El Salvador Made Bitcoin an Official Currency. Now It’s Backtracking for IMF Loan.

The government of El Salvador’s President Nayib Bukele agreed to scale back his ambitious plan to adopt bitcoin as a national currency in exchange for a much-needed $1.4 billion loan by the International Monetary Fund.

The IMF said in a statement Wednesday that in exchange for the financial-aid program to support the Bukele administration economic overhaul agenda, the government agreed to implement measures to mitigate bitcoin-related risks.

The deal signals an important shift by the IMF, showing greater flexibility over government use and regulation of bitcoin in anticipation of friendlier crypto policies by the incoming administration of President-elect Donald Trump , said Alejandro Werner , a former director of the IMF’s Western Hemisphere Department.

Bukele’s surprise decision to make bitcoin legal tender was cheered by crypto enthusiasts but stalled financial support from the IMF in the midst of concern that the volatile crypto asset could rock the finances of the impoverished and indebted Central American nation.

“In a situation where the international financial community didn’t want to set a precedent on the adoption of bitcoin as legal tender, it became an obstacle to close an agreement with the IMF,” said Werner, who also served as adviser to El Salvador’s government and currently heads the Georgetown Americas Institute in Washington, D.C.

The use of bitcoin as a national currency in this country of around 6.5 million didn’t take off, surveys show. After the government spent more than $200 million in 2021 rolling out bitcoin ATMs and an e-wallet with $30 of free bitcoin for anyone who signed up, most users took the virtual currency to buy goods or exchange it for dollars.

The government began purchasing bitcoin when it was trading at about $30,000, booking losses at first and then posting significant gains as its volatile price surpassed $100,000 recently.

Among the concessions made by the Bukele administration, acceptance of bitcoin by the country’s businesses will no longer be mandatory, while the public sector’s participation in bitcoin-related activities will be restricted, the IMF said.

“The potential risks of the bitcoin project will be diminished significantly” in line with fund policies, the IMF said.

Under the agreement, El Salvador’s government agreed to reduce bitcoin purchases, and it will no longer accept tax payments with the crypto asset. The government’s participation in Chivo, the crypto e-wallet launched in 2021, will be gradually unwound, the IMF said.

“Transparency, regulation, and supervision of digital assets will be enhanced to safeguard financial stability, consumer and investor protection, and financial integrity,” it added.

Bukele highlighted on X the IMF’s remarks about the steady expansion of the country’s economy since the pandemic, bolstered by “robust remittances and a remarkable pickup in tourism,” in the midst of improvements in public security.

Stock futures are little changed Sunday evening as investors await the release of key reports on the labor market during another abbreviated week of trading, including Friday’s jobs numbers.

At 6:13 p.m. Eastern time on Sunday, Dow Jones Industrial Average futures were flat; the S&P 500 futures gained 0.1%; and Nasdaq Composite futures gained 0.1%.

Stocks started out the new year on a muted note. Last week, the Dow Jones Industrial Average closed down 260 points, or 0.6%, to 42,732.13, according to Dow Jones Market Data.

The S&P 500 was down 0.48% to 5,942.47, and the Nasdaq Composite closed down 0.51% to 19,621.86.

Stock markets will close Thursday in honor of former President Jimmy Carter, who died late last month. Also this week, several reports on the labor market are expected, including Friday’s jobs report for December. Economists expect the economy added 153,000 jobs last month, lower than November’s reading.

This week also features oral arguments at the Supreme Court in TikTok’s battle against the U.S. government, with a potential ban of the video-sharing app looming later this month.

Among the week’s other economic reports, the Federal Reserve will release the meetings of its December meeting, and three Fed governors are speaking publicly this week. On Monday, Governor Lisa Cook will be at the University of Michigan Law School’s Seventh Conference on Law and Macroeconomics.

Gov. Christopher J. Waller on Wednesday will discuss the economic outlook at the Organisation for Economic Co-operation and Development (OECD) Conference Center in Paris.

And Gov. Michelle Bowman on Thursday will reflect on 2024’s monetary policy, economic performance, and lessons for banking regulation at the California Bankers Association’s 2025 Bank Presidents Seminar in La Quinta, Calif.

El Salvador Made Bitcoin an Official Currency. Now It’s Backtracking for IMF Loan.

Organization is showing flexibility by allowing the bitcoin program to proceed in a limited way