The International Monetary Fund (IMF) granted El Salvador a US$1.4 billion loan on Wednesday on the condition that the country drop Bitcoin as legal tender. A communiqué by the lender said the program, a 40-month-long Extended Fund Facility, addresses “risks arising from the Bitcoin project” by making the acceptance of the cryptocurrency voluntary and limiting the government’s purchases of Bitcoin.

Under President Nayib Bukele, El Salvador became the first country in the world to use Bitcoin as legal tender in 2021 when the Legislative Assembly passed the so-called “Bitcoin Law.” Bukele championed projects such as Chivo, a state-owned crypto wallet, and a “Bitcoin city” built around the Conchagua volcano to provide geothermal energy for cryptocurrency mining.

El Salvador does not have its own currency; since 2001, the country has progressively adopted the U.S. dollar as its legal tender.

Despite the announcement, the country said it would continue buying the cryptocurrency. On Wednesday, the government’s Bitcoin Office announced that it had just added another bitcoin to the country’s “strategic reserve,” the tenth purchase in the past week. 

Bitcoin Office head Stacy Herbert appeared to confirm that they would maintain their course regarding the cryptocurrency. Also on Wednesday, she made a post on X calling El Salvador a “Bitcoin country” and lauding it for being “so far ahead of everyone else.”

Others do not share her optimism.

“This is absolutely the end for Bitcoin as legal tender in El Salvador,” John Dennehy, founder of Mi Primer Bitcoin (My First Bitcoin), an education project set in the country, told the Herald. The measure, which in and of itself is a modification of the 2021 Bitcoin Law, will go into effect on April 30.

The government will stop accepting cryptocurrency to pay certain taxes and administrative fees and plans to “gradually unwind its participation in the [Chivo] e-wallet,” the IMF added.

Even if some in the Bitcoin community in El Salvador think that this does not mean the end of the cryptocurrency as legal tender, Dennehy insists that the “consensus definition” for it “is that the currency must be accepted for all public and private debts.”

Bitcoin adoption was not widespread under Bukele’s administration, Dennehy said. “To give a very rough estimate, between 10 and maybe 15% of stores in El Salvador accept Bitcoin, while 10 to 15% of people have used it at some point in the past year,” he said.

“Shortly before the Bitcoin Law went into effect, it was nearly zero.”

For Dennehy, the IMF targeted Bitcoin because the lender of last resort “represents the status quo,” meaning the U.S. dollar as the standard world currency. “I think the IMF was scared that El Salvador could be an example that other nations would follow,” he added.

“It’s in their best interest to discourage it, and the IMF is able to influence the policy of nations that need loans from them.”

The Fund’s communiqué added that the Central American country faces “deep macroeconomic imbalances, stemming from high debt and weak external and financial buffers, as well as barriers to investment and productivity.”