IMF vs. Bitcoin: Bitcoin Law, El Salvador, CBDCs.

By: Elena Obukhova

In Dec 2024, El Salvador reached a $1.4 billion loan agreement with the International Monetary Fund (IMF), but the deal came with a revision of its Bitcoin Law. Bitcoin remains (a sort of) legal tender in El Salvador, but now it’s voluntary. Businesses can voluntarily accept it as payment, but it can no longer be used for tax payments or public services. The government will also start phasing out its involvement in the Chivo Wallet, the primary tool for Bitcoin transactions in the country. It’s essentially ending Bitcoin’s full legal tender status.

“Taxes will only be paid in U.S. dollars and the government’s participation in the crypto e-wallet (Chivo) will be gradually unwound.”

**IMF

By stripping Bitcoin of its legal tender status, El Salvador has removed Bitcoin’s classification as a currency on the international stage, effectively relegating it back to the status of a commodity. This could mean an end to Bitcoin use for national debt repayment, central bank reserves, or official trade agreements, reinforcing the dominance of IMF-backed fiat currencies, particularly the U.S. dollar.

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Why Does the IMF Keep Pressuring Countries?

The IMF’s motivation for pressuring El Salvador—and other countries—into weakening their Bitcoin policies is clear. If Bitcoin were to gain widespread recognition as a currency, it would challenge the IMF’s ability to regulate international finance through traditional monetary policies.

Here’s why this was a battle the IMF couldn’t afford to lose:

1. Preserving the U.S. Dollar’s Dominance

• Bitcoin as a currency could have challenged the supremacy of the U.S. dollar in international trade and finance.
• The IMF’s top shareholders, including the United States (16.5% of voting power, giving it veto control), China, Japan, Germany, France, and the UK, have a vested interest in maintaining fiat currency dominance.

2. Preventing a Parallel Financial System

• The IMF relies on centralized financial institutions to monitor capital flows and enforce monetary policies.
• Bitcoin’s decentralized nature makes it difficult for global financial institutions to control, track, or tax transactions.

3. Ensuring Countries Remain Dependent on Fiat-Based Loans

• Countries using Bitcoin as legal tender could, in theory, reduce their reliance on IMF loans and traditional financial systems.
• Keeping Bitcoin classified as a commodity rather than a currency ensures it remains outside sovereign monetary policy and cannot be used for national financial planning.

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El Salvador’s Bitcoin Experiment: Did It Work?

The IMF’s push to reverse Bitcoin’s legal tender status was met with little resistance from the Salvadoran government, largely because Bitcoin adoption rates remained low. While President Nayib Bukele had high hopes for Bitcoin’s ability to bring financial inclusion, attract foreign investment, and position El Salvador as a financial innovator, the reality fell short.

Chivo Wallet Usage:

• Despite being the primary tool for Bitcoin transactions, Chivo Wallet had around 400,000 active users—a small fraction of El Salvador’s 6.8 million population.

Bitcoin Transaction Volume:

• Only 8-10% of Salvadorans used Bitcoin for transactions.

• Less than 2% of remittances were sent using cryptocurrency.

Who Was Actually Using Bitcoin?

• The majority of Bitcoin transactions came from large merchants and major businesses, who was accepting Bitcoin as .

• Now, with Bitcoin no longer being a recognized currency, these larger players no longer have incentives to accept it, and they can no longer price goods in Bitcoin.

While Bitcoin remains an option for those who want to use it, the changes might stall further retail adoption. In truth, the way Bitcoin is currently used and applied is not an ideal solution for day-to-day transactions in an economy that still operates primarily on U.S. dollars and depends on a fiat-based financial system. No matter how much we want to believe it is perfect.

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Was Bitcoin the Right Choice for Retail?

The relative Bitcoin’s volatility made it impractical for daily transactions in El Salvador, where the U.S. dollar remains the primary currency. Retail users simply can’t afford the risk of sudden price swings when paying for essentials. That’s why stablecoins like USDT and USDC became the preferred crypto tools for remittances and payments worldwide.

What Do the Law Changes Really Mean?

In practice, not much changes for the general population:

✔ Merchants can still accept Bitcoin (if they want).

✔ People can still use it for remittances (if they want).

✔ No capital gains tax on transactions.

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The Bigger Picture: How the IMF Controls Monetary Policy

El Salvador isn’t the only country that has faced IMF pressure to abandon or restrict Bitcoin adoption:

• Argentina (2022): As part of a $44 billion IMF debt restructuring deal, Argentina had to discourage cryptocurrency use, leading to restrictions on banks offering crypto services.

• Central African Republic (2023): After adopting Bitcoin as legal tender, the country faced IMF pushback and ultimately reversed its decision due to “financial stability concerns.”

The IMF claims it promotes financial stability in developing economies, but in reality, it seems to pressure nations to align with the interests of its largest shareholders, particularly Western economies like the U.S.

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The Future of Bitcoin as a Currency

El Salvador’s reversal does not mean the end of Bitcoin as a financial tool, but it does represent a significant setback for its recognition as a currency on an international scale.

With Bitcoin officially reaffirmed as a commodity, the IMF ensures:

✔ Fiat currencies like the U.S. dollar remain the foundation of global finance.

✔ Countries remain under centralized financial oversight.

✔ Stronger case for CBDCs.

✔ IMF-backed monetary policies stay in power.

The biggest issue for the IMF isn’t just Bitcoin’s volatility or lack of adoption—it’s that Bitcoin cannot be manipulated, controlled, or inflated the way fiat currencies can. That lack of control threatens the very foundation of centralized global finance.

Did the IMF Win the Battle?

El Salvador’s Bitcoin amendment might be seen as a win for the IMF, but it doesn’t mean the Bitcoin experiment is over. The reality is that:

• Bitcoin’s role as a global store of value continues to grow.

• Stablecoins are emerging as the true alternative for fiat-based settlements.

• The IMF’s aggressive stance only reinforces Bitcoin’s purpose—to exist outside centralized control.

For now, the IMF maintains its grip on global monetary policy, ensuring that developing countries remain dependent on its financial system. But as more nations look for alternatives, the fight between decentralized financial sovereignty and centralized global control is far from finished.

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