Catenaa, Saturday, December 21, 2024 – El Salvador has reached a $1.4 billion loan agreement with the International Monetary Fund (IMF) after agreeing to reduce its reliance on bitcoin as legal tender.
The deal comes as the cryptocurrency briefly hit a record high of over $108,000 this week.
Under the agreement, businesses in El Salvador will now have the choice of whether to accept bitcoin, and the public sector’s involvement with the cryptocurrency will be significantly limited.
The IMF, which had opposed President Nayib Bukele’s bitcoin policies, said the legal reforms mitigate risks associated with its adoption.
“The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies,” the IMF stated.
El Salvador made history in 2021 as the first country to adopt bitcoin as legal tender. While President Bukele has touted its benefits, including claiming that the country’s bitcoin holdings have doubled in value, the IMF had raised concerns that such policies could hinder financial assistance.
The deal still requires approval from the IMF’s executive board but is expected to bolster the nation’s struggling economy.
Meanwhile, bitcoin’s recent rally, partly attributed to favorable market sentiment following Donald Trump’s election victory, has provided a temporary boost to El Salvador’s crypto reserves.
Despite the adjustments to its bitcoin strategy, Bukele celebrated the recent market surge, emphasizing the cryptocurrency’s value to the country’s financial portfolio.
