IMF gave them 1.4 billion to abandon the “experiment”:
> The IMF made this a condition for a loan of 1.4 billion US dollars (1.35 billion euros).
In December of last year, the IMF reached an agreement with President Nayib Bukele’s government on the loan of the stated amount to strengthen the country’s “fiscal sustainability” and mitigate the “risks associated with Bitcoin,” as it was described.
—-
I dislike cryptocurrencies as much as the next guy but this was clearly something else than a failure of the currency itself
If you need to go to the IMF for a loan of ~3% of your GDP to mitigate the risks associated with Bitcoin, well, that's a pretty good sign that adopting Bitcoin as legal tender was a pretty disastrous failure.
> If you need to go to the IMF for a loan of ~3% of your GDP to mitigate the risks associated with Bitcoin, well, that's a pretty good sign that adopting Bitcoin as legal tender was a pretty disastrous failure.
In addition, the whole country ditched Bitcoin as a payment system as soon as they cached out their sign on bonus. How is a national currency depicted as a success if no one uses it at all once they cached out the free money?
Crypto bros need to stop moving the goal posts they themselves plant arbitrarily and against any reason.
>President Nayib Bukele’s government has accumulated 5,900 BTC, achieving profits of $333.59 million from an initial $269.74 million investment, fuelled by Bitcoin’s recent surge past $100,000. (dec 2024)
If I could convince someone to give me 1.x billion to change my behaviour, I would consider that behaviour a massive success without much further thought. It isn't a huge amount of money at the scale of a national economy but >$1 billion for nothing is a win.
Although of course it is unknowable how much of that money was bribe and how much El Salvador would have gotten without additional leverage.
Keep in mind that El Salvador is tiny. This is like 14 days of El Salvador's entire GDP. Or scaled to GDP, it's like giving a $1.2 Trillion loan to the USA.
What do you mean "gave" them 1.4 Billion? It's a loan so it has to be repaid. Usually, this is unsaid but with crypto people you sometimes have to explain basic financial conditions. Also, the loan was to bail them from risks of Bitcoin.
Being granted a loan of $1.4B with favourable terms under the extended fund facility is an enormous privilege. El Salvador is certainly getting far more favourable terms than would for their USD-denominated bonds. Putting it another way, El Salvador being given a line of credit that would have cost them hundreds of millions of dollars had they sold bonds to raise this cash through traditional means.
It's funny to have to explain basic government loan mechanics to this comment, given the derisive comment about "crypto people" needing basic financial concepts explained.
> IMF gave them 1.4 billion to abandon the “experiment”
No, that is not what the quote says. It says it was a condition on a loan.
There is a huge difference between unsolicitedly saying “hey, I’ll give you money for you to stop betting on horses” or being asked for money and replying “OK, but if I do lend you the money you have to promise me you won’t spend it on horse betting; I want it back”.
There is a book called "Talking to your daughter about Economics", where the author explains one of the problems with bitcoin is, you cant print more of it in a crisis. Maybe thats what happened here.
That may be one of the problems with bitcoin as legal tender and official state currency but not a problem with Bitcoin itself, quite the opposite: as evidenced by the genesis block’s embedded message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
Ironically part of the long-term problem was El Salvador's dollarization, also preventing them from printing in a crisis (that crisis being the COVID pandemic).
Or maybe the IMF doesn't want the money they "give" to El Salvador to be dissipated into a synthetic commodity masquerading as a deflationary currency.
I'm not going to defend the IMF here... they're sort of like sharks swimming in the national currency markets (look up "Our Brand is Crisis" and "Life and Debt" for more info, and then read Summers' "The Payment System" for the IMF's take on things.)
But... I think my point is... I don't think there's any more conspiracy going on here than normal IMF conspiracy. But the IMF is sort of open about it, so is it still a conspiracy? I don't think the IMF or WB care one whit about cryptocurrencies, they just don't even register.
EDIT: Oh, and "Confessions of an Economic Hit-Man" is also nice and conspiratorial. If half of the author's assertions are truthful, there's WAY more happening in Latin America vis a vis international banking cabals.
The very first IMF loan ever given was to France for reconstruction. One of the terms for the condition was to remove the only elected communist in their government from their position.
Arguably, both preconditions could have been simply intended to secure an eventual return on the loan. Having a communist in political leadership and allowing citizens to pay their taxes in Bitcoin both increase fiscal risk. I can understand the IMF wanting to reduce that risk as much as possible before providing a loan.
No country with its own money ever needs to get the IMF involved.
Largely because the only place the IMF can get your money is from you.
Currencies are public monopolies.
The problems always arise when a state starts issuing state backed liabilities in other denominations - as there is no way for a state to absolve itself of that debt without paying it back. It becomes a debtors prison.
If the IMF was loaning them 1.4B to do economic development then its reasonable that the country not keep a massive liability on its balance sheets.
Imagine I wanted to loan your car company 100M to build out a factory because I believe in the product. I'm told that your company keeps all its reserves in bitcoin and its possible that even if the factory is successful that the loan wont be repaid if bitcoin falls.
