It is a change in the positioning of the International Monetary Fund (IMF) in a possible agreement. He did ask for a modification to “reduce the scope.”
The International Monetary Fund (IMF) stated that if El Salvador does not repeal the Bitcoin law, which makes this a legal tender currency in the country, it should at least reduce the scope – as a condition for reaching an agreement with that multilateral body to receive around $1.3 billion, according to the U.S. media Forbes.
What we have recommended is a reduction in the scope of the Bitcoin law, strengthening the regulatory framework and supervision of the Bitcoin ecosystem and limiting public sector exposure to bitcoin,” explained the director of the IMF Communications Department, Julie Kozack, at a press conference on October 3.
This marks a change in the IMF’s approach. In 2021, its representatives called for the total abolition of the law. The idea, now, is for the country to limit the influence of bitcoin, especially in the public sector, as Kozack said.
Despite seeking resources, the president of El Salvador announced that the national budget 2025 will not include the issuance of new debt, so the government could be prepared (or resigned) not to receive the IMF funds.
But not reaching an agreement with this institution will have strong consequences for the country, as it will result in the interest rate of the $1 billion in bonds, which was set at 12%, will rise 4 percentage points, or 16%.
A “nonsense” bet
The country has been exploring the possibility of issuing Bitcoin-related bonds since 2021, known as Volcano Bonds. But it is a promise that has not been fulfilled. Nayib Bukele announced its creation on November 20, 2021.
The last time they were officially talked about was in December 2023, when the National Bitcoin Office (ONBTC) announced that the launch was very close, as it had already obtained the approval of the Salvadoran authorities.
For Teo Sepúlveda, an economist at South Texas College, from the outside of the country, the bet is seen as “nonsense.” This is because no one would be willing to buy this debt at only 6.5 per cent when they were able to purchase the bonds issued on the international market by the Government of El Salvador, with a real interest of 12 per cent, or almost twice as many percentage points.
“For the Bitcoin Bonus to be attractive, it should have very high interests, higher than that of the bonds issued this year by El Salvador. This is because it is not backed by dollars, but by Bitcoin,” says Sepúlveda.
For the economist, this is why Volcano Bonds are never issued: because, after consulting the market, the government has realized that there are not enough people interested in acquiring it.
“The crypto world is very small when compared to the world of the international bond market. In the crypto world there are people who may be interested in instruments like those broadcast by Tether (Bitfinex twin company), who have, say, a fixed rate of return, but what they look for most are more volatile instruments, not something like Bitcoin Bonds,” he adds.
Nayib Bukele says the country has a treasure in Bitcoin of more than $370 million. However, no information is available to verify the veracity of that statement.
This article has been translated after first appearing in El Salvador