El Salvador Revises Bitcoin Law to Limit Public Sector Exposure, Secures $3.5B Financing Deal Including IMF Support
The post El Salvador Revises Bitcoin Law to Limit Public Sector Exposure, Secures $3.5B Financing Deal Including IMF Support appeared on BitcoinEthereumNews.com.
El Salvador has reached a significant milestone in its financial and economic reform efforts by securing $3.5 billion in financing following revisions to its Bitcoin law that limit public sector exposure. This financing includes a $1.4 billion Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), as well as contributions from the World Bank, the Inter-American Development Bank, and other regional development banks. Mitigating Bitcoin-Related Risks A key aspect of this deal is a revised approach to Bitcoin, where its use in the private sector will now be voluntary, and public sector involvement in Bitcoin-related activities will be scaled back. Additionally, Public taxes will continue to be paid exclusively in U.S. dollars. These changes also include gradually unwinding its role in the Chivo e-wallet platform. Per IMF, legal reforms will ensure robust regulation and supervision of digital assets, prioritizing financial stability and consumer protection. IMF Long Urge on Bitcoin Risks El Salvador’s decision to adopt Bitcoin as legal tender in 2021 faced repeated criticism from the IMF. The global financial institution has warned the government on multiple occasions about the potential fiscal risks and negative financial consequences of fully embracing Bitcoin. Per an October 4 report, the IMF reiterated its concerns regarding the widespread use of Bitcoin in the country, encouraging a more cautious approach to the crypto. At the time, Julie Kozack, the IMF’s Director of Communications, confirmed that the agency addressed concerns about El Salvador’s growing exposure to Bitcoin. The IMF has urged tighter controls on Bitcoin usage and more rigorous oversight to minimize the public sector’s engagement with the digital asset. Strengthening Fiscal and Economic Stability Notably, the latest financing agreement aims to enhance El Salvador’s fiscal and external stability while supporting inclusive growth. The IMF has outlined a fiscal consolidation strategy to improve the…