Bitcoin May Lose Its Status as Legal Tender in El Salvador

El Salvador may change its policy regarding Bitcoin in exchange for a $1.3 billion loan from the International Monetary Fund (IMF).

The Salvadoran authorities are in negotiations with the IMF about opening a credit program worth $1.3 billion, which is needed to cover the country’s budget deficit. A condition for the agreement is changes in legislation that would strip BTC of its status as legal tender. This was reported by the Financial Times citing informed sources.

The agreement is expected to be reached within two to three weeks. If the relevant amendments to the law are made, businesses will no longer be legally required to accept BTC payments, and the first cryptocurrency will become a voluntary payment method.

In addition to the main loan line, El Salvador will also be eligible for loans of $1 billion each from the World Bank and the Inter-American Development Bank in the coming years.

It’s worth noting that the IMF repeatedly opposed El Salvador’s adoption of BTC as legal tender. The most recent call for the country’s government to reconsider Bitcoin regulation came in early October 2024. However, in February 2023, IMF representatives noted that the risks associated with adopting BTC at the state level didn’t materialize due to the limited use of the asset.

Earlier, IMF analysts in 2023 noted that countries in Latin America and the Caribbean made significant progress in the development of the digital asset sector, but also pointed out risks related to corruption, underdeveloped financial infrastructure, and the inefficiency of the banking sector in the region.