- Signs that the IMF was warming to Bitcoin were off the mark.
- El Salvador is negotiating for IMF funding.
- Bitcoin is proving a roadblock in funding negotiations.
El Salvadorโs Bitcoin Law, enacted in September 2021, marked a pivotal shift for the nation. With President Bukeleโs crackdown on corruption and gangs, alongside his push to attract foreign investment, the country has seen significant progress.
However, organizations like the IMF and World Bank were quick to criticize El Salvadorโs Bitcoin policy. Although the IMF had shown slight signs of easing its stance, a recent press briefing clarified that the organization remains firmly opposed to Bitcoin.
No Agreement on Bitcoin
During a recent press briefing led by IMF communications director Julie Kozack, Bitcoin’s legal tender status in El Salvador was raised. Kozack confirmed that the IMF and El Salvador remain at odds over Bitcoin in terms of funding.
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El Salvador is currently negotiating with the IMF for financial support, but the organization is concerned about the potential risks Bitcoin poses to the countryโs productivity and economic stability.
As a condition for funding, the IMF is pushing for El Salvador to scale back its Bitcoin law. This includes tightening regulatory control over the Bitcoin ecosystem and limiting public exposure to the cryptocurrency.
VanEckโs Sigel Says Hold the Line
An August IMF update on funding negotiations with El Salvador highlighted progress toward reaching a deal. It acknowledged that many of the risks tied to Bitcoin had not yet materialized, but both sides agreed that further steps are needed to address potential risks from the country’s Bitcoin experiment.
This led many to believe that the IMF had softened its stance on cryptocurrency. However, during the recent press briefing, Kozack made it clear that El Salvadorโs current Bitcoin policy remains a major obstacle in securing IMF funding.
Matthew Sigel, head of research at VanEck, expressed his frustration, stating that the “IMF continues to hold El Salvador hostage over Bitcoin.” He pointed out that the country’s GDP is rising, tourism is booming, and the murder rate has sunk since Bitcoin was made legal tender.
Sigel called on President Bukele to “stand firm” against the IMF’s demands.
On the Flipside
- Critics claim the IMF‘s conditions for loans are austerity measures that increase poverty and inequality.
- Bukele has a 91% approval rating.
- Most Salvadorians prefer to use cash over BTC.
Why This Matters
El Salvador bowing to IMF demands to scale back its Bitcoin strategy would deal a bitter blow to the crypto industry.
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