The IMF Was Wrong About El Salvador’s Bitcoin Strategy – Here’s Why

• The IMF has acknowledged that El Salvador's Bitcoin Strategy hasn't backfired yet and is open to collaborating with the country.
• Negotiations between the IMF and El Salvador included a promise toimprove the country's fiscal legislation and financial situation and enhance crypto transparency.
• Over 12% of Salvadorans were using Bitcoin in day-to-day transactions in 2023, showing real adoption from citizens.

The International Monetary Fund (IMF) admitted El Salvador's adoption of Bitcoin ($BTC) as legal tenderhasn't backfired on the country.

While the IMF maintains a cautious attitude and recommends further transparency, it collaborates with El Salvador to implement the necessary changes.

Progress has been made in negotiations towards an IMF-supported program, focused on policies to strengthen public finances, increase bank reserves, improve governance and transparency, and mitigate risks associated with Bitcoin.IMF

El Salvador officially has 5,834 $BTC ($355M), though rumors hint at significantly larger reserves. The country keeps buying 1 $BTC per day, even during market crashes.

Let's discuss why the IMF was wrong about the El Salvador Bitcoin strategy and what the future holds for the country.

IMF Close to an Agreement with El Salvador on Bitcoin Strategy

The IMF has closely monitored El Salvador's $BTC situation for months and has recently issued a statement. Here's a summary of El Salvador's promises:

• Improve the primary balance by ~3.5% of the GDPR over three years to reduce public debt.
• Rationalize the public wage bill and offer space for social and infrastructure spending.
• Strengthen the financial system reserve buffers to remain consistent with the private sector's growth.
• Reduce the government's reliance on domestic financing by receiving IMF support.
• Create a multi-year strategy to enhance transparency, governance, and the investment climate.
• Address money-laundering vulnerabilities, corruption, and weaknesses in the procurement frameworks.

Negotiations were successful, as the IMF was wrong about El Salvador's Bitcoin strategy, and the country's crypto efforts are still going strong.

Max Keiser, a Bitcoin adviser to El Salvador President Nayib Bukele, said the IMF's concession was a significant milestone for the country.

Bitcoin de-risked' El Salvador. We see it in their skyrocketing sovereign bonds. The new Bitcoin Bank Law will bring in $100 billion in new private capital.Max Keiser

However, the IMF and El Salvador recognize the need for more transparency and additional security measures for the Bitcoin project.

The main goal is consolidating the country's fiscal policies and financial situation, especially since El Salvador's 2022 public debt was 78% of its GDP.

Moreover, its public debt is estimated to continuously increase by $9.1B by 2029 (+30.5%).

With the IMF's assistance, El Salvador should be able to reduce its public debt and advance in its Bitcoin Strategy.

How Is El Salvador Doing with Its Bitcoin Projects?

After El Salvador's decision to make $BTC a legal tender in 2021, the country has launched several projects, including:

• Bitcoin bonds in partnership with Bitfinex Security
• $BTC freedom visas that raised $153M in one week
• Bitcoin reserves
• Several mining projects
• Tax-free Bitcoin City
• Tokenized real estate

In July 2024, when $BTC dropped under $60K and fluctuated wildly, President Bukele remained constant in the accumulation strategy.

Regardless of the market conditions, the country was buying 1 $BTC per day, which shows El Salvador's long-term vision.

Bukele envisions a pro-Bitcoin bank that will enable transfers between $BTC and USDand offer new investment opportunities for people.

In 2023, over 12% of Salvadorans were using $BTC for daily purchases, indicating real crypto adoption among citizens.The IMF's Shift Could Help El Salvador's Bitcoin City

With the IMF acknowledging El Salvador's Bitcoin Strategy as not so risky after all, the country's Bitcoin City might become a reality sooner rather than later.

Discussions so far have shown an optimistic perspective, though they haven't reached a full agreement on the details.

We'll see what happens in the coming months and whether El Salvador will achieve its Bitcoin maximalist objectives.

References

• The IMF and El Salvador Close to an Agreement on Bitcoin! (Coin Tribune)
• Max Keiser X Post About the IMF's Shift on El Salvador (X)
• National debt of El Salvador from 2007 to 2029 (Statista)

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