El Salvador Reverses Decision to Make Bitcoin Legal Tender Amidst IMF Loan Negotiations

The government of El Salvador, led by President Nayib Bukele, has agreed to withdraw its ambitious plan to accept Bitcoin as legal tender in order to secure a $1.4 billion loan from the IMF. The IMF stated that the government has committed to taking measures to mitigate the risks associated with Bitcoin in exchange for a financial assistance program to support its economic reform agenda. Alejandro Werner, a former director of the IMF's Western Hemisphere Department, indicated that the agreement signifies a significant shift by the IMF and that the government has shown greater flexibility regarding the use and regulation of Bitcoin in anticipation of a more friendly crypto policy from the incoming administration of elected President Donald Trump. Bukele's surprise decision to make Bitcoin legal tender was welcomed by crypto enthusiasts; however, concerns that the volatile digital asset could destabilize the finances of the impoverished and indebted Central American nation halted the IMF's financial support. Werner, who also advises the El Salvador government and currently heads the Georgetown Americas Institute in Washington, stated, “The international financial community did not want to set a precedent of accepting Bitcoin as a legal means of payment, which has become an obstacle to reaching an agreement with the IMF.”