IMF Agreement Limits El Salvador’s Bitcoin Activities

The International Monetary Fund (IMF) has set conditions restricting Bitcoin-related activities by El Salvador’s public sector as part of a $1.4 billion financial arrangement.

On March 3rd, the IMF submitted a new request for an extended fund facility for El Salvador, releasing an updated staff report and a statement from the fund’s executive director representing the country.

A key provision in the agreement prohibits El Salvador’s public sector from voluntarily accumulating Bitcoin. 

It also bans the issuance of government debt or tokenized financial instruments tied to Bitcoin if they create liabilities for the public sector.

In a February 26th statement, Méndez Bertolo, the IMF’s executive director for El Salvador, said the agreement aims to enhance governance, transparency, and economic stability while improving investor confidence. 

He added that risks associated with Bitcoin are being addressed through various measures.

Bertolo explained that recent amendments to El Salvador’s Bitcoin Law have clarified its legal framework. 

Bitcoin will no longer have essential characteristics of legal tender, its use will be voluntary, tax payments will be made in U.S. dollars, and the government’s involvement in Bitcoin-related projects will be reduced.

The IMF also stated that El Salvador will strengthen regulatory oversight of digital assets in line with international standards. 

Additionally, the program is expected to attract financial support from institutions such as the World Bank and the Inter-American Development Bank.

Despite these conditions, President Nayib Bukele has continued to acquire Bitcoin. On March 3rd, he announced a new purchase, bringing the country’s total holdings to 6,100 Bitcoin.