El Salvador has reiterated its commitment to Bitcoin in spite of recent developments that saw its digital wallet, Chivo, being sold or retired. This is just days after the country sealed a $1.4 billion loan deal with the International Monetary Fund.
The deal forces the scaling back of Bitcoin policies, but the Salvadoran government remains undeterred in its quest to accumulate BTC for its strategic reserves.
El Salvador Reaffirms BTC Commitment, to Keep Accumulating Reserves
El Salvador recently struck a $1.4 billion deal with the International Monetary Fund (IMF). It is also looking to secure a $3.5 billion deal, but with certain concessions regarding Bitcoin (BTC) to secure the funding. As part of the agreement, the country has agreed to scale back its Bitcoin policies, particularly in relation to its official digital wallet, Chivo, which the country plans to sell or retire.
Stacey Herbert, the Director of the National Bitcoin Office, highlighted the fact that Bitcoin would keep on playing a critical role in the country’s financial strategy. She said that, while the Chivo wallet will stop being active, the government will speed up its buying of Bitcoin, continuing to add more BTC to its reserves.
EL SALVADOR SECURES $3.5 FUNDING DEAL
Bitcoin remains legal tender
El Salvador will continue buying bitcoin (at possibly an accelerated pace) for its Strategic Bitcoin Reserve
Bitcoin capital markets will continue to be built; for example, the recent tokenized issuance…
— Stacy Herbert (@stacyherbert) December 19, 2024
Presently, El Salvador holds 5,968.77 Bitcoin, which is nearly $596 million, with plans to purchase one Bitcoin per day.
The IMF required Bitcoin use in the private sector to be voluntary. It also limited public sector involvement in Bitcoin transactions.
Despite these restrictions, Herbert stated that many Bitcoin-related initiatives will continue. These include developing Bitcoin capital markets and expanding Bitcoin education programs.
Despite Incentives, Bitcoin Adoption Remains Low
In September 2021, El Salvador became the first country to adopt Bitcoin as legal tender. This decision was met with skepticism from the IMF due to Bitcoin’s high volatility. The IMF warned that Bitcoin’s adoption could risk future monetary aid to the country.
A 2023 survey showed that 88% of Salvadorans had not used Bitcoin in the past year. This highlighted poor national adoption of the cryptocurrency. The Chivo wallet once offered $30 in Bitcoin incentives to encourage sign-ups. Despite this, more than 60% of users never made a single transaction.
Despite these setbacks, President Nayib Bukele remains optimistic about Bitcoin’s role in the country’s economy. Earlier this month he celebrated the recent surge past $100,000. Recently, crypto exchange Bitget has achieved a significant milestone, becoming the first digital asset trading platform to be granted a license as a Bitcoin Service Provider by El Salvador’s Central Bank. This development comes after Bukele revealed that El Salvador’s Bitcoin holdings have generated an unrealized profit of $362 million.
Though the IMF agreement requires the country to make adjustments to its BTC strategy, the government remains determined to keep Bitcoin as legal tender and to expand its use in key economic initiatives.
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