South American Country Continues Bitcoin Purchases Despite IMF Agreement
The El Salvador government expanded its strategic reserve by purchasing $1 million worth of Bitcoin following a $3.5 billion financing agreement with the International Monetary Fund (IMF). An update from the National Bitcoin Office indicated that the country purchased 11 Bitcoin tokens in a single transaction. With this purchase, El Salvador's total Bitcoin reserve has increased to 5,980.77 BTC, reaching a value of approximately $586.5 million.
This acquisition is considered a deviation from President Nayib Bukele's daily Bitcoin purchase strategy announced in November 2022. Stacy Herbert, Director of the National Bitcoin Office, emphasized in a statement on December 19 that Bitcoin purchases could be accelerated and noted the office's commitment to strengthening Bitcoin markets and enhancing educational initiatives.
Bitcoin Condition in IMF Agreement El Salvador secured a $1.4 billion loan agreement from the IMF by committing to restrict public sector Bitcoin activities and making private sector Bitcoin acceptance optional. Under this agreement, Bitcoin public sector activities will be limited, and taxes can only be paid in U.S. dollars. This strategic approach is seen as part of El Salvador's effort to balance digital innovation with international economic concerns.
The IMF must wait for the approval of its executive board for the agreement to be finalized. The negotiation process, ongoing for four years due to El Salvador's Bitcoin policy, may result in an agreement despite the risks involved.
Investments in Education and Technology The El Salvador government is also continuing its investment in education related to Bitcoin and digital currencies. "Little HODLer" workbooks, set to be released for grades 2 and 3 in January 2025, are an example of these educational initiatives. Additionally, there are plans to develop Bitcoin policies and create training programs for developers and public officials.
In particular, the CUBO+ program aims to graduate over 20 Bitcoin and Lightning Network developers by 2025. Moreover, initiatives like Mi Primer Bitcoin and Node Nation are actively being implemented in high schools across El Salvador. Under the ESIAP program, 80,000 public officials have received Bitcoin certification.
The Role of Bitcoin in El Salvador's Economy El Salvador first recognized Bitcoin as legal tender in 2021, a step that increased tensions with the IMF. However, the IMF noted that the anticipated financial and legal risks have yet to materialize. The role of Bitcoin in the country is still regarded as an economic innovation.
The economic motivation behind El Salvador's adoption of Bitcoin revolves around the goal of reducing remittance costs, which hold a significant share of the country's economy. By facilitating peer-to-peer transactions through platforms like Bitcoin and Chivo Wallet, the aim is to eliminate intermediaries, reduce transfer costs, and increase the value received by families. However, the long-term viability of this strategy continues to be questioned due to the volatile nature of Bitcoin and challenges related to digital literacy and technology access in the country.