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El Salvador Scales Back Crypto Mandate Under IMF Pressure — Partners With Argentina on Regulation

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Giuseppe Ciccomascolo
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Key Takeaways

  • El Salvador is on the verge of securing a $1.3 billion International Monetary Fund loan.
  • The deal involves revising its Bitcoin law to make its acceptance voluntary.
  • However, El Salvador remains a notable player in this global trend.
  • El Salvador and Argentina have formed a partnership to collaborate on crypto regulation.

El Salvador, the nation that once boldly embraced Bitcoin as legal tender, is now pivoting its strategy. Facing economic pressures and IMF scrutiny, the country is poised to significantly curtail its Bitcoin experiment.

This shift marks a notable turn for a Nation that once led the charge in cryptocurrency adoption.

However, its involvement in the crypto industry is not over, as El Salvador signed a new deal with Argentina to boost crypto regulation in Latin America.

El Salvador Gives In To IMF Pressure

El Salvador is close to securing a $1.3bn IMF loan , potentially finalizing the deal in the next two to three weeks. The agreement would revise its use of Bitcoin as legal tender, making acceptance by businesses voluntary, and include measures to reduce the fiscal deficit by 3.5% of GDP over three years through spending cuts and tax hikes.

The deal could unlock an additional $2bn in funding from the World Bank and Inter-American Development Bank. El Salvador also plans to increase reserves from $11bn to $15bn and pass anti-corruption reforms.

The IMF has criticized Bitcoin adoption, citing financial stability risks. President Bukele has promoted cryptocurrency despite limited use among citizens, announcing plans for a “Bitcoin City” powered by geothermal energy. The government has accumulated $600mn in Bitcoin reserves, with Bukele touting gains of 127%.

Bukele, re-elected with 85% of the vote, has shifted focus to economic revival and foreign investment. Sovereign bond prices have rallied, narrowing spreads significantly.

He linked the rally to Bitcoin, stating it’s a historic first for cryptocurrency to drive sovereign bond prices.

Remains Among Top Holders

However, El Salvador remains among the top holders of Bitcoin. Several countries  worldwide have begun to hold Bitcoin officially, leveraging the cryptocurrency for various strategic, economic, and regulatory purposes. The U.S. leads in Bitcoin holdings, with 207,189 BTC valued at approximately $20.93 billion. These holdings stem largely from assets seized in legal operations, reflecting the U.S.’s proactive regulatory engagement with cryptocurrency markets.

Despite stringent cryptocurrency trading and mining bans, China holds 194,000 BTC worth about $19.59 billion.

These holdings are primarily the result of confiscated assets, highlighting a complex relationship between regulatory policies and actual practices. Meanwhile, the UK holds 61,000 BTC, valued at $6.16 billion, largely tied to law enforcement and financial recovery operations.

Countries with largest Bitcoin holdings
Countries with the largest Bitcoin holdings. | Credit: Bitbo

Ukraine has become a significant Bitcoin holder with 46,351 BTC, valued at $4.68 billion. The Nation has used Bitcoin for fundraising amid ongoing geopolitical challenges.

Bhutan, a surprising player in the Bitcoin landscape, has quietly accumulated 13,029 BTC worth $1.31 billion, likely as part of its efforts to diversify and modernize its economic portfolio.

El Salvador, the first country to adopt Bitcoin as legal tender, holds 5,942 BTC valued at $600 million. Finland’s 1,981 BTC, valued at $200 million, stems mainly from confiscated assets, showcasing a cautious yet pragmatic approach.

Georgia’s holdings are modest at 66 BTC, valued at $6.6 million, marking a minimal but notable presence in cryptocurrency.

Teaming Up With Argentina

Before signing an official deal with the IMF, El Salvador joined forces  with Argentina to boost the crypto industry in Latin America.

Juan Carlos Reyes, head of El Salvador’s crypto regulatory body CNAD, and Roberto Silva, president of Argentina’s CNV, signed an agreement to collaborate on crypto regulation.

Reyes highlighted  the partnership’s dual objectives: sharing El Salvador’s expertise to support well-regulated crypto industries globally and expanding the international reach of regulated companies.

He praised Argentina’s innovative approach and high adoption rate as key reasons for the collaboration.

While specific details of the deal remain undisclosed, Reyes noted the agreement aims to foster knowledge exchange and crypto innovation.

He described the partnership as a foundation for greater regional cooperation to promote the digital asset sector.

El Salvador‘s early leadership in crypto regulation, following its adoption of Bitcoin as legal tender, positions it as a valuable partner.

Meanwhile, Argentina’s President Javier Milei has shown ideological support for cryptocurrencies, gaining popularity among crypto developers for his inflation-mitigating policies.

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Giuseppe Ciccomascolo

Giuseppe Ciccomascolo began his career as an investigative journalist in Italy, where he contributed to both local and national newspapers, focusing on various financial sectors. Upon relocating to London, he worked as an analyst for Fitch's CapitalStructure and later as a Senior Reporter for Alliance News. In 2017, Giuseppe transitioned to covering cryptocurrency-related news, producing documentaries and articles on Bitcoin and other emerging digital currencies. He also played a pivotal role in establishing the academy for a cryptocurrency exchange website. Crypto remained his primary area of interest throughout his tenure as a writer for ThirdFloor.
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