IMF Pressure Reshapes El Salvador’s Bitcoin Experiment as Chivo Exit Nears

Negotiations between the International Monetary Fund and El Salvador over the country’s Bitcoin policy are entering a decisive phase, with talks advancing on the future of the state-backed Chivo wallet and the limits of government involvement in crypto. While discussions remain ongoing, the IMF has made clear that transparency, protection of public funds, and the containment of Bitcoin-related risks remain central conditions under its lending program.

The update came during the IMF’s second review of El Salvador’s 40-month Extended Fund Facility, a $1.4 billion agreement approved in 2024 after lengthy negotiations shaped largely by concerns over Bitcoin adoption. According to the fund, conversations with Salvadoran authorities are particularly advanced regarding the sale or wind-down of the Chivo wallet, the government-run platform launched in 2021 as a cornerstone of President Nayib Bukele’s Bitcoin strategy.

Chivo was introduced alongside Bitcoin’s designation as legal tender and was intended to accelerate adoption by offering fee-free transactions and a state-issued incentive. Instead, the wallet quickly became a source of controversy. Since its launch, it has faced persistent criticism over technical failures, frozen accounts, alleged identity theft, and claims of fraud. Even one of the wallet’s original architects acknowledged last year that Chivo should be shut down, citing the reputational and operational damage it had caused.

Under the terms of the IMF agreement, El Salvador committed to scaling back public sector participation in Bitcoin-related activities. In March, the fund formally requested that the government halt Bitcoin accumulation through both purchases and mining, while dismantling public mechanisms used to acquire the asset. The IMF has since stated that El Salvador has complied with these commitments, including initiating a full phase-out of Chivo, even as private-sector wallets are expected to continue operating within the country.

Despite these concessions, Bitcoin accumulation remains the most sensitive point of tension between San Salvador and Washington-based lenders. The IMF has repeatedly warned that Bitcoin’s volatility poses material risks to public finances and debt sustainability. Nonetheless, El Salvador continues to report ongoing purchases. Official disclosures show that the country added more than 1,000 BTC to its reserves last month, bringing total holdings to roughly 7,500 BTC, with acquisitions continuing on a daily basis.

President Bukele has shown little willingness to reverse course. In public statements earlier this year, he dismissed the idea of halting Bitcoin purchases, signaling that the policy would continue regardless of external pressure. That stance has kept Bitcoin firmly on the agenda of IMF negotiations, even as other aspects of the relationship show signs of improvement.

Indeed, while maintaining its warnings on crypto exposure, the IMF adopted a notably positive tone regarding El Salvador’s broader economic performance. The fund said growth has exceeded expectations, with real GDP projected to expand by around 4% this year and momentum carrying into next year. Fiscal targets remain on track, foreign reserves are rising, and domestic borrowing has declined. Structural reforms have also advanced, including new banking stability rules, the adoption of Basel III standards, and strengthened anti-money laundering frameworks.

As the IMF works toward completing its second review under the EFF, El Salvador’s Bitcoin experiment remains under close scrutiny. The country appears increasingly willing to retreat from direct state involvement, yet unwilling to abandon accumulation altogether, leaving its crypto strategy suspended between compliance and defiance.