I think if you are obsessed with bitcoin its easy to see this as conspiratorial, but the reality is no bank is going to loan a (company, person, country) money in cash if they are told the loan may default if bitcoin falls.
Of course it was an utter failure. Why else would they need 1.4 B USD from the IMF when BTC has run up what... 6x or so since they started with this "experiment"?
This wasn't a vendetta or a political maneuver. The IMF is intending to enforce stability on loan recipients but insisting on sensible policy. Per the article, the program was already unsuccessful and they wanted it removed as a risk factor.
> this was clearly something else than a failure of the currency itself
They needed the loan. The original thesis was taxes on crypto bros’ business and tourism would increase revenues while crypto-based lending would provide an alternative to the IMF. Neither panned out. This was a failure of Bitcoin to provide any of the international benefits of the dollar financial system.
They gave it to them, with a contingency that they need to stop reckless financially dangerous policies, like allowing a wildly volatile cryptocurrency to be legal tender backed by the government at various levels of society.
IMF loans often come with the stipulation that you need to reign in wild and speculative financial policies
"I dislike crypto as much as the next guy but this was clearly something else than a failure of the currency itself."
Zeke Faux who wrote the book "Number Go Up", a George Plimpton-styled account which was released last year, went to El Salvador and tried to use crypto as currency.
BECKER: ... But also, I just want to point out that in 2021, the president of El Salvador, Nayib Bukele, announced that his government was going to be betting on Bitcoin. And we actually have a bit of tape from him at that year's Bitcoin conference with a lot of cheers from crypto enthusiasts about his government's use of Bitcoin.
Let's listen.
NAYIB BUKELE: Next week, I will send to Congress a bill that will make Bitcoin a legal tender in El Salvador. In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy. And in the medium and long term, we hope that this small decision can help us push forward (CHEERS).
BECKER: And following that announcement, the government of El Salvador encouraged businesses to use Bitcoin. Zeke Faux, you traveled to El Salvador. What did you
find out there?
FAUX: ... And people were literally, I was at this conference. People were, it was one of the first ones I went to, people were in tears, and I just, I was like, what is this weird world, and they all said, you got to go to El Salvador, you got to see, it's the future, it's going to help the poor, they're all using Bitcoin. And the listeners are probably asking themselves, "What does this even mean, how does this make sense?" And it doesn't make sense. I got there, and one of the first places I went to was this little roadside store.
And the president had passed this Bitcoin law, which meant that all businesses were supposed to accept Bitcoin as payment. The country's main currency is the dollar, and they didn't abandon that. But they're supposed to also use Bitcoin. And I went to the store, and I pulled, I grabbed, I asked for a bottle of water.
And the clerk gave it to me, so I'm holding the water. And then in my terrible gringo Spanish, I said, "Puedo pagar con Bitcoin, por favor?" And the clerk just said, "Basura!" Trash! And grabbed the water out of my hand, and just walked away. Get out of here, you dumb tourist. I don't want to use your Bitcoin.
And that was the attitude I got all over the place. Despite this huge push from the president, the currency was totally rejected by the people. Stores would only use it begrudgingly. And what using Bitcoin means is that they would have a special payment terminal and I could use an app on my phone to send my Bitcoins to them instead of using my credit card or my dollars, but the terminals never worked right.
They're very slow on there and people complained. "Hey, the price of Bitcoin goes up and down a lot. Why would I want to accept that for my surf lesson or to sell you a beer? How about you just give me some dollars?" So the ones that did accept that it was just as like a courtesy for the annoying Bitcoin tourists, which I
became one of."
There seems to be two concepts that are getting conflated. One concept is that BTC is a good investment. Historically that is undeniable.
The other concept is that it is a good medium of exchange. I think that is not so true because 1) its neither cheap nor easy to buy a lot of things with it 2) a thing that goes up in value is not a good medium of exchange because people don't want to spend it, they want to hoard it.
If you accept that BTC is a reasonable investment, but not a great medium of exchange then what is happening makes sense.
I am not saying that a decentralized token couldn't be a good medium of exchange -- honestly I don't know. But so far BTC is not that.
You're also conflating two distinct concepts: "Bitcoin the currency" and "Bitcoin the payment network."
The currency itself can be used independently of its base-layer network, which is intentionally slow and costly (functioning primarily as a settlement layer). This separation is enabled by off-chain or layer 2 systems, such as the Lightning Network or custodial platforms. These solutions retain Bitcoin's monetary benefits - like a predictable money supply, off/on ramping through the base layer - while enabling fast, cheap transactions. The tradeoff is that you must trust an intermediary, but this mirrors the same compromise inherent to digital USD payment systems (Venmo, credit cards, PayPal, etc.).
In fact, USD lacks a true "base layer" altogether. The closest equivalent would be the Federal Reserve Bank’s ledger, but accounts there are restricted to large financial institutions, not individuals.
> a thing that goes up in value is not a good medium of exchange because people don't want to spend it, they want to hoard it.
