Why did El Salvador accept this?

The International Monetary Fund (IMF) required El Salvador to phase out its official Bitcoin wallet, Chivo, as part of a $1.4 billion loan agreement reached in December 2024. The IMF stipulated that the Salvadoran government gradually reduce its involvement in Bitcoin-related activities, including unwinding its participation in the Chivo wallet. This move aims to mitigate potential financial risks associated with Bitcoin’s volatility and to enhance financial stability and consumer protection in the country. 

Despite these conditions, Bitcoin remains legal tender in El Salvador. The government has indicated plans to continue purchasing Bitcoin for its strategic reserves, potentially at an accelerated pace. However, the acceptance of Bitcoin by private businesses has been made voluntary, and tax payments are now exclusively conducted in U.S. dollars. 

The decision to phase out Chivo and adjust the country’s Bitcoin policies reflects a compromise between embracing cryptocurrency innovation and adhering to international financial guidelines to secure essential funding.