come as the IMF strengthens its oversight of the country’s Bitcoin adoption policies. Beyond limiting Bitcoin purchases, the IMF has also prohibited the issuance of government debt or tokenized financial instruments linked to Bitcoin. This restriction prevents the country from using Bitcoin-backed instruments to finance public sector projects. Revised Bitcoin Law In line with these new terms, the Salvadoran government has already taken steps to address Bitcoin-related risks. The government recently amended its Bitcoin Law to clarify the legal status of Bitcoin, removing its designation as legal tender. Notably, in the latest update, the Salvadoran government has committed to ending public involvement in the Chivo Bitcoin project by March 2025, with full discontinuation by July 2025. Key steps include liquidating the Bitcoin trust fund (Fidebitcoin), publishing financial audits, and ensuring that Chivo clients' U.S. dollar funds are safeguarded at the Central Reserve Bank. A new governance framework for managing government-owned Bitcoin and other crypto assets will be established. Notably, investment guidelines and risk-minimization policies are set to be enacted by December 2025. Interestingly, the government has also agreed to stop acquiring new Bitcoins and issuing Bitcoin-linked debt. Additionally, no new public entities will engage in Bitcoin operations unless necessary for managing existing assets.

El Salvador Continues Bitcoin Accumulation Despite IMF Conditions Despite the IMF’s restrictions, President Nayib Bukele has continued acquiring Bitcoin for the country. Today, Bukele announced another purchase, bringing El Salvador’s total Bitcoin holdings to 6,100 BTC. This move raises questions about how the Salvadoran government will navigate its Bitcoin strategy under the IMF’s funding conditions. https://twitter.com/nayibbukele/status/1896745753521148308 The development has sparked significant attention in the crypto community. Some suggest that El Salvador has an extended deadline to fully comply with the IMF conditions.