So... traditional money is good because it forces poor people to spend it? Rich people have no problem converting cash into assets that go up in value and holding onto them converting back at need. It's only poor people that have to hold comparatively high percentage of their assets in something that loses value.
Let me add a third concept which, to me, is a much more useful feature (as I wrote in a sister thread): a store of value for people whose governments like to control the money flow, dilute savings in the single available local fiat currency and confiscate savings calling it a money reform. Which, sadly, is a large part of the world.
Value oscillating against some golden reference by a factor of 4? Many will likely take that if it means avoiding their own government shenanigans. I saw a currency reform which turned savings to zero. My parents lived through two such devaluations. As did my grandparents. Buying dollars or another hard currency, if found, meant prison. In this setup a permissionless, anonymous store of value, warts and all, is very valuable.
Makes me wonder why the BTC original design tilted toward deflationary, since allegedly, 'satoshi' was trying to create currency, not speculation. Was it a two phase idea ? Attract people for 80 years as investment then when it's stable, use them as stupid coins ?
The trouble is, it needs to be more than that if it is to survive. Since inception, mining has mostly been subsidized by new bitcoin, which is capped by design (and about 95% distributed).
Satoshi’s paper assumed that transaction costs would make up for the exponentially declining subsidy, but that hasn’t really happened since it never lived up to his “digital cash” vision.
It's reasonable when you think about it from a risk assessment point of view.
The IMF wants to feel that El Salvador (a) will likely be able repay the debt, (b) in a currency that is unlikely to devalue too much. For that reason, the debt would probably be in USD or some other prominent world currency (letting the debt be in El Salvador's local currency would risk them printing money to devalue it, threatening (b)).
So the IMF would probably make the debt in USD. In theory, bitcoin can be exchanged for USD, so in theory, El Salvador could exchange some of their bitcoin into USD to pay the IMF back. But what if bitcoin's value drops precipitously? Or if it becomes illiquid?
It seems the IMF thinks bitcoin is hype, so it expects its value to drop to near zero eventually. That would make it very difficult for a country that has large bitcoin reserves (instead of large reserves of a more stable currency) to repay the loan.
They care about the economic stability of a country they make loans to. Their loans often come with conditions about how the government can run fiscal or trade policy.
I don't know if that is good or bad but I have heard smart economists argue both sides.
“Another change makes using bitcoin entirely voluntary. (Previously, the law mandated that businesses accept bitcoin for any goods or services they provided.) Additionally, bitcoin can no longer be used to pay taxes or settle government debts.”
They did this to receive a loan from the IMF. The IMF was withholding the loan because of BTC and would not disburse it until they got rid of its status as legal tender.
Imagine you have 6,050 bitcoins but they didn't work out for you the way that you hoped. The most reasonable thing to do is to still advertise a bullish position because otherwise you are devaluing your own asset.
There is a strong sentiment around bitcoin in El Salvador and it can make them money; but the experiment around it being a legal tender, well, failed.
Investment is not legal tender, its moved from a functional role to a high risk investment strategy, would be my take. They're different buckets of money/value and expectations.
> Salvadorans, with the exception of a few, never embraced Bukele’s initiative, who enjoys enormous popularity for his war against gangs, which dropped homicides to historic lows in El Salvador. A recent survey by the Central American University (UCA) revealed that 92% of Salvadorans did not use bitcoin in their transactions in 2024.
I would say this points to an actual failed experiment, if true.
It's no longer legal tender; merchants will no longer be forced to accept it. That's the key point; if the state wants to indulge in speculation, that's its business (though you'd question whether a state which needs to take IMF loans, which are kind of a last resort, should really be engaging in this...)
That's probably why OP chose a highly editorialized "Tico Times" article as the source for this. What's even funnier is it's a Costa Rican newspaper. So one Central American country publishes an article smearing another Central American country, and then HN sees the bias-confirming headline and tries to glean some economic lesson from it. Classic.
It's interesting and nice to see how progressive and creative El Salvador has been. Some failures are perfectly understandable when one is willing to try new things. Their approach to crime is another thing that comes to mind that was lambasted and ridiculed by the "international community" and "experts". Yet in the space of a single decade they went from murder capital of the world to safer than New Zealand (in terms of homicide rate), which is just staggering.
I love that they are innovating and experimenting and trying their own things, and don't let the stuffy pompous status quo hold them back.
Note that their official homicide numbers no longer include bodies found in unmarked graves (as of 2021), people killed in conflicts between police and gangs (as of 2022), and people killed in prison. These are arguably reasonable decisions but unless you backfit the old numbers, you don't have the real trend.
I suspect that the trend would be impressive either way, you'd just lose the "safer than New Zealand" line.
Well there's no need to suspect, homicide rates were dropping like a rock before 2021. Perhaps faster than has been achieved by any other social reform on record.
They just offered to accept any criminal of any nationality (including American citizens) from the USA for a fee. https://www.nytimes.com/2025/02/04/us/politics/el-salvador-p... It's creative but hard to see as progressive, importing the idea of a for profit prison system from the USA.
