El Salvador agreed to restrict its state-backed cryptocurrency operations to secure a $3.5 billion financing package from international lenders, marking a partial retreat from President Nayib Bukele’s ambitious digital currency agenda.
The International Monetary Fund, which will contribute $1.4 billion to the package, said on Wednesday that El Salvador would make bitcoin acceptance optional for businesses and require tax payments in US dollars only.
As part of the agreement, the government will divest from its Chivo digital wallet platform, launched in 2021 as a cornerstone of the nation’s cryptocurrency strategy. Private cryptocurrency services will continue to operate in the country.
Despite initial incentives offering citizens $30 in bitcoin, adoption remained low. A recent Central American University study showed 88% of surveyed citizens reported no cryptocurrency transactions in 2023.
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The country will maintain bitcoin’s legal tender status while limiting public sector involvement in cryptocurrency activities, according to the IMF agreement terms.
Bitcoin Office Director Stacey Herbert said the government would continue its daily cryptocurrency purchases, with current holdings at approximately 6,000 bitcoins valued near $596 million.
The financing package includes additional support from the World Bank and regional development banks, supplementing the IMF contribution.
The deal follows two years of IMF warnings about risks associated with El Salvador’s cryptocurrency program, particularly regarding bitcoin’s price volatility.
Herbert indicated that several initiatives would continue, including cryptocurrency market development and education programs, despite the new restrictions on government involvement.
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