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El Salvador agrees to pause public sector Bitcoin acquisitions under IMF deal.IMF demands transparency, regulatory reforms, and BTC management framework from El Salvador.Despite IMF pause, El Salvador continues purchasing Bitcoin, increasing holdings to 6,100 BTC.
El Salvador has agreed to halt the public sector’s acquisition of Bitcoin as part of a $1.4 billion loan agreement with the International Monetary Fund (IMF). This decision is part of the broader terms outlined in the IMF’s Extended Fund Facility, which aims to address risks associated with the country’s Bitcoin policies while ensuring financial stability.
Under the agreement, El Salvador will pause all voluntary Bitcoin acquisitions by public entities. This includes buying and mining Bitcoin, as stated in a technical memorandum of understanding. However, any BTC acquired through forfeiture or legal actions like seizures will not fall under this restriction.
The memorandum also clarifies that the halt applies to all government-controlled wallets, such as the Chivo Wallet and the Bitcoin Trust. Public sector entities, including the Comisión Ejecutiva Hidroeléctrica del Río Lempa and the Oficina Nacional del Bitcoin, are specifically mentioned as being under scrutiny for their Bitcoin holdings.
Increased Transparency and Regulatory Reforms
El Salvador will improve transparency surrounding its Bitcoin-related activities as part of the deal. The government has committed to publicly releasing statements about the Chivo Wallet, the Fidebitcoin Trust, and all Bitcoin addresses associated with public-sector wallets. In addition, the IMF has pushed for regulatory reforms to mitigate the risks associated with Bitcoin, particularly in the wake of the country’s legal tender status.
Read Also: El Salvador Increases Daily Bitcoin Purchases to 1.6 BTC, Strengthening National Holdings
The IMF also required El Salvador to abandon its BTC-USD convertibility mechanism and ensure that taxes and other obligations to the state are only paid in U.S. dollars. These reforms aim to reduce the potential for financial instability related to Bitcoin’s volatile nature.
Government’s Continued Bitcoin Purchases
Despite the IMF’s request to pause acquisitions, El Salvador’s government purchased an additional 5 BTC as the coin’s price dipped to around $83,000. This brings the country’s total holdings to 6,100 BTC. The government’s Bitcoin purchases began in 2022 when President Nayib Bukele committed to buying 1 BTC daily. Bukele has stated that the country will continue its Bitcoin accumulation strategy, despite IMF opposition.
El Salvador has also promised to liquidate the funds held in the Fidebitcoin Trust and store them securely in the Central Reserve Bank (BCR). The government will develop a management framework to ensure the accountability, transparency, and governance of its cryptocurrency holdings and other assets. The IMF stressed the need for these actions to meet international standards while promoting innovation within the sector.
Read Also:Bitfinex Secures El Salvador’s DASP License, Expands Regulated Offerings
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