El Salvador "You Don't Have to Pay with Bitcoin"... Reasons Behind the Changed Stance

Abolition of Mandatory Payment Regulation for Retail and Wholesale Sectors
Conditions Accepted to Secure IMF Funding

El Salvador, a Central American country known as a 'pro-cryptocurrency nation' for being the first in the world to designate Bitcoin as legal tender, has abolished the mandatory Bitcoin payment regulation to comply with the International Monetary Fund (IMF) financial support program conditions.

On the 31st of last month (local time), AFP and other news agencies reported that the El Salvador National Assembly deleted the legal provision requiring Bitcoin to be adopted as a mandatory payment method. However, Bitcoin's status as legal tender remains unchanged.

This move is aimed at securing a total of $1.4 billion (approximately 2 trillion KRW) in funding from the IMF. The IMF agreed to provide this funding through an Extended Fund Facility (EFF) over 40 months, while requiring El Salvador to impose restrictions on Bitcoin-related economic activities in the public sector, encourage voluntary Bitcoin payments in the private sector, collect taxes only in US dollars (the legal currency), and gradually reduce the use of the cryptocurrency electronic wallet (Chivo).

President Nayib Bukele of El Salvador. Photo by EPA Yonhap News

El Salvador introduced Bitcoin as an official legal currency in September 2021, becoming the first country in the world to do so. To promote Bitcoin usage, the government instructed the distribution of the 'Chivo' application to all citizens; however, AFP reported that as of last year, only 8% of the population were users. President Nayib Bukele of El Salvador attracted attention by ignoring international warnings about volatility risks and purchasing Bitcoin using national budget funds. The El Salvador government refers to this as the 'Strategic Bitcoin Reserve' (SBR).

At one point, El Salvador's Bitcoin value suffered a massive loss, dropping by half, but as of this date, the value is estimated at approximately $616.98 million (about 899.5 billion KRW), according to NaiveTracker, a private investment loss analysis website. The Bitcoin Office directly under the El Salvador presidency (ONBTC) has publicly disclosed holding 6,051.18 Bitcoins, and based on this, the unrealized capital gains exceed 120%.