Three years ago, El Salvador went down in history as the first country to accept Bitcoin as an official means of payment. President Nayib Bukele promised financial freedom, the creation of Bitcoin City, and even the issuance of government bonds in BTC.
The law initially required all businesses and government agencies to accept Bitcoin if they had the technology to do so. To encourage adoption, the government offered a $30 million bonus to users who installed the official Chivo app.
Why did the government abandon BTC?
**Economic crisis: **El Salvador's public debt has reached 85% of GDP, and the economy is stalling.
**Low adoption: **Only 21% of the population used cryptocurrency in 2022, and in 2024, only 8.1% reported continuing to use it.
**IMF pressure: **International organizations initially criticized the initiative.
Now, Bitcoin remains a voluntary instrument, taxes are accepted only in dollars, and state involvement in crypto projects is minimized. Moreover, the IMF has banned state entities in El Salvador from buying and mining Bitcoin as part of a $1.4 billion loan program. The ban applies to all wallets under state control, including Chivo and the National Bitcoin Agency. The exception is confiscated BTC.
"This decision comes after almost two years of pressure from the International Monetary Fund (IMF), which demanded a reduction in the risks associated with Bitcoin in exchange for a major loan of $1.4 billion. To get these funds, the government simply had to change the law. Obviously, the Bitcoin story also has a political context."
"Nevertheless, El Salvador continues to see value in the cryptocurrency, even if it is no longer an official means of payment. For example, El Salvador continues or even increases the purchase of bitcoins to replenish its reserves."
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