El Salvador to Scale Back Bitcoin Project After $1.4 Billion IMF Deal
El Salvador, the first country to adopt Bitcoin as legal tender, has reached a $1.4 billion loan agreement with the International Monetary Fund (IMF).
A key condition of the deal requires President Nayib Bukele’s government to scale back its ambitious Bitcoin project. The agreement, after four years of negotiation, aims to improve El Salvador’s fiscal balance and reduce its debt-to-GDP ratio.
In 2021, El Salvador’s adoption of Bitcoin created tensions with the IMF, leading to credit downgrades and plummeting bond prices. This new arrangement seeks to address those issues while making Bitcoin use voluntary for the private sector. The IMF noted that these adjustments would “significantly diminish” risks associated with the cryptocurrency experiment.
Scaling Down the Chivo Wallet Initiative
One major adjustment involves unwinding El Salvador’s involvement in the Chivo crypto wallet. Launched in 2021, Chivo offered $30 worth of Bitcoin to new users, attracting over 3 million sign-ups. However, adoption stalled, and by 2022, less than 2% of remittances were sent via the platform. Technical challenges and limited user retention have diminished its impact.
Despite setbacks, the government continues to purchase one Bitcoin daily, building a strategic reserve. President Bukele has also implemented broader economic reforms, such as buying back dollar-denominated bonds at a discount and restructuring pension debt. Bitget’s recent licensing as a Bitcoin Service Provider highlights El Salvador’s ongoing commitment to fostering a crypto-friendly ecosystem.
Bitcoin Faces Market Pressures Amid Global Shifts
El Salvador’s move comes as Bitcoin faces significant selling pressure, with prices slipping below $100,000 amid broader crypto market volatility. The Federal Reserve’s recent rate cut announcement has further weighed on market sentiment.
Key Highlights:
El Salvador agrees to scale back Bitcoin initiatives for a $1.4B IMF loan.
Use of Bitcoin becomes voluntary for private businesses.
Chivo wallet adoption underwhelms; fewer than 2% of remittances use the platform.
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