El Salvador to Change Bitcoin Law as Part of New IMF Deal: FT

El Salvador may roll back a small aspect of its Bitcoin law as part of a new deal with the International Monetary Fund.

The Latin American country may no longer require Salvadorean merchants to accept bitcoin (BTC) as a means of payment across the nation, instead making bitcoin acceptance voluntary, according to a new report from the Financial Times.

The legal modification is part of the conditions imposed by the IMF for El Salvador to gain access to a $1.3 billion loan program, the report said. The World Bank and the Inter-American Development Bank are also expected to lend an extra $1 billion each to the nation, for a total of $3.3 billion. The agreement is projected to be reached within the next two or three weeks.

El Salvador shook the world when it made bitcoin legal tender in 2021, granting the top cryptocurrency the same regulatory status as the nation’s official currency, the U.S. dollar. At the same time the country’s president, Nayib Bukele, has pursued the establishment of a bitcoin Treasury, the holding of which has neared $600 million at bitcoin's current price of roughly $100,000.

The IMF, however, has criticized the approach and issued various warnings over the years that El Salvador’s bitcoin strategy could imperil the nation’s financial stability.

The law change is unlikely to significantly impact bitcoin adoption across the country, which has been relatively poor. The Central American University, Bukele’s alma mater, found in January that 88% of surveyed Salvadorans hadn’t used Bitcoin in 2023.

Modifications to the bitcoin law aren’t the only condition imposed by the IMF. The Salvadoran government will also need to commit — via spending cuts and tax increases — to reducing its budget deficit to 3.5% of GDP over three years, the report said. Increased reserves and the passing of an anti-corruption law will also be necessary, according to the report.

Beyond the Bitcoin law, El Salvador’s National Commission of Digital Assets (CNAD) has already developed a comprehensive regulatory framework for crypto. At press time, the agency had not responded to a request for comment on the potential bitcoin law modification.