San Salvador (AFP) – Merchants in El Salvador, the first country to make bitcoin legal tender, will no longer be obliged to accept the cryptocurrency as payment, under a reform adopted to comply with conditions for an international loan. The International Monetary Fund said last month it had reached an agreement for a $1.4 billion loan with the government of President Nayib Bukele.
But a condition was that “acceptance of bitcoin by the private sector will be voluntary and public sector’s participation in bitcoin-related activities will be confined.” Furthermore, taxes must only be paid in US dollars — the country’s other official currency — “and the government’s participation in the crypto e-wallet (Chivo) will be gradually unwound,” under the deal. The IMF had said the loan was “to address balance of payment needs and support the government’s economic reforms.”
The Central American country’s Bukele-aligned parliament adopted the reform late Wednesday. Launching bitcoin as legal tender on September 7, 2021, Bukele said he wanted to bring the 70 percent of Salvadorans who do not use banks into the financial system. Swatting away warnings about volatility risks, he promptly began plowing an undisclosed amount of public money into cryptocurrencies.
To spur Salvadorans to use bitcoin, he created the Chivo Wallet app for sending and receiving bitcoin free of charge and gave $30 to each new user. In September 2021, the cryptocurrency traded at about $44,000, but its value has fluctuated greatly and a year ago it was worth about $23,000. Since Donald Trump’s election last November, the value has soared by about 50 percent, topping $100,000.
About 92 percent of Salvadorans did not use bitcoin in 2024, according to a survey by the Central American University.
© 2024 AFP
