- El Salvador will either scrap its Chivo wallet or sell it off as part of an IMF funding deal
- The national wallet was introduced when El Salvador introduced Bitcoin as legal tender in 2021
- The country is borrowing $3.5 billion from the IMF and other such entities, and has been required to make concessions
El Salvador may ditch its Chivo wallet as part of a $3.5 billion loan from the International Monetary Fund (IMF) and others, just one of a number of changes it must make to its Bitcoin adoption. The national crypto wallet will be “sold off or wound down,” according to Stacey Herbert, director of the Bitcoin Office in El Salvador, but other Bitcoin wallets operated by private companies will continue to serve the country. El Salvador was informed that it would have to make concessions regarding its Bitcoin adoption if it wanted to unlock the $3.5 billion loan, and these concessions are now starting to be formalized.
IMF Demands More Transparency from El Salvador
The IMF revealed on Wednesday that it had come to an agreement with El Salvador over the release of a $1.4 billion Extended Fund Facility (EFF) arrangement, which aimed to “strengthen fiscal and external sustainability, through implementation of an ambitious and growth-friendly fiscal consolidation plan, as well as actions to enhance reserve buffers.”
The IMF itself will only provide $1.4 billion, with funds from the World Bank, the Inter-American Development Bank and regional development banks expected to bring the total amount to $3.5 billion.
A key component of the agreement is the commitment to improve governance and transparency within El Salvador. The IMF highlights that early efforts in these areas are essential to boost confidence and the country’s growth potential. The program aims to implement actions that enhance governance, transparency, and resilience, which are expected to contribute to stronger economic performance.
Bitcoin Still King
In order to access the funds, El Salvador has had to concede on some areas of its nationwide Bitcoin adoption, notably, that private sector acceptance of Bitcoin will be voluntary, and public sector participation in Bitcoin-related activities will be confined. This approach is intended to safeguard financial stability while allowing for the continued use of Bitcoin within a regulated framework.
Herbert posted to X to say that, as a result, the Chivo wallet will either be decommissioned or sold:
🇸🇻EL SALVADOR SECURES $3.5 FUNDING DEAL
➡️Bitcoin remains legal tender
➡️El Salvador will continue buying bitcoin (at possibly an accelerated pace) for its Strategic Bitcoin Reserve
➡️Bitcoin capital markets will continue to be built; for example, the recent tokenized issuance…— Stacy Herbert 🇸🇻🚀 (@stacyherbert) December 19, 2024
Herbert was quick to point out that El Salvador retains faith in Bitcoin, and the country will continue adding to its reserves, currently at almost 6,000 BTC, on a daily basis. Many of El Salvador’s bitcoin-related projects, including the development of bitcoin capital markets and the offering of bitcoin educational programs, will remain unaffected, while Bitcoin’s status as legal tender is not under threat.
