On September 4, 2026, a seemingly technical IMF announcement pressed a new chapter switch for El Salvador's Bitcoin story over the past five years. The announcement stated that the IMF and El Salvador have reached a staff-level agreement on the second and third combined reviews under the Extended Fund Facility, which, if subsequently approved by the IMF Board of Directors, will garner approximately $140 million in funding for this country, which boldly embraced Bitcoin, corresponding to about 101.96 million SDR. Accompanying this funding is a clear and direct policy cost: the IMF confirmed that the Salvadoran government has committed not to increase its Bitcoin holdings with public funds, meaning that the public sector's asset exposure to Bitcoin is frozen at the existing level, with no further steps forward; at the same time, the official Chivo digital wallet, which was launched in 2021 as part of a legal currency reform led by the government, has been identified in the announcement as "fundamentally withdrawing from public participation," with majority ownership and operational control transferred to a private operator, moving the government from the forefront of Bitcoin infrastructure to behind the scenes. Since El Salvador adopted Bitcoin as legal tender, the IMF has consistently warned of related risks in its evaluations, and now the policy commitments during the loan review have finally translated into specific terms: no longer using public funds to buy Bitcoin and withdrawing from the official wallet operation in exchange for the next disbursement under the medium-term loan arrangement. This combination of actions does not affect Bitcoin's status as legal tender but synchronously contracts at both asset allocation and infrastructure ends, marking a directional retreat of El Salvador's high-profile national Bitcoin experiment under external financial constraints.
IMF Loan Pressure: $140 Million in Exchange for Policy Shift
For El Salvador, the Extended Fund Facility loan arrangement is not a one-time emergency measure, but a medium-term funding and policy framework spanning several years. As a mid-term loan tool typically used to support macroeconomic adjustments, it has become an indispensable pivot in El Salvador's efforts to obtain external financing and buffer economic and fiscal pressures. Under this arrangement, the IMF needs to regularly review the policy implementation status of the recipient country, and this current staff-level agreement corresponds to a crucial milestone in the second and third combined reviews. Once approved by the IMF Board of Directors, approximately $140 million, about 101.96 million SDR, will be unlocked, and the review itself is not simply a matter of checking accounts but involves bundling policy commitments and structural reforms into the lending conditions.
The contraction of Bitcoin policy is explicitly written into the core chips of the transaction under this review logic. Since the IMF deemed Bitcoin as legal tender in El Salvador, it has repeatedly warned of the associated risks in its evaluations; now, in the September 4 announcement confirming the staff-level agreement, the Salvadoran government commits not to increase Bitcoin holdings with public funds, freezing its previous government holding policy at existing levels while allowing the Chivo digital wallet to basically withdraw from public participation, with majority ownership and operational control handed over to private operators. These actions do not touch Bitcoin's status as legal tender but substantially weaken the government’s proactive role in Bitcoin asset allocation and infrastructure. For the IMF, this provides a policy buffer in its evaluations of financial stability and macro sustainability; for the Salvadoran government facing fiscal and external financing pressures, it offers a clear exchange—weakening Bitcoin policy in exchange for continued access to international funding support and a temporal window within the extended fund loan arrangement.
No Further Accumulation and Chivo's Withdrawal
When the IMF stated in the announcement that "the Salvadoran government commits not to increase Bitcoin holdings with public funds," it effectively locks in the dynamic trajectory of national asset exposure: Bitcoin previously purchased with fiscal resources is acknowledged to exist, but this purchasing channel has been closed, and the position size is frozen at existing levels. Whatever happens with Bitcoin prices in the future, the public sector can only passively bear the gains and losses of existing assets without further layering risks onto the national balance sheet through new purchases. For the IMF, this confines potential sources of financial instability within a manageable range; for the Salvadoran government, it is an agreement to “stop here” in exchange for continued funding and time within the extended fund loan arrangement.
Concurrently with the “closure” of assets is the quiet retreat from infrastructure. The IMF announcement confirms that the Chivo digital wallet, previously led by the government to serve national users, has now essentially withdrawn from public participation, with majority ownership and operational control transferred to private operators. This means that the main channels for Bitcoin in terms of technology and services are no longer directly steered by the state; the government has shifted from the role of “actively building wallets and attracting users” to handing over the field to the market and retreating to the background. These two actions combined—on one hand, the state no longer proactively expands its Bitcoin exposure, and on the other hand, the abandonment of direct control over the core wallet—together outline a new stance: El Salvador is no longer the engine pushing for Bitcoin expansion but has left it in the gray area between legality and reality, choosing to passively maintain or even gradually contract its policy investment in Bitcoin within the existing framework.
