El Salvador's Bitcoin Mandate Could Become Voluntary in IMF Loan Deal

El Salvador may ease a key aspect of its Bitcoin law, no longer requiring merchants to accept Bitcoin as payment. This potential shift is tied to a $1.3 billion loan agreement with the International Monetary Fund (IMF), as reported by the Financial Times.

Under the deal, Bitcoin acceptance in the country could become voluntary rather than mandatory. This modification aligns with conditions set by the IMF and accompanies an additional $2 billion in loans expected from the World Bank and the Inter-American Development Bank, bringing the total funding package to $3.3 billion. The agreement could be finalized in the coming weeks.

El Salvador made headlines in 2021 when it adopted Bitcoin as legal tender, placing it alongside the U.S. dollar. President Nayib Bukele also spearheaded efforts to build a Bitcoin treasury, with holdings currently valued at $600 million at Bitcoin's price of $100,000.

Despite these initiatives, Bitcoin usage has remained limited among Salvadorans. A 2023 survey by the Central American University found that 88% of citizens had not used Bitcoin that year. The IMF has repeatedly expressed concerns that El Salvador’s Bitcoin strategy risks financial instability.

In addition to revising the Bitcoin law, the IMF deal requires El Salvador to implement fiscal reforms, including spending cuts, tax increases, and measures to reduce its budget deficit to 3.5% of GDP over three years. The government must also bolster reserves and enact anti-corruption legislation.

El Salvador’s National Commission of Digital Assets (CNAD) has already developed a robust regulatory framework for crypto. However, the agency has yet to comment on the proposed changes to the Bitcoin law.

This development reflects the evolving dynamics of Bitcoin adoption in El Salvador as the nation navigates financial challenges and international demands.