El Salvador’s agreement with the International Monetary Fund (IMF) could lead to the discontinuation or sale of the state-backed Bitcoin wallet Chivo, though the nation will maintain its overall support for Bitcoin.
The move is part of a broader arrangement to secure a $1.4 billion loan from the IMF. Stacy Herbert, director of El Salvador’s national Bitcoin office, confirmed that the decision aligns with the terms of the deal. However, she clarified that the discontinuation of Chivo will not affect the country’s Bitcoin laws. Bitcoin will continue to be recognized as legal tender in El Salvador under the agreement, according to Reuters.
Chivo was introduced in August 2021 alongside El Salvador’s landmark decision to legalize Bitcoin as a national currency. The state-operated crypto wallet was designed to advance President Nayib Bukele’s ambitious Bitcoin adoption strategy. At launch, citizens were incentivized to use Chivo with Bitcoin rewards for signing up. However, the wallet faced numerous challenges, including repeated security breaches. Hackers attacked Chivo at least twice, compromising sensitive user data and leaking its source code in April 2024.
El Salvador’s Commitment to Bitcoin
Despite Chivo’s potential shutdown, El Salvador remains steadfast in its commitment to Bitcoin. Under President Bukele’s leadership, the country became the first in the world to adopt Bitcoin as legal tender and allocate state funds for Bitcoin purchases.
Since legalizing Bitcoin in September 2021, El Salvador has invested $270 million into the cryptocurrency. As of press time, the nation held over $632 million in Bitcoin, with $362 million in unrealized profits from its investments. Bitcoin’s rise above $100,000 has had a ripple effect on El Salvador’s bond markets, marking a significant moment in the intersection of cryptocurrency and sovereign debt markets. This development highlights the influence of Bitcoin price trends on global financial systems.
Global Influence of El Salvador’s Bitcoin Strategy
El Salvador’s bold Bitcoin experiment has inspired other nations, including Brazil and the United States, to explore Bitcoin reserve laws. These developments follow years of skepticism about cryptocurrency from traditional financial institutions and governments.
About The Author
