El Salvador Has Stopped Buying Bitcoin with Public Funds, but Its Bitcoin Strategy Is Far from Abandoned

The first government to make Bitcoin legal currency, El Salvador has stopped public sector Bitcoin buys per its IMF deal. However, the country's Bitcoin strategy is far from abandoned, as private acquisitions continue under new mechanisms.

El Salvador has ceased buying Bitcoin with public sector funds, in accordance with the terms set by the International Monetary Fund (IMF), the institution has verified.

The Central American country stays completely in line with its commitments of its loan from the lender, as the body had ordered the nation to halt any further accumulation of Bitcoin by government agencies. This forms a key part of the Extended Fund Facility, which is a $1.4 billion lending program.

The IMF had imposed this condition as part of the loan terms, which also include broader fiscal and structural reforms.

“The general fiscal sector keeps meeting its performance criteria by continuing to follow their non-accumulation of bitcoin commitment,” stated Rodrigo Valdes, director of the IMF’s Western Hemisphere Department, during a press conference.

The IMF’s statement confirms prior reports in August, which signaled that El Salvador was in compliance with the stipulations of the loan agreement.

However, reports by Salvadoran news outlet El Mundo and Bitcoin Magazine indicate that the country is still acquiring the cryptocurrency, despite the stipulations of the loan from the IMF.

Earlier this year, the Central American nation unveiled plans to integrate cryptocurrencies into the global economic data reported to the institution.

According to data from the National Bitcoin Office of El Salvador, the country has been incrementally buying one Bitcoin per day.

Nevertheless, the funding channels for these daily purchases have not yet been officially disclosed by the government. This lack of transparency has sparked speculation among crypto analysts about the sources being used to support the ongoing accumulation strategy.

One prevailing theory suggests that El Salvador is utilizing the profits generated by its Strategic Bitcoin Reserve to finance these daily acquisitions.

With an average acquisition price for Bitcoin estimated at $44,000 and considering the gains realized on the 6,158 BTC currently held by El Salvador—now valued at over $583 million at present market values—the reserve could be generating substantial income to sustain these purchases.

Earlier this year, Samson Mow, a strategist known for his work with institutions like Union Investment and his role in Lumena.io, disclosed that Japan is among the nations showing interest in adopting a similar idea to support crypto mining.

The Salvadoran government has highlighted the importance of this plan, attributing it to promoting financial inclusion, reducing dependence on the dollar, and positioning the country for long-term economic benefits.

However, the bulk of the 40-month program is focused on broader reforms, which are pertinent to private investment and facilitating the country’s economic recovery.

“The program of El Salvador is not about bitcoin. It’s far deeper in structural improvements, in terms of governance, in terms of transparency,” added Valdes, noting that the country is making good progress in these areas.

The broader goal of the program is to generate stronger flows of private investment and facilitate more robust economic growth.

The program also includes a focus on improving the investment climate in El Salvador and enabling more sustainable development, which ties into the country’s better security condition.

The government’s plan to invest in Bitcoin has divided public opinion in El Salvador. Some hail the move as a bold step that puts the nation at the forefront of digital finance, while others are concerned about the volatility associated with cryptocurrency investments.

As the IMF prepares for its first assessment of El Salvador’s loan program, all eyes will be on how the country continues to juggle its commitments: complying with the international financial body and advancing its own ambitious bitcoin agenda.