Yes I am certain that not everything El Salvador does is progressive, even before reading this link.
Some people called Obama progressive and he definitely helped destroy Libya and Syria, ordered the extrajudicial execution of a US citizen under presidential immunity, droned poor brown people living on the other side of the planet, let Citi group pick his cabinet, etc. Nevertheless, the progressive things that Obama did do were still progressive.
This is... a strange and jarring thing to read. My kneejerk response was that yes, they are innovating and experimenting with oppressive and corrupt governance, but that is ultimately uncharitable. A more balanced response is that while you may personally think of Bitcoin as progressive (I can't imagine why) you certainly can't claim that Bukele's El Salvador is progressive. You may like the gang crackdown, you may appreciate the suspension of habeus corpus, but you can't claim that's a progressive position.
I don't think "bitcoin" is progressive, bitcoin is a technology. I think the idea of trying a decentralized electronic currency is progressive. Whether they implemented it well or should have seen the problems with using it as a currency is one thing, but in the idea of trying something new sure I think it was good. I don't think it caused grave harm to try.
And I certainly can claim that their policies on crime are progressive. They are prioritizing the rights of the many law abiding people who have a fundamental human right to live unmolested and unterrorized by criminals. I think that is very progressive and quite a radical departure from the status quo. I don't think I have ever heard "human rights advocates" and UN types opine and lament the human rights of people who have to endure this type of criminal society and I think it is brave and progressive to fight for them. I absolutely understand that it has required concessions and weakening of rights in other areas, and I don't say that is a good thing, but everything is a tradeoff right? If they continued conservative status quo the tradeoff would have been other peoples rights continuing to be violated.
Just because it's not "progressive" as exactly defined by an elite ruling class in the "international community" and think-tanks and academia, and the leftist intelligentsia at large, does not mean it is not progress in social reform and improvement for the greater good. To the actual people who have to live in El Salvador, approval for Bukele's reforms are staggering. I'm sure a lot of the "experts" who assured everybody they would never work are upset about it because they have a lot of egg on their face now, but fortunately the country has a bright young progressive leader who cares about the people more than the elitists say.
CNN says Secretary Rubio just struck a deal with Bukele to accept deportees from the United States regardless of nationality, including US citizens, as long as we pay to house them in his prison.
The word progressive has a real meaning besides the popular figure-of-speech of calling leftist policies "progressive". Progress in anything, including politics, can move in a direction you like or in a direction you don't like. It's still progress.
(a) Mass arrests of anyone who merely had a gang tattoo, (b) Jailing of children, (c) Security cameras everywhere, (d) Inhumane treatment of prisoners.
Trashing human rights is always effective but hardly creative nor progressive.
Hardly. What made Bukele's presidency impressive is that many other governments had tried the "mano dura" approach before, but he was the first one to make it work, and nobody is sure why. There's evidence even he didn't expect it to work that well.
Human rights of victims of these criminals were being routinely trashed and ignored before Bukele's reforms, so that's just not a trump card. His progressive reforms have significantly improved society for the greater good and has stood up for human rights that were being trampled, it is also against the conservative status quo thinking of how to deal with crime, so it very much fits the dictionary definition of progressive. Just not the elitist status quo definition of the word (ironically, they are conservative by at least some definitions).
a - gang tattoos mean gang involvement. Let's stop pretending otherwise.
b - I'm not sure what you think you're reading but that article points to the scourge of gangs and their impact on children. I only skimmed it but I couldn't see anything in that article about detaining children.
c - So?
d - Gang members in places like El Salvador victimise communities. They are a scourge. I will not accept the humanizing of them - they are parasites. I absolutely support Bukele's policies to rid the country of them. I hope he keeps going.
It is permissionless, very liquid asset that the governments cannot dilute. For many people this is a very big deal. A significant part of the world population lives under regimes where the governments control the money flow, heavily dilute savings in the single local fiat currency and can confiscate savings under a guise of money reform.
While not nearly as bad, most democratic, developed countries dilute their fiat to the tune of 5-7% a year. Would I buy bitcoin if I have an easy access to a convenient currency with no (or at least significantly under the average GDP growth) debasement? Hell no! Otherwise, I will (together with gold, income-generating stocks, real estate, etc.) as an insurance against government spending run amok. My 2c.
It doesn't have to be "magic" that causes it to go up forever. People need a way to put large amounts of money in places that are difficult for governments to get to and /or easy to move across jurisdictional borders. Think: money launderers, people that are worried their corrupt government will seize their assets, people hiding money from someone they owe like a spouse in a divorce. These all seem to me to be reasonable use cases for bitcoin.
All the things that make bitcoin a pain to buy a pizza are irrelevant if your goal is to hide $100m in your shoe. Nothing can do that better than bitcoin and there is a demonstrated need.
If you assume the reason to use bitcoin isn't going away and the wealth of the world goes up-- while the supply of bitcoin is pretty constant-- it can keep going up without magic.
