El Salvador has agreed to make merchant acceptance of Bitcoin voluntary as part of a $1.4 billion loan agreement with the International Monetary Fund (IMF). Meanwhile, Bitcoin made a bearish move yesterday (Wednesday), causing its price to drop to $100000. The cryptocurrency had reached an all-time high of $108,000 the day before.

The country will also scale back its involvement with the Chivo wallet, which has seen limited use, and restrict public sector participation in Bitcoin-related activities. These changes are aimed at reducing El Salvador's debt-to-GDP ratio, according to an IMF statement on December 18.

IMF Agreement Limits Bitcoin Use

The agreement, set to last 40 months, requires El Salvador to implement legal reforms, making Bitcoin acceptance voluntary for the private sector. Additionally, public sector engagement with Bitcoin will be confined, with taxes to be paid in US dollars, the country’s official currency. The IMF noted that government involvement in Chivo will be gradually phased out.

“The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies. Legal reforms will make acceptance of Bitcoin by the private sector voluntary,” the IMF said.

BTCUSD Forms Bearish Engulfing Candle After Reaching $108K

After breaching the $100K mark, BTCUSD headed north and reached $108K. However, following the formation of a doji candle on the daily chart, a bearish engulfing candle emerged, closing back within the $100K range. This is a significant level, where the cryptocurrency is likely to find its next direction for some time.

El Salvador’s Bitcoin Strategy Faces IMF Scrutiny

El Salvador, which started buying Bitcoin in 2021, currently holds 5,968.8 Bitcoin, valued at approximately $632 million. A spokesperson for the National Bitcoin Office confirmed that the country will continue accumulating Bitcoin at a rate of one per day and will not sell its current holdings.

The deal is subject to approval by the IMF Executive Board but concludes years of negotiations surrounding President Nayib Bukele’s 2021 decision to adopt Bitcoin as legal tender. The IMF has previously expressed concerns about the risks posed by Bitcoin, citing its speculative nature.

92% of Salvadorans Avoid Bitcoin

In addition to the IMF loan, El Salvador is expected to secure over $3.5 billion in total financing from other global financial institutions, including the World Bank.

In response to the IMF announcement, Bukele's Bitcoin adviser, Max Keiser, criticized the IMF, dismissing its comments as "bureaucratic" and "meaningless."

Keiser argued that Bitcoin use in El Salvador remains voluntary and continues to grow. However, an October survey revealed that 92% of Salvadorans do not use Bitcoin for transactions, a slight increase from 88% in 2023.