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Highlights
- El Salvador's Bitcoin bet to get a stress test
- IMF is reportedly demanding a change in its Bitcoin rules for a $1.4 billion loan
- Will El Salvador succumb to this demand?
El Salvador is seeking a $1.4 billion loan from the International Monetary Fund (IMF) and in return, the body is requesting that the Central American nation review its Bitcoin (BTC) law.
El Salvador Loan Demands and IMF Demand
The loan negotiations has been ongoing for a while to help El Salvador urgently meet its fiscal commitments and debt payments. Notably, the request of the IMF has remained the same during this period: make a reform to Salvadoran cryptocurrency law. However, Nayib Bukele, the President of El Salvador has no plans of heeding to this request.
The IMF’s most recent warning came a few days ago through Julie Kozack, the Communications Director of the Fund who talked about the risks associated with BTC. It appears that if El Salvador does not make the requested changes to its Bitcoin law, the Fund will not consider its $1.4 billion loan appeal
This request from the IMF is not surprising as the financial agency has been particularly against El Salvador as it relates to the use of BTC as a legal tender. The IMF decided to use the loan negotiation as another avenue to ask El Salvador to reconsider its Bitcoin stance.
IMF Mounting Pressure on El Salvador Over Bitcoin Adoption
Since at least September 2021, the IMF has spoken out against El Salvador’s use of the coin as a legal tender. The financial agency strongly believes that the use of this leading cryptocurrency poses a threat to financial stability and economic health given its highly volatile nature.
In 2022, El Salvador received a recommendation from the financial agency, asking that it halt its use of Bitcoin as legal tender in the country for reasons bordering on the financial risks attached to it. This required that El Salvador alter its Bitcoin law. Ever since, the pressure from the IMF has continued to mount but El Salvador has remained committed to its Bitcoin strategy.
El Salvador’s Vice President Felix Ulloa emphasized the government’s unwavering commitment and went as far as citing the recent spot Bitcoin ETF endorsement from the U.S. Securities and Exchange Commission (SEC) as a pivotal factor. Considering how important the $1.4 billion loan is to the Central American country and how crucial it upholds its Bitcoin strategy, it’s not yet certain if El Salvador will give in to the request of the IMF.
With El Salvador’s BTC holdings currently in huge profit amid the massive BTC price rally this year, the resolve to alter its laws regarding the coin might prove to be more unlikely. As it stands, only time will tell whether Nayib Bukele will give in to the request.
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