But that doesn't distinguish Bitcoin from other cryptocurrencies. The thing that distinguishes Bitcoin is fame, pure and simple. Everyone has heard of it.
Here's one good use: I looked into leaving the US to become a citizen elsewhere. I have about $15MM in my retirement. I would have to pay a penalty on my taxes for early withdrawal, and be taxed when I renounce my citizenship. In theory I could cash everything out, buy a huge amount of BTC, move to another country (within a week, or quickly!!), and then cash it out in their currency. Of course, all sorts of alarm bells would go off if a normal schmoe like me tried to move that much money out of my investment account, because I'm not rich enough to break finance laws like people worth 10x, 100x or 1,000x more than me can do without going to jail. And I'd be terrified that the other country would OOPS my deposit like in the film Blow with Johnny Depp.
Many of us in the BC is digital money camp argued the case that more transactions and a lower transaction fee could be most easily implemented, within the spirit of the founders intent, if we simply increased the size of the transaction buffer, mitigating an obvious bottleneck.
We argued against the complexity of SegWit and Lightning Network.
I think greed and politics won rather than engineering or economics good sense - people didnt want cheaper transactions, it now costs around $15 USD per BTC transaction.
Despite the proliferation of alt-coins using essentially the same code-base, with shorter block-times and larger buffers.. and more programmability - ultimately proof-of-stake might be a better implementation of the block minting process, than proof-of-work.
Those who continue to invest in and use the Lightning (layer 2) network think it will be used as currency but most see it as a long term storage of value, at least until infrastructure supporting layers 2 and 3 mature.
As for “magically,” there’s nothing magic about its increase in value as it replaces legacy technology, chiefly gold as a store of value.
Except it has none of the properties of gold as an asset. The value of bitcoin is highly correlated with equities and anti-correlated with gold. It’s the opposite of what you want to be holding as a hedge against a stock market crash.
I think people mostly realized that the more immediate priority is establishing Bitcoin as an international reserve commodity. Its usage as a currency, either directly or via intermediary layers, is kind of secondary to that. Bitcoin is making pretty good progress in that regard.
Because if you/they knew that, then they'd be buying more bitcoin.
On a much smaller scale, your dollar goes up by 5% every year but you still use it everyday because all your monies are in dollars. If all your monies are in btc, you'd have to sell to buy things.
It used to be that buying a Bitcoin today would net you 10000x more if you waited a bit.
Then it was 100x more.
Now 10x more is the best people can dream of. The possibility of getting super rich from Bitcoin is now gone unless you're already rich to start with. Turning $100 into a million dollars made the whole world interested. Turning 100k into a million isn't anything interesting and it's out of reach of most normal people, and those who can throw 100k into something are already investing in other things with similar returns. As a normie, putting in $100 with the hopes of Bitcoin reaching a million would only get you $1000. That's not much different than a couple scratch off lottery tickets.
It'd be much smarter to find the new secret thing that costs $5 now and will net you a million dollars ten years down the road. There's loads of stuff out there that people aren't paying attention to yet. Crypto isn't one of those things.
It's like those people who collect action figures and never take them out of the box. I'm not trying to knock it, but I don't think I'll ever understand it.
Yes, some Bitcoin people still hold on to the idea that somehow layer 2 or layer 3 systems will somehow make Bitcoin practical for regular payments again.
But largely that's been abandoned for the "store of value"/"number go up" speculative use-case which is easily 99.99% of the point of Bitcoin today.
I literally use USDT daily. Use it to pay for food delivery, for a massage or a manicure, or exchange it for cash delivered to my home. Literally 90% of my spending goes through it.
Yeah the rest of us can continue geeking out over layered network protocol design and technologies like Lightning or Liquid. There is so much going on under the hood but it is so much easier to take the piss and learn nothing. That is no surprise, with the current state of the world.
I don't particularly like BTC (as it senselessly burns huge amounts of energy, thereby actively contributing to the destruction of our biosphere), but this news post is intentionally misleading. As reported by many other outlets (e.g. [1,2]), El Salvador abandons BTC to qualify for an IMF loan - so the IMF is pressuring them towards this move (presumably for political reasons).
Its not like IMF had a gun to their head. They could have refused the loan.
At the end of the day they abandoned the policy because they believe it will help the economy to abandon it (indirectly via the loan). I certainly wouldn't call that a success.
Readit News
> The IMF made this a condition for a loan of 1.4 billion US dollars (1.35 billion euros). In December of last year, the IMF reached an agreement with President Nayib Bukele’s government on the loan of the stated amount to strengthen the country’s “fiscal sustainability” and mitigate the “risks associated with Bitcoin,” as it was described.
—-
I dislike cryptocurrencies as much as the next guy but this was clearly something else than a failure of the currency itself
The IMF gave them 1.4 billion dollars to mitigate the risk of bitcoin to the IMF. A subtle but important difference.
In addition, the whole country ditched Bitcoin as a payment system as soon as they cached out their sign on bonus. How is a national currency depicted as a success if no one uses it at all once they cached out the free money?
