- El Salvador has suspended public funds for Bitcoin purchases as part of its financial agreement with the International Monetary Fund (IMF).
- The government also plans to strip Bitcoin status as fiat currency and focus on restoring economic stability through regulatory reforms.
The Salvadoran government ultimately decided to stop using public funds to buy Bitcoin. The decision comes after the country reached an agreement with the International Monetary Fund (IMF) to acquire a US$1.4 billion aid package. Meanwhile, this step is also a form of major adjustments to El Salvador’s crypto policy, which previously shook the world.
El Salvador will stop buying bitcoin using public funds
Since 2021, El Salvador has actually become the first country to adopt Bitcoin as an official payment tool. However, earthly reality does not always align with expectations. According to an AS/COA report, Bitcoin adoption among the public is still relatively low.
Many citizens face difficulties in using this technology in their daily trading. In fact, only a small portion of Bitcoin is actively used, and the majority still rely on traditional money.
In early March, several economic experts also evaluated the Bitcoin adoption project failing to meet its targets. Instead of expanding financial inclusion and attracting foreign investment, there have been economic instability and increased fiscal risk.
Therefore, as part of the agreement with the IMF, the government not only halted the purchase of Bitcoin using state funds, but also agreed to remove Bitcoin status as the fiat currency in El Salvador. This is not just a symbolic move, it is a major course correction.
Bitcoin City and International Partnership, New Hope or New Issues?
In addition to internal issues, there are also external efforts to improve the country’s image and position. The CNF previously reported that El Salvador had strengthened its cooperation with Paraguay through a Memorandum of Understanding (MOU) aimed at strengthening money laundering efforts in the crypto space.
Such strategic collaborations are expected to increase global market confidence and accelerate institutional adoption. Imagine that if the crypto market in this region is more stable, it is not impossible to get more funds.
However, new challenges have been revealed. The intense debate surrounds President Naive Buquere’s proposal to create a tax-free metropolis loaded with geothermal energy from Mount Conchagua called “Bitcoin City.” This initiative certainly seems like Nirvana to cryptocurrency investors.
Meanwhile, environmentalists say the construction of Bitcoin City will put the surrounding ecosystems at risk, including protected mangrove forests. Furthermore, criticism from several quarters has emerged, given that this ambitious effort puts imagination first above actual environmental impact.
Furthermore, the Salvadoran government had to be more cautious in its actions as pressured by the IMF to strengthen the state’s financial management.
