El Salvador will relax BTC policies to obtain IMF loans

According to the Financial Times, citing sources, El Salvador is expected to reach a $1.3 billion loan program protocol with the International Monetary Fund (IMF) in the next two to three weeks, in exchange for changing its practice of using BTC as legal tender and reducing the government's deficit.

IMF recommends Salvadoran regulation of BTC ecosystem

El Salvador became the first country in the world to adopt BTC as legal tender in September 2021. The IMF opposes El Salvador's adoption of digital currency, citing risks to financial stability and integrity. The IMF has repeatedly urged El Salvador to strengthen its regulatory framework and regulate the national BTC ecosystem.

At the press conference in October this year, IMF spokesperson Julie Kozack suggested that El Salvador should not only narrow the scope of its 'Bit Law', but also limit the exposure of the public sector to this Cryptocurrency.

El Salvador will abandon the legal requirement for businesses to accept BTC as a payment method

According to reports, a delegation from the International Monetary Fund has arrived in El Salvador to finalize the details of the protocol with President Nayib Bukele's government. Insiders say that the transaction is expected to receive $1 billion in loans from the World Bank and the Inter-American Development Bank in the coming years. A spokesperson for the International Monetary Fund declined to comment, citing the organization's policy of not discussing ongoing negotiations.

The loan program must be approved by the International Monetary Fund's board of directors. According to sources, El Salvador will waive the legal requirement for businesses to accept BTC as a form of payment. In addition, the Salvadoran government will commit to reducing the budget deficit as a percentage of GDP by 3.5 percentage points over three years, while taking measures to cut spending and increase taxes, passing anti-corruption laws, and increasing reserves from $11 billion to $15 billion.

El Salvador Auto-Invests one BTC daily

Bukele has a good relationship with the incoming US President Trump and Musk. He is trying to reshape this poor Central American country into a surfing and encryption currency paradise, and is the first to use BTC as a legal currency. He announced plans to build a 'BTC city' powered by geothermal energy on a volcanic slope.

However, most Salvadorans avoid using Bitcoin in their daily lives and prefer to stick to the country's other legal tender, the US dollar, while the BTC City project has yet to materialize.

(Only 7.5% of Salvadorans have used cryptocurrency transactions, President Bukele admitted that BTC is still not popular)

The Salvadoran government continues to buy BTC as reserves. President Nayib Bukele announced El Salvador's 'National Wallet' in March this year and stated that 1 BTC will be invested daily. According to Arkham's data, El Salvador currently holds 5,960 BTC, worth approximately $580 million.

El Salvador sovereign bond prices rise

During his second term, President Bukele is committed to revitalizing the Salvadoran economy and seeking foreign investment to increase its wealth. The banking industry has turned positive, with the country's risk rating dropping from 3,500 basis points above US treasuries in July 2022 to just 398 basis points last week.

El Salvador's sovereign bonds are currently trading at or near face value, ending the significant discount that previously existed. Bukele commented last week on the dual rise in El Salvador's bond prices and BTC, stating that "this is the first time in history that BTC has driven the rise of traditional market sovereign bonds".

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