Crypto bros need to stop moving the goal posts they themselves plant arbitrarily and against any reason.
Was that the goal of the loan? How did you come to this conclusion?
I wish I could have a $333m failure like that.
(edit - see also his approval rating - 91% https://x.com/stats_feed/status/1875573928250179666)
Although of course it is unknowable how much of that money was bribe and how much El Salvador would have gotten without additional leverage.
https://www.reuters.com/markets/currencies/el-salvadors-bitc...
It's funny to have to explain basic government loan mechanics to this comment, given the derisive comment about "crypto people" needing basic financial concepts explained.
Dead Comment
Is this really the general sentiment on HN?
No, that is not what the quote says. It says it was a condition on a loan.
There is a huge difference between unsolicitedly saying “hey, I’ll give you money for you to stop betting on horses” or being asked for money and replying “OK, but if I do lend you the money you have to promise me you won’t spend it on horse betting; I want it back”.
I'm not going to defend the IMF here... they're sort of like sharks swimming in the national currency markets (look up "Our Brand is Crisis" and "Life and Debt" for more info, and then read Summers' "The Payment System" for the IMF's take on things.)
But... I think my point is... I don't think there's any more conspiracy going on here than normal IMF conspiracy. But the IMF is sort of open about it, so is it still a conspiracy? I don't think the IMF or WB care one whit about cryptocurrencies, they just don't even register.
EDIT: Oh, and "Confessions of an Economic Hit-Man" is also nice and conspiratorial. If half of the author's assertions are truthful, there's WAY more happening in Latin America vis a vis international banking cabals.
IMF loans have ALWAYS been political
Largely because the only place the IMF can get your money is from you.
Currencies are public monopolies.
The problems always arise when a state starts issuing state backed liabilities in other denominations - as there is no way for a state to absolve itself of that debt without paying it back. It becomes a debtors prison.
It's not like you just choose to issue debt in foreign denomination cause it's fun.
Imagine I wanted to loan your car company 100M to build out a factory because I believe in the product. I'm told that your company keeps all its reserves in bitcoin and its possible that even if the factory is successful that the loan wont be repaid if bitcoin falls.
I think if you are obsessed with bitcoin its easy to see this as conspiratorial, but the reality is no bank is going to loan a (company, person, country) money in cash if they are told the loan may default if bitcoin falls.
Deleted Comment
They needed the loan. The original thesis was taxes on crypto bros’ business and tourism would increase revenues while crypto-based lending would provide an alternative to the IMF. Neither panned out. This was a failure of Bitcoin to provide any of the international benefits of the dollar financial system.
this is a really ambiguous phrasing. Is bitcoin a "currency"? is el Salvador adopting bitcoin as a ___?____ a currency?
The bank would be pretty reckless not to stipulate these things.
IMF loans often come with the stipulation that you need to reign in wild and speculative financial policies
Zeke Faux who wrote the book "Number Go Up", a George Plimpton-styled account which was released last year, went to El Salvador and tried to use crypto as currency.
https://www.wwno.org/2023-09-19/tales-from-the-world-of-cryp...
BECKER: ... But also, I just want to point out that in 2021, the president of El Salvador, Nayib Bukele, announced that his government was going to be betting on Bitcoin. And we actually have a bit of tape from him at that year's Bitcoin conference with a lot of cheers from crypto enthusiasts about his government's use of Bitcoin.
Let's listen.
NAYIB BUKELE: Next week, I will send to Congress a bill that will make Bitcoin a legal tender in El Salvador. In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy. And in the medium and long term, we hope that this small decision can help us push forward (CHEERS).
BECKER: And following that announcement, the government of El Salvador encouraged businesses to use Bitcoin. Zeke Faux, you traveled to El Salvador. What did you find out there?
FAUX: ... And people were literally, I was at this conference. People were, it was one of the first ones I went to, people were in tears, and I just, I was like, what is this weird world, and they all said, you got to go to El Salvador, you got to see, it's the future, it's going to help the poor, they're all using Bitcoin. And the listeners are probably asking themselves, "What does this even mean, how does this make sense?" And it doesn't make sense. I got there, and one of the first places I went to was this little roadside store.
And the president had passed this Bitcoin law, which meant that all businesses were supposed to accept Bitcoin as payment. The country's main currency is the dollar, and they didn't abandon that. But they're supposed to also use Bitcoin. And I went to the store, and I pulled, I grabbed, I asked for a bottle of water.
And the clerk gave it to me, so I'm holding the water. And then in my terrible gringo Spanish, I said, "Puedo pagar con Bitcoin, por favor?" And the clerk just said, "Basura!" Trash! And grabbed the water out of my hand, and just walked away. Get out of here, you dumb tourist. I don't want to use your Bitcoin.
And that was the attitude I got all over the place. Despite this huge push from the president, the currency was totally rejected by the people. Stores would only use it begrudgingly. And what using Bitcoin means is that they would have a special payment terminal and I could use an app on my phone to send my Bitcoins to them instead of using my credit card or my dollars, but the terminals never worked right.
