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El Salvador abandons Bitcoin as legal tender

(ticotimes.net)
927 points smallerfish | 19 comments | 04 Feb 25 00:00 UTC | HN request time: 0.016s | source | bottom
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Mengkudulangsat ◴[04 Feb 25 00:11 UTC] No.42925325[source]▶
> The government, she assured, will continue buying bitcoin and having reserves in this cryptocurrency

Sounds like the term "Failed Experiment" is the writer's assertion and not the government official position.

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cwillu ◴[04 Feb 25 00:26 UTC] No.42925524[source]▶
“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.”

--https://reason.com/2025/02/03/el-salvador-walks-back-its-bit...

Sounds pretty failed to me.

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desumeku ◴[04 Feb 25 00:29 UTC] No.42925557[source]▶
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.
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1. Mengkudulangsat ◴[04 Feb 25 00:44 UTC] No.42925736[source]▶
Fair demand by the IMF.

Presumably they require their loan to be repaid in fiat because of their internal charter. If Bitcoin adoption eventually removes El Salvador's ability to issue fiat, their loan can't be repaid.

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2. hackernudes ◴[04 Feb 25 00:57 UTC] No.42925878[source]▶
El Salvador doesn't have a fiat currency. They are dollarized since 2001.
replies(1): >>42926024 #
3. do_not_redeem ◴[04 Feb 25 00:58 UTC] No.42925890[source]▶
El Salvador can't issue fiat. They use US dollars. Only the US Federal Reserve can issue USD.
replies(1): >>42927117 #
4. xenihn ◴[04 Feb 25 01:03 UTC] No.42925948[source]▶
El Salvador hasn't issued fiat since 2001. Any other presumptions as to why its a fair demand?
5. Mengkudulangsat ◴[04 Feb 25 01:10 UTC] No.42926024[source]▶
Hmm.. I didn't know that. Which makes the demand purely political then. I recall IMF making the same demand from an island country a few years ago too.

https://www.imf.org/en/Blogs/Articles/2021/07/26/blog-crypto...

replies(1): >>42926347 #
6. bawolff ◴[04 Feb 25 01:19 UTC] No.42926133[source]▶
That's not really how that works. IMF can demand their loan be repaid in whatever currency they want. Its totally normal for international loans to be denominated in a currency other than the recipient's legal tender, particularly for high risk countries (although that is usually bad for the recipient)
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7. chrisco255 ◴[04 Feb 25 01:27 UTC] No.42926212[source]▶
In particular El Salvador doesn't even have its own legal tender and haven't for a long time. They use the US dollar.
8. throwaway314155 ◴[04 Feb 25 01:38 UTC] No.42926340[source]▶
They don't want Bitcoin in exchange. Seems entirely reasonable to me given how much the value of cryptocurrency fluctuates with low predictability. They could get paid in it one day and lose half the value the next.
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9. mattnewton ◴[04 Feb 25 01:38 UTC] No.42926347{3}[source]▶
The IMF feels bitcoin is a risky asset and doesn’t want to be a part of that gamble when making its loan. The IMF has a history of making lots of conditions they feel minimize risk.

To me it looks more like my bank mandating I carry certain kinds of insurance in the terms of my mortgage than a political bias, but I am not an expert.

replies(1): >>42926606 #
10. ty6853 ◴[04 Feb 25 01:55 UTC] No.42926517{3}[source]▶
This is why otc tradfi crypto futures are needed. You can buy a train car full of corn a year out trivially on a liquid futures market, regardless if corn prices fluctuate wildly you will pay what was agreed. Listing BTC derivatives would solve the predictability for fixed loan terms.
11. iforgot22 ◴[04 Feb 25 02:03 UTC] No.42926606{4}[source]▶
"urged officials to limit its exposure" is what the Reuters article said, so yeah. They think El Salvador's ability to repay the loan is tied too much to BTC.
12. kragen ◴[04 Feb 25 02:49 UTC] No.42927096[source]▶
The IMF will definitely not accept repayment in El Salvador's own fiat currency! That would be obviously stupid of them.
replies(1): >>42930107 #
13. kragen ◴[04 Feb 25 02:50 UTC] No.42927117[source]▶
They could. Ecuador does in fact mint its own US-dollar coins, and El Salvador could dedollarize.
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14. favorited ◴[04 Feb 25 03:31 UTC] No.42927499{3}[source]▶
Ecuador mints their own centavo coins, but they are not legal tender outside of Ecuador. They've never released their own $1 coin into general circulation – their ubiquitous Sacagawea dollars are minted in the US.
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15. kragen ◴[04 Feb 25 03:34 UTC] No.42927528{4}[source]▶
Sorry, I didn't mean to say they minted US$1 coins, just coins whose value is denominated in dollars. I think the biggest one is US$0.25?

US dollars are also not legal tender outside the US, with a few exceptions (I think including both El Salvador and Ecuador.)

16. bboygravity ◴[04 Feb 25 06:57 UTC] No.42929003{3}[source]▶
Fiat currencies also can and have lost half their value plenty of times.

Actually I can't think of any fiat currency that hasn't at least halved in value?

replies(1): >>42931248 #
17. Paradigma11 ◴[04 Feb 25 09:16 UTC] No.42930107[source]▶
Especially since it doesn't have one.
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18. kragen ◴[04 Feb 25 10:14 UTC] No.42930544{3}[source]▶
It could certainly create one. It has in the past.
19. graemep ◴[04 Feb 25 11:57 UTC] No.42931248{4}[source]▶
Usually over a long time. They are a lot less volatile than Bitcoin.

You can also offset the risks of sudden devaluation through matching assets and liabilities, trading derivatives and so on.