From Legal Tender to Restricted Assets: A Three-Year Experiment Review
Returning to the beginning, El Salvador in 2021 chose an extremely distinct path: establishing Bitcoin as legal tender at a legal level, becoming the first country to do so in the world, while the government led the launch of the official Chivo wallet, attempting to embed this new system directly into the infrastructure for daily payments and receipts. That year, the ruling narrative both internally and externally was one of “leapfrogging”—bypassing the old financial system and embracing new opportunities brought by technology and asset price narratives, allowing the nation to reshape its economic and financial identity with speed and courage. The government served as rule-maker, product designer, and promoter, purchasing Bitcoin, building wallets, and encouraging residents to download and use them; the state was almost sculpted into the largest holder, developer, and promoter in this experiment.
Parallel to this narrative has been almost continuous external reminders since 2021. The IMF has repeatedly pointed out the risks associated with Bitcoin's legal tender status and the government's holding policy in its evaluations and announcements, believing this could amplify volatility in the financial system and undermine fiscal and macroeconomic sustainability, exposing an already pressured economy to risks of significant fluctuations in asset prices and sudden liquidity contraction. Since then, Bitcoin-related risks have been locked in as one of the key points of the IMF's observation of Salvadoran policy: on one hand, the state actively expanded its Bitcoin exposure and positioned Chivo as the official entry, while on the other hand, multilateral institutions continuously categorized these actions in review documents as variables needing "control" and "constraint." Three years later, looking back at the current commitments—not to use public funds to increase Bitcoin holdings and to hand over majority ownership and operational control of Chivo to private operators—the initial state-led buying of Bitcoin and building of wallets has been reframed as a policy of restricted assets that is frozen on paper, retreated behind the scenes in infrastructure, and continuously flagged as risky in international reviews.
International Institutions' Red Lines: The Boundaries of Sovereign Crypto Policies
When El Salvador wrote into the staff-level agreement for the second and third combined reviews of the Extended Fund Facility that it would "no longer use public funds to increase Bitcoin holdings" and "let the Chivo wallet essentially exit public participation," Bitcoin policy was officially embedded for the first time into the structural terms of international financing. As a significant global lender of last resort, particularly possessing strong bargaining power with emerging markets and highly indebted countries, the IMF has transformed the risks previously highlighted in its announcements and evaluations— that Bitcoin could harm financial stability and fiscal sustainability—directly into constraints for loan reviews, effectively drawing a clear red line on sovereign crypto attempts: you can retain the existing legal status but must not continue to expand the relevant asset exposure while receiving assistance from medium-term loan tools, and the government must also step back from the operation of key infrastructure.
This represents not only a turning point for El Salvador but also a signal released externally. If the IMF Board approves this staff-level agreement, approximately $140 million, corresponding to about 101.96 million SDR, will materialize, while the contraction of Bitcoin policy will be recorded as one of the conditions for securing funding and alleviating financial stability concerns. Other developing countries considering adopting or strengthening crypto asset policies witness a script that is not unfamiliar: much like the past policy concessions surrounding exchange rate regimes and financial regulations, digital asset policies are being incorporated into the negotiation lists of multilateral institutions, becoming part of financing conditions. Within this framework, sovereign states' pursuit of financial sovereignty and dependence on external funds creates a long-term game—whether to insist on expanding crypto exposure on public balance sheets is no longer just a weighing of internal politics and market risks, but a choice repeatedly tugged between inspection documents, board meetings, and timelines for fund disbursement.
Choices in El Salvador's Post-Bitcoin Era
After committing not to use public funds to increase Bitcoin holdings and letting the Chivo wallet essentially exit public participation, El Salvador will likely proceed towards a path of “formal change with practical continuity” regarding legal tender: legally retaining Bitcoin's status as legal tender, but the public sector no longer expanding asset exposure and no longer relying on national infrastructure to actively shape payment behavior, returning the actual usage more to market entities willing to bear price volatility and operational risks. As Chivo shifts from government-led to private operation, should the local Bitcoin ecosystem continue to exist, it will resemble more of a commercial experiment pieced together spontaneously by enterprises, trading platforms, and individual users, rather than a national project driven by fiscal budgets and official wallets. The IMF staff-level agreement still requires approval from the Board of Directors, with subsequent reviews and negotiations likely to continue compressing the official policy space, but El Salvador has already provided a clear benchmark globally: Bitcoin can be written into the legal texts of sovereign currency, yet it is challenging to maintain a central position on the national balance sheet under the practical framework of requiring external financing and accepting financial stability reviews. Future sovereign Bitcoin attempts must navigate a more measured choice between the impulse for “national-level adoption” and the hard constraints of multilateral rules.
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