They're very slow on there and people complained. "Hey, the price of Bitcoin goes up and down a lot. Why would I want to accept that for my surf lesson or to sell you a beer? How about you just give me some dollars?" So the ones that did accept that it was just as like a courtesy for the annoying Bitcoin tourists, which I became one of."
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El Salvador keeps buying the Bitcoin for its strategic reserve. Businesses and citizens can keep using it.
But for getting an IMF loan, IMF (which, to put it mildly, doesn't like Bitcoin) required the end to Bitcoin legal tender status.
Now the businesses are free to accept it or not instead of being required to accept it. That's all. The government plans to keep buying and using it.
The other concept is that it is a good medium of exchange. I think that is not so true because 1) its neither cheap nor easy to buy a lot of things with it 2) a thing that goes up in value is not a good medium of exchange because people don't want to spend it, they want to hoard it.
If you accept that BTC is a reasonable investment, but not a great medium of exchange then what is happening makes sense.
I am not saying that a decentralized token couldn't be a good medium of exchange -- honestly I don't know. But so far BTC is not that.
The currency itself can be used independently of its base-layer network, which is intentionally slow and costly (functioning primarily as a settlement layer). This separation is enabled by off-chain or layer 2 systems, such as the Lightning Network or custodial platforms. These solutions retain Bitcoin's monetary benefits - like a predictable money supply, off/on ramping through the base layer - while enabling fast, cheap transactions. The tradeoff is that you must trust an intermediary, but this mirrors the same compromise inherent to digital USD payment systems (Venmo, credit cards, PayPal, etc.).
In fact, USD lacks a true "base layer" altogether. The closest equivalent would be the Federal Reserve Bank’s ledger, but accounts there are restricted to large financial institutions, not individuals.
So... traditional money is good because it forces poor people to spend it? Rich people have no problem converting cash into assets that go up in value and holding onto them converting back at need. It's only poor people that have to hold comparatively high percentage of their assets in something that loses value.
Value oscillating against some golden reference by a factor of 4? Many will likely take that if it means avoiding their own government shenanigans. I saw a currency reform which turned savings to zero. My parents lived through two such devaluations. As did my grandparents. Buying dollars or another hard currency, if found, meant prison. In this setup a permissionless, anonymous store of value, warts and all, is very valuable.
I'll deny it.
Bitcoin has seen large gains, that is undeniable. However, that is not the same thing as being a good investment.
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Bitcoin tried for 15-20 years to find a use case but now it’s just an asset class like gold and nothing else, it will never be more than that.
Satoshi’s paper assumed that transaction costs would make up for the exponentially declining subsidy, but that hasn’t really happened since it never lived up to his “digital cash” vision.
Lol, gold that can be teleported around the globe for fractions of a cent, yeah.. it sucks that bitcoin will never be more than that.
Right, so it's no longer legal tender.
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The IMF wants to feel that El Salvador (a) will likely be able repay the debt, (b) in a currency that is unlikely to devalue too much. For that reason, the debt would probably be in USD or some other prominent world currency (letting the debt be in El Salvador's local currency would risk them printing money to devalue it, threatening (b)).
So the IMF would probably make the debt in USD. In theory, bitcoin can be exchanged for USD, so in theory, El Salvador could exchange some of their bitcoin into USD to pay the IMF back. But what if bitcoin's value drops precipitously? Or if it becomes illiquid?
It seems the IMF thinks bitcoin is hype, so it expects its value to drop to near zero eventually. That would make it very difficult for a country that has large bitcoin reserves (instead of large reserves of a more stable currency) to repay the loan.
I don't know if that is good or bad but I have heard smart economists argue both sides.
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Sounds like the term "Failed Experiment" is the writer's assertion and not the government official position.
--https://reason.com/2025/02/03/el-salvador-walks-back-its-bit...
Sounds pretty failed to me.
There is a strong sentiment around bitcoin in El Salvador and it can make them money; but the experiment around it being a legal tender, well, failed.
> Salvadorans, with the exception of a few, never embraced Bukele’s initiative, who enjoys enormous popularity for his war against gangs, which dropped homicides to historic lows in El Salvador. A recent survey by the Central American University (UCA) revealed that 92% of Salvadorans did not use bitcoin in their transactions in 2024.
I would say this points to an actual failed experiment, if true.
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I love that they are innovating and experimenting and trying their own things, and don't let the stuffy pompous status quo hold them back.
I suspect that the trend would be impressive either way, you'd just lose the "safer than New Zealand" line.
Some people called Obama progressive and he definitely helped destroy Libya and Syria, ordered the extrajudicial execution of a US citizen under presidential immunity, droned poor brown people living on the other side of the planet, let Citi group pick his cabinet, etc. Nevertheless, the progressive things that Obama did do were still progressive.
