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El Salvador Pauses Daily Bitcoin Purchases
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In September 2021, El Salvador began its Bitcoin experiment. It adopted Bitcoin as legal tender. In 2022 the country started to buy 1 $BTC per day. President Bukele had plans for this. He wants to keep doing this until $BTC ‘becomes unaffordable’ with fiat.
The International Monetary Fund (IMF) was skeptic from day one about this plan. Now it seems that El Salvador has stopped with their daily $BTC buying. So, this begs the question, what is going on? Let’s take a closer look.
Why Did El Salvador Stop Buying Its Daily Bitcoin?
It seems that El Salvador stopped buying its daily $BTC. The very reason for this could well be the IMF. In December 2024, El Salvador and the IMF reached a staff-level agreement. This agreement involves a $1.4 billion loan from the IMF to El Salvador.
Source: IMF
However, the kicker is, that the country should wind down its Bitcoin activities. The IMF sees Bitcoin as an unstable asset. So, it seems that Bukele could keep his country for a long time out of the IMF’s hands. Nonetheless, it seems that he finally succumbed to the IMF.
I’ll explain why it’s kinda sad:
They stopped buying BTC because they finalize a loan agreement with the International Monetary Fund (which are the ultimate global money lenders).
— ELI5 of TLDR (@explain_briefly) February 23, 2025
But what does El Salvador get in return, besides the money? The idea is to give an impulse to El Salvador’s economy. So, this is part of the loan:
- Fiscal policy — It should improve the GDP (Gross Domestic Product) by 3.5% over the next 3 years. As a result, the ratio of public debt to GDP should reduce.
- Transparency, governance, and resilience — Among others, this will focus on anti-corruption efforts. It will also improve the Anti-Money Laundering and Counter-Financial Terrorism (AML/CFT) plans. This should bring it up to par with international standards.
- Reserves — The IMF plans to increase the bank’s liquidity from 11.5% of deposits to 15%. This should be complete by the end of June 2026. This increases importance of banks in the country. That’s what Bukele tried to change with his Bitcoin policies. On to that now, though.
- Digital assets — The Bitcoin project will be toned down. Economic Bitcoin activities will be restricted. You can pay your taxes only in US dollars. The local crypto e-wallet (Chivo) will unwrap over time.
Loan Still Needs to Be Approved
However, keep in mind that the loan still needs approval from the IMF’s executive board. Nonetheless, El Salvador managed to build up a 6,000 $BTC reserve. That’s currently worth $600 million. And there’s no selling pressure.
NEW:
El Salvador now owns over 6,000 #Bitcoin worth over $560m in their Strategic #Bitcoin Reserve pic.twitter.com/hmg2GMoJrL
— Swan (@Swan) December 28, 2024
To sum up, it seems that El Salvador’s Bitcoin adventure may have come to a halt. However, it doesn’t mean that the Bitcoin experiment is out of the window. El Salvador may have opened quite a few eyes by what they did and achieved. Now bigger countries are considering Strategic Bitcoin Reserves.
Disclaimer
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We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.
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February 24, 2025 at 05:28AM
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