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Jimmy Aki
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Jimmy Aki
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Key Takeaways:
- The IMF mandates El Salvador to end public Bitcoin purchases and phase out support for Chivo by July 2025.
- The government must disclose all Bitcoin holdings, liquidate Fidebitcoin and release audited reports.
- Despite IMF restrictions, El Salvador recently bought 12 BTC, bringing its total to 6,100 BTC.
- Economic struggles, rising debt, and low Bitcoin adoption signal a failure in President Bukele’s crypto strategy.
The International Monetary Fund (IMF) has released fresh requirements and guidelines for El Salvador to follow to access its full $1.4 billion loan support. One major requirement of the agreement is that the Central American country must gradually reduce its role in the government-backed Chivo Bitcoin wallet, introduced after the country adopted Bitcoin.
El Salvador to End Public Funding for Chivo by July 2025
According to an IMF press release on March 3, El Salvador is required to phase out support for the Chivo Bitcoin wallet by July 2025 and halt all voluntary Bitcoin purchases by the public sector, limiting the government’s involvement with the cryptocurrency.
This means that El Salvador will no longer be able to buy or mine Bitcoin using public funds.
However, Bitcoin holdings obtained through law enforcement actions, such as seizures and forfeitures, are not included in this restriction.
The agreement also outlines the need for transparency regarding the country’s existing Bitcoin reserves. The Salvadoran government must provide the IMF with a full list of all Bitcoin wallets controlled by public institutions, detailing both hot and cold storage holdings.
Furthermore, it must liquidate Fidebitcoin, a trust fund initially created to support Bitcoin adoption in the country.
The government is also required to release audited financial statements from both Fidebitcoin and Chivo Bitcoin wallet to ensure greater accountability regarding public finances.
To guarantee compliance with these measures, the IMF has scheduled regular reviews throughout 2025, with assessments set for March, June, July, and December.
El Salvador Loosens Bitcoin Mandate for Businesses
El Salvador made history in 2021 as the first country to adopt Bitcoin as a legal tender, requiring businesses to accept it as payment alongside the U.S. dollar.
However, in late January 2025, the nation’s Congress passed legislative amendments that removed this mandate, allowing businesses to choose whether or not to accept Bitcoin.
The reform was passed with overwhelming support: 55 votes in favor and only two against, reflecting a broader shift in policy that aligns with the IMF’s conditions.
While businesses are no longer obligated to process Bitcoin transactions, they can still opt to accept cryptocurrency payments voluntarily. This marks a departure from the government’s previous stance, which had actively promoted Bitcoin adoption as part of its economic strategy.
Bitcoin Purchase Spree Continues
Although the IMF has emphasized the importance of reducing government exposure to Bitcoin, President Nayib Bukele’s administration has continued purchasing the cryptocurrency.
On February 25, 2025, El Salvador acquired an additional 7 BTC at an estimated price of $94,050 per coin. Just days later, on March 2, El Salvador added another 5 BTC to its reserves, seizing an opportunity during a market dip to $83,000 per coin.
This purchase, worth approximately $415,000, increased the nation’s total Bitcoin holdings to 6,100 BTC.
Financial Transparency Concerns Amid IMF Loan Deal
On February 26, the IMF approved a 40-month extended arrangement under the Extended Fund Facility (EFF) for El Salvador, granting access to SDR 1,033.92 million (approximately $1.4 billion, or 360% of the quota).
The approval allowed for an immediate disbursement of SDR 86.16 million (around $113 million).
The arrangement is expected to unlock additional multilateral financial support, bringing the total financing package to over $3.5 billion throughout the program period.
Despite the IMF’s insistence on greater financial accountability, concerns remain about how El Salvador will manage the funds.
The IMF’s conditions include measures to improve oversight, such as requiring the government to publish audited financial statements and disclose the status of its Bitcoin reserves.
However, the loan terms do not specify how the funds will be allocated or monitored.
Critics argue that the lack of strict accountability measures could allow for mismanagement or opaque financial practices. Under President Bukele’s leadership, government transparency has steadily declined.
Since taking office in 2019, Bukele has restructured the country’s transparency framework, making it more difficult for citizens and regulatory organizations to access information about government spending, officials’ asset declarations, and legislative processes.
President Bukele’s Bitcoin Experiments Appear to End in Failure
While President Bukele initially promoted Bitcoin adoption as a tool to attract foreign investment and stimulate economic growth, the anticipated benefits have not materialized as expected.
A key indicator of a country’s economic health is its Gross Domestic Product (GDP), which measures the total value of goods and services produced within a given period.
In El Salvador’s case, GDP growth has been inconsistent. The country saw a contraction of 0.20% in the third quarter of 2024, reflecting broader struggles in sustaining economic momentum.
Weak GDP growth discourages foreign investment and limits job creation, compounding the country’s financial difficulties.
Adding to these challenges is El Salvador’s widening fiscal deficit, which has become a major concern.
In 2023, the country’s deficit increased to 4.7% of GDP, up from 2.6% the previous year. This growing gap between government spending and revenue has contributed to rising public debt, which peaked at 84.9% of GDP.
With fewer financial resources available, the government has had to make difficult decisions regarding its economic priorities, including its involvement with Bitcoin.
Studies indicate that Bitcoin has not gained widespread use among residents, with 85% of Salvadorans reporting they do not use the cryptocurrency in daily transactions.
This lack of adoption, combined with a volatile market, has made it difficult for Bitcoin to deliver the economic boost that Bukele envisioned.
Frequently Asked Questions (FAQs)
Non-compliance with the IMF’s stipulated conditions could jeopardize the disbursement of the remaining funds from the $1.4 billion loan, potentially exacerbating El Salvador’s fiscal challenges. This may lead to reduced investor confidence and increased borrowing costs for the country.
The gradual reduction of government support for the Chivo wallet may lead to decreased usability and reliability, prompting current users to transition back to traditional banking systems or other financial services. This shift could affect the convenience and speed of their transactions.
To align with the IMF’s requirements, El Salvador has committed to publishing audited financial statements and disclosing the status of its Bitcoin reserves. These steps aim to improve oversight and accountability in public finances.
The limited use of Bitcoin, evidenced by less than 20% of Salvadorans utilizing it for transactions, suggests that the cryptocurrency has not achieved widespread acceptance. This low adoption rate challenges the effectiveness of Bitcoin as a tool for economic growth and may prompt the government to reassess its digital currency initiatives.