And I certainly can claim that their policies on crime are progressive. They are prioritizing the rights of the many law abiding people who have a fundamental human right to live unmolested and unterrorized by criminals. I think that is very progressive and quite a radical departure from the status quo. I don't think I have ever heard "human rights advocates" and UN types opine and lament the human rights of people who have to endure this type of criminal society and I think it is brave and progressive to fight for them. I absolutely understand that it has required concessions and weakening of rights in other areas, and I don't say that is a good thing, but everything is a tradeoff right? If they continued conservative status quo the tradeoff would have been other peoples rights continuing to be violated.
Just because it's not "progressive" as exactly defined by an elite ruling class in the "international community" and think-tanks and academia, and the leftist intelligentsia at large, does not mean it is not progress in social reform and improvement for the greater good. To the actual people who have to live in El Salvador, approval for Bukele's reforms are staggering. I'm sure a lot of the "experts" who assured everybody they would never work are upset about it because they have a lot of egg on their face now, but fortunately the country has a bright young progressive leader who cares about the people more than the elitists say.
Alright so let's have a look at these progressive/creative approaches: https://en.wikipedia.org/wiki/Crime_in_El_Salvador
(a) Mass arrests of anyone who merely had a gang tattoo, (b) Jailing of children, (c) Security cameras everywhere, (d) Inhumane treatment of prisoners.
Trashing human rights is always effective but hardly creative nor progressive.
Hardly. What made Bukele's presidency impressive is that many other governments had tried the "mano dura" approach before, but he was the first one to make it work, and nobody is sure why. There's evidence even he didn't expect it to work that well.
b - I'm not sure what you think you're reading but that article points to the scourge of gangs and their impact on children. I only skimmed it but I couldn't see anything in that article about detaining children.
c - So?
d - Gang members in places like El Salvador victimise communities. They are a scourge. I will not accept the humanizing of them - they are parasites. I absolutely support Bukele's policies to rid the country of them. I hope he keeps going.
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I don't follow it closely, but that idea seems to have faded and now it's just an asset to buy and hold while it magically goes up forever.
It is permissionless, very liquid asset that the governments cannot dilute. For many people this is a very big deal. A significant part of the world population lives under regimes where the governments control the money flow, heavily dilute savings in the single local fiat currency and can confiscate savings under a guise of money reform.
While not nearly as bad, most democratic, developed countries dilute their fiat to the tune of 5-7% a year. Would I buy bitcoin if I have an easy access to a convenient currency with no (or at least significantly under the average GDP growth) debasement? Hell no! Otherwise, I will (together with gold, income-generating stocks, real estate, etc.) as an insurance against government spending run amok. My 2c.
At best it will work as long as few enough people are doing it that the government doesn't care.
All the things that make bitcoin a pain to buy a pizza are irrelevant if your goal is to hide $100m in your shoe. Nothing can do that better than bitcoin and there is a demonstrated need.
If you assume the reason to use bitcoin isn't going away and the wealth of the world goes up-- while the supply of bitcoin is pretty constant-- it can keep going up without magic.
We argued against the complexity of SegWit and Lightning Network.
I think greed and politics won rather than engineering or economics good sense - people didnt want cheaper transactions, it now costs around $15 USD per BTC transaction.
Despite the proliferation of alt-coins using essentially the same code-base, with shorter block-times and larger buffers.. and more programmability - ultimately proof-of-stake might be a better implementation of the block minting process, than proof-of-work.
As for “magically,” there’s nothing magic about its increase in value as it replaces legacy technology, chiefly gold as a store of value.
On a much smaller scale, your dollar goes up by 5% every year but you still use it everyday because all your monies are in dollars. If all your monies are in btc, you'd have to sell to buy things.
Then it was 100x more.
Now 10x more is the best people can dream of. The possibility of getting super rich from Bitcoin is now gone unless you're already rich to start with. Turning $100 into a million dollars made the whole world interested. Turning 100k into a million isn't anything interesting and it's out of reach of most normal people, and those who can throw 100k into something are already investing in other things with similar returns. As a normie, putting in $100 with the hopes of Bitcoin reaching a million would only get you $1000. That's not much different than a couple scratch off lottery tickets.
It'd be much smarter to find the new secret thing that costs $5 now and will net you a million dollars ten years down the road. There's loads of stuff out there that people aren't paying attention to yet. Crypto isn't one of those things.
But largely that's been abandoned for the "store of value"/"number go up" speculative use-case which is easily 99.99% of the point of Bitcoin today.
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They even have their own tracker, https://bitcoin.gob.sv/
[1] https://finance.yahoo.com/news/el-salvador-changes-bitcoin-r... [2] https://www.msn.com/en-us/money/financial-regulation/el-salv...
At the end of the day they abandoned the policy because they believe it will help the economy to abandon it (indirectly via the loan). I certainly wouldn't call that a success.
What were Bukele's goals with his policy of adopting bitcoin?
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somehow everyone forgets that wars don't make sense and shouldn't really be financeable... and yet they are.
BTC can burn orders of magnitude more energy if it makes financing wars just twice as hard as it is today...