El Salvador is nearing a $3.5 billion agreement with the International Monetary Fund, with certain concessions related to bitcoin. Stacey Herbert, director of the Bitcoin Office in El Salvador, announced on Thursday that the government-issued Chivo wallet will be sold or shut down as part of the deal. Meanwhile, private bitcoin wallets will continue to operate in the country. The IMF stated that under the agreement, El Salvador will make bitcoin acceptance voluntary for the private sector and require taxes to be paid in US dollars.
Herbert noted that El Salvador will continue to add bitcoin to its reserves and many bitcoin-related projects will proceed, including the development of bitcoin capital markets and educational programs. The IMF has expressed concerns over El Salvador's bitcoin initiatives since President Nayib Bukele made bitcoin a legal tender in 2021.
The agency warned of significant risks associated with using bitcoin due to its price volatility. According to the IMF, the potential risks of the Bitcoin project will be significantly diminished in line with their policies.
The Chivo wallet was introduced in 2021 to promote bitcoin adoption, but national adoption was limited. By mid-2022, over 60% of recipients had not made a transaction, and a survey found that 88% of Salvadorans had not used bitcoin in 2023. The IMF will provide $1.4 billion, with additional funds from the World Bank and other regional development banks bringing the total to $3.5 billion.