IMF Shifts Strategy on El Salvador’s Bitcoin Law: What’s Next?

The International Monetary Fund (IMF) has proposed that El Salvador cut government support for Bitcoin. This is a much more conservative approach than previous attempts to overturn the country's bitcoin laws.

However, President Naib Bukele seems committed to Bitcoinization.

Bitcoin and El Salvador

According to a recent report by Forbes, the International Monetary Fund (IMF) is trying a new tactic with El Salvador: if it does not abolish Bitcoin as legal currency, it will have to reduce Bitcoin's legal support. The IMF has been the staunch enemy of El Salvador's bitcoin project since Bukele declared it legal tender in 2021.

“What we recommend is to narrow the scope of bitcoin legislation, strengthen regulatory frameworks and oversight of the bitcoin ecosystem, and limit public sector exposure to bitcoin,” IMF spokeswoman Julie Kozak said in a press release.

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Before Bukele legalized Bitcoin as legal tender in El Salvador, the country's sole currency was the US dollar. Buckele turned this around and turned it into an openly decentralized currency, an attempt to achieve national sovereignty and economic independence. The IMF has tried various methods to reverse this rule, such as making Salvadoran bonds like tankers, but their tune may be changing.

Bukele won re-election in June this year, promising “economic transformation” through Bitcoin. In his second term, he launched new grand projects to integrate the economy. Additionally, since his re-election, the IMF has appeared more conciliatory in its approach, and today's announcements seem to continue that trend.

Simply put, the cat is out of the bag, thanks to Buckele's achievements. El Salvador has acquired a significant amount of bitcoin reserves, and a Forbes analysis of the country's 2025 budget suggests that the country may not need an IMF loan. A little reconciliation now may be the IMF's best chance to rebuild its working relationship with the country.

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The IMF's incentives are not aligned with El Salvador's, and El Salvador must steer its own course independent of the IMF's interests. John Dennehy, founder of the Salvadoran NGO Mi Primer Bitcoin, went against the advice he had previously given regarding Bitcoin.

Buckele seems unlikely to accept this olive branch. His re-election was a political success, and he has various plans to continue the Bitcoinization of the country. El Salvador has made it this far by ignoring its financial institutions, and it has little reason to stop now. Bitcoin is doing well, and the future looks bright.