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El Salvador has recently made significant amendments to its Bitcoin policies in response to the terms of a critical $1.4 billion loan agreement with the International Monetary Fund (IMF). The reforms, which were swiftly approved by the country's Congress, mark a pivotal shift in the nation's economic strategy as it aligns with the IMF's requirements. Once struggling with high debt and a controversial Bitcoin experiment, El Salvador has been forced to adjust its approach to secure financial stability and continue with its ambitious economic overhaul.
On the heels of the IMF deal, the El Salvador Congress passed reforms that have shifted the way Bitcoin is utilized within the country. Notably, businesses are no longer required to accept Bitcoin as a form of payment, making its use voluntary for both businesses and individuals. While this marks a significant departure from the previous legislation that mandated Bitcoin as legal tender, the cryptocurrency still holds its status as legal tender in the country.
Ruling party lawmaker Elisa Rosales emphasized that the amendment was crucial to ensuring Bitcoin's permanence as legal tender while also enabling its more practical application within the economy. The reforms were approved with overwhelming support, with 55 votes in favor.
El Salvador adds another 11 BTC to our Strategic Bitcoin Reserve!
— The Bitcoin Office (@bitcoinofficesv) January 20, 2025
🇸🇻🚀 https://t.co/6NnNIdJtY5
The amendments come after El Salvador found itself isolated from traditional financial markets due to a combination of high debt levels and an ambitious but controversial Bitcoin experiment. With soaring bond yields and a dwindling ability to access new capital, the IMF loan became an essential lifeline for the government.
The reform package also paves the way for the country to scale back its state-backed cryptocurrency initiatives, such as the Chivo wallet, which was initially launched to promote Bitcoin use. Additionally, tax payments will now be restricted to U.S. dollars, moving away from the more unconventional idea of using Bitcoin for taxes.
Despite these changes, Bitcoin's position as legal tender in El Salvador remains intact. The country has already accumulated a significant reserve of Bitcoin, holding 6,049 BTC worth approximately $633 million, according to the National Bitcoin Office. The value of this Bitcoin reserve has seen an unrealized profit of 127%.
El Salvador's Bitcoin strategy remains robust despite the policy changes. In fact, the country is accelerating its Bitcoin accumulation efforts. Just a day after finalizing the IMF deal, the government deviated from its previous policy of acquiring "1 Bitcoin a day" and instead purchased 11 BTC, valued at over $1 million at the time. The government has continued to add to its Bitcoin holdings, including an additional 12 BTC on January 21.
Stacy Herbert, the director of the National Bitcoin Office, confirmed that the country plans to increase its Bitcoin accumulation at a faster pace moving forward, signaling that Bitcoin will continue to play an important role in El Salvador's economic future.
El Salvador became the first country to accept Bitcoin as legal tender on September 6, 2021. Since then, the government has implemented various initiatives to integrate Bitcoin into the national economy. These initiatives include the installation of over 200 Bitcoin ATMs, making the country one of the most Bitcoin-friendly regions in the world.
Moreover, the government has launched projects like Volcano Energy, a Bitcoin mining initiative that uses renewable energy sourced from volcanoes. Another key initiative is the Volcano Bond, a Bitcoin-backed bond designed to raise funds for infrastructure projects and the development of Bitcoin City, a proposed tax-free crypto hub powered by geothermal energy.
El Salvador's crypto-friendly policies have also attracted attention from major players in the crypto industry. On January 13, Tether Group, a global leader in stablecoins, announced it would relocate its entire operations to El Salvador. This move came after the company secured a Digital Asset Service Provider license via Bitfinex Derivatives, a Seychelles-based affiliate. The announcement reflects the growing interest in El Salvador as a hub for cryptocurrency operations and innovation.
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Brenda has been a news writer since 2019 with a deep background in crypto. Brenda commits to producing excellent, well-optimized content to ensure consumer satisfaction.
