El Salvador’s All In Bitcoin Bet Puts It at Risk of Sovereign Default, IMF Urges Immediate Repeal

▲ El Salvador Bitcoin

El Salvador, which carried out a bold financial experiment by adopting Bitcoin (BTC) as legal tender, is now burdened with mounting unrealized losses. On top of this, the country faces a dual crisis with debt warnings from the International Monetary Fund (IMF), threatening the very survival of its national economy.

According to cryptocurrency media outlet BeInCrypto on February 13 (local time), El Salvador has encountered significant obstacles in negotiations with the IMF for a loan package worth approximately $1.3 billion, while also grappling with large-scale losses from its Bitcoin investments.

The IMF is demanding that El Salvador revoke Bitcoin’s status as legal tender and enhance related transparency measures. Warning that “Bitcoin adoption poses serious threats to national financial stability and fiscal sustainability,” the IMF has made policy changes a precondition for financial support.

President Nayib Bukele continues to maintain that Bitcoin will revolutionize the nation’s economy, but the reality remains harsh. The value of approximately 5,700 BTC accumulated under his leadership has struggled amid market volatility, and the country’s credit rating has fallen to junk status.

Debt repayment pressures facing El Salvador are intensifying, while access to funding in international financial markets is virtually blocked. With Bitcoin prices remaining sluggish, analysts warn that if negotiations with the IMF collapse, El Salvador could face an unprecedented sovereign default.

The government is attempting to find a breakthrough by issuing Bitcoin-backed bonds, yet global investor sentiment remains cold. Financial markets worldwide are closely watching whether Bukele’s high-stakes bet on Bitcoin will prove to be a masterstroke or a poisoned chalice leading El Salvador’s economy toward collapse.

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