El Salvador has announced plans to sunset its state-backed cryptocurrency wallet Chivo as part of a new $1.4 billion loan agreement with the International Monetary Fund (IMF).
Stacy Herbert, director of El Salvador's National Bitcoin Office, confirmed that the Chivo wallet will either be sold off or wound down as part of the deal's terms. The digital wallet was launched in September 2021 alongside the country's historic move to make Bitcoin legal tender.
While the Chivo wallet faces discontinuation, Bitcoin will remain legal tender in El Salvador under the new IMF agreement. However, the deal stipulates that Bitcoin acceptance by private businesses will become voluntary rather than mandatory.
The IMF deal also requires limiting public sector involvement in Bitcoin-related activities and transactions. Tax payments will only be accepted in US dollars going forward.
The Chivo wallet had faced multiple challenges since its launch, including two separate hacker attacks that exposed user data and leaked the wallet's code. Recent surveys indicate limited adoption, with around 88% of Salvadorans reporting they did not use Bitcoin in 2023.
Despite scaling back the state-backed wallet initiative, El Salvador maintains a bullish stance on Bitcoin. The country currently holds 5,969 bitcoins valued at approximately $582 million, with President Nayib Bukele's administration indicating plans to continue building its Bitcoin reserves.
The 40-month IMF agreement aims to improve El Salvador's debt-to-GDP ratio while maintaining a modified approach to its cryptocurrency strategy. The deal requires final approval from the IMF Executive Board and could unlock additional international financing exceeding $3.5 billion.