Will El Salvador abandon its law requiring all businesses to accept bitcoin? This is what the IMF demands in exchange for its loans.
The IMF still hostile to bitcoin
El Salvador raises a lot of hope for those who imagine that bitcoin can replace the fiat system.
This small Central American country is in fact the only one to have made bitcoin a currency in its own right. Using it does not trigger any capital gains taxes.
By the way, the Czech Republic has just taken the plunge by removing this tax when bitcoins are kept for more than three years.
But El Salvador goes further since businesses are obliged to accept bitcoin (if they have the technical capabilities). In other words, all major brands like Mac Donald accept bitcoin payments via the Lightning Network.
Better yet, Nayib Bukele's government has been accumulating bitcoins since 2021 (one BTC per day). It also mines using geothermal energy. Its strategic reserve is now more than 6,000 BTC, almost ten times more than its debt to the IMF (~$71 million).
But rather than repaying this debt, El Salvador is instead seeking to borrow much more from international institutions.
IMF conditions
According to the Financial TimesEl Salvador hopes to reach an agreement in the next two or three weeks on a loan of 1.3 billion dollars. One of the conditions would be to end the obligation for businesses to accept bitcoin.
An IMF delegation arrived in San Salvador to finalize the details of the agreement. The latter should make it possible to unlock $1 billion in additional loans via the World Bank. And then another billion from the Inter-American Development Bank.
Among other conditions, El Salvador will have to remove the legal requirement for businesses to accept bitcoin. They will, however, be free to continue to accept it.
Furthermore, note that most Salvadorans use bitcoin very little for their everyday purchases. They prefer to stick to the dollar, the country's other legal currency. Salvadorans quickly threw in the towel in the face of recurring increases in transaction fees, among other mishaps.
That being said, El Salvador is banking heavily on the installation of wealthy bitcoiners along its coasts. And the fact that the possibility of being able to spend your bitcoins directly is one of the main selling points.
Continued in the next episode. Meanwhile, El Salvador's borrowing suggests that it is not difficult to do without the ability to create money ex nihilo. As Michael Saylor says, bitcoin does not need to replace the fiat system to succeed.
On this subject, don’t miss our article: “Bitcoin, what it will and will not be”.
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