El Salvador to Weaken Bitcoin Law to Help Secure IMF Funding: Report

El Salvador is coming closer to securing a deal with the International Monetary Fund (IMF)—but it has to change some parts of its controversial Bitcoin law in return, according to a newspaper report. 

The tiny Central American country will secure multi-billion dollar funding as part of a deal with the IMF in the next few weeks, the Financial Times reported Monday, citing people close to the talks. 

In return, the government will stop forcing businesses to accept Bitcoin, added the newspaper, and they can instead voluntarily accept the asset for payments.

The deal would unlock a total of $2 billion in loans from the World Bank and the Inter-American Development Bank, aimed at “supporting macroeconomic adjustment and structural reforms.”

Neither the IMF nor a press person for the Salvadoran government immediately responded to Decrypt’s questions. 

The IMF said in a statement to Decrypt that it was currently in the country engaging with the Salvadoran government to reach an agreement on a new fund-supported program.

El Salvador has been in talks with the IMF for years about a program to help the country’s economy grow. 

The impoverished—and formerly crime-ridden—country made Bitcoin legal tender along with the dollar back in 2021, forcing businesses to accept the cryptocurrency if they had the technological means to do so. 

But the IMF criticized the move at the time, citing “a number of macroeconomic, financial, and legal issues.” It has since asked the country to drop the law altogether. 

The Bitcoin law was the brainchild of Salvadoran President Nayib Bukele. The eccentric leader—who has teased the IMF on X (formerly known as Twitter)—has also used the country’s coffers to buy Bitcoin.

Salvadorans were given $30 worth of the cryptocurrency back in 2021 via a state-sponsored crypto wallet. 

But President Bukele, who cleaned up the country’s sky-high murder rate by locking up 2% of the population, said in an August interview with Time magazine that the Bitcoin experiment had fallen short due to less adoption than expected.

The millennial leader is very popular at home, but polls show that citizens are less enthusiastic about Bitcoin, matching the lagging adoption.

Edited by Andrew Hayward