IMF will restrict El Salvador’s bitcoin accumulation after issuing a $1,4 billion loan to the country

What’s new? The International Monetary Fund (IMF) intends to work to “guarantee” that the number of bitcoins in El Salvador’s government accounts will not grow.

Material by The Block

What else is known? Last December, El Salvador and the IMF reached an agreement to limit the government’s cryptocurrency activities in exchange for a 40-month funding package that involves a $1,4 billion loan.

Other institutions, including the World Bank, may also provide additional financial support, bringing the total package to about $3,5 billion.

The country moved quickly to move the deal forward, with Congress approving amendments to incorporate the IMF agreements into the Bitcoin Act. Thus, in February this year, bitcoin was stripped of its legal tender status.

This means that now the cryptocurrency is not accepted for payment of taxes, and sellers can accept it solely at will. In El Salvador, bitcoin has had official currency status since September 2021.

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The fund’s program is aimed at addressing El Salvador’s macroeconomic and structural problems. The IMF believes that the bitcoin reserve carries potential risks and that the government’s crypto-investments should be limited.

In general, the IMF has criticized the legalization of bitcoin and its accumulation by the authorities for several years, explicitly stating that these circumstances would prevent the country from receiving loans.

Despite the agreement, El Salvador’s President Nayib Bukele has vowed to continue to increase bitcoin hoarding:

“No, it’s not stopping. If it didn’t stop when the world ostracized us and most ‘bitcoiners’ abandoned us, it won’t stop now, and it won’t stop in the future.”

Last week, Bukele reported that unrealized gains on the government’s bitcoin investments amounted to $357 million. However, he reposted the IMF announcement without touching the section of the article on limiting BTC investments, leaving uncertainty about the future of El Salvador’s bitcoin strategy.

Shortly after the IMF announcement, El Salvador’s National Bitcoin Office (ONBTC) announced that the country had acquired an additional 8 BTC and increased its total assets to 6190,18 BTC.