Organization is showing flexibility by allowing the bitcoin program to proceed in a limited way
2 min
The government of El Salvador’s President Nayib Bukele agreed to scale back his ambitious plan to adopt bitcoin as a national currency in exchange for a much-needed $1.4 billion loan by the International Monetary Fund.
The IMF said in a statement Wednesday that in exchange for the financial-aid program to support the Bukele administration economic overhaul agenda, the government agreed to implement measures to mitigate bitcoin-related risks.
The deal signals an important shift by the IMF, showing greater flexibility over government use and regulation of bitcoin in anticipation of friendlier crypto policies by the incoming administration of President-elect Donald Trump , said Alejandro Werner , a former director of the IMF’s Western Hemisphere Department.
Bukele’s surprise decision to make bitcoin legal tender was cheered by crypto enthusiasts but stalled financial support from the IMF in the midst of concern that the volatile crypto asset could rock the finances of the impoverished and indebted Central American nation.
“In a situation where the international financial community didn’t want to set a precedent on the adoption of bitcoin as legal tender, it became an obstacle to close an agreement with the IMF,” said Werner, who also served as adviser to El Salvador’s government and currently heads the Georgetown Americas Institute in Washington, D.C.
The use of bitcoin as a national currency in this country of around 6.5 million didn’t take off, surveys show. After the government spent more than $200 million in 2021 rolling out bitcoin ATMs and an e-wallet with $30 of free bitcoin for anyone who signed up, most users took the virtual currency to buy goods or exchange it for dollars.
The government began purchasing bitcoin when it was trading at about $30,000, booking losses at first and then posting significant gains as its volatile price surpassed $100,000 recently.
Among the concessions made by the Bukele administration, acceptance of bitcoin by the country’s businesses will no longer be mandatory, while the public sector’s participation in bitcoin-related activities will be restricted, the IMF said.
“The potential risks of the bitcoin project will be diminished significantly” in line with fund policies, the IMF said.
Under the agreement, El Salvador’s government agreed to reduce bitcoin purchases, and it will no longer accept tax payments with the crypto asset. The government’s participation in Chivo, the crypto e-wallet launched in 2021, will be gradually unwound, the IMF said.
“Transparency, regulation, and supervision of digital assets will be enhanced to safeguard financial stability, consumer and investor protection, and financial integrity,” it added.
Bukele highlighted on X the IMF’s remarks about the steady expansion of the country’s economy since the pandemic, bolstered by “robust remittances and a remarkable pickup in tourism,” in the midst of improvements in public security.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
The Australian leather house has opened an immersive four-day pop-up in Manhattan, unveiling its Bloom Collection and redefining what a product launch can look like.
Following the successful launch of its Palais Collection, MAISON de SABRÉ has unveiled a new modular handbag system offering more than 720 styling combinations.
Investors are bracing for a bumpier fall stock market due to shifting odds of a Federal Reserve interest-rate increase and other macro challenges.
3 min
The stock market had a decent summer. Investors are bracing for a bumpier fall.
In the past couple of months, equity investors cheered soaring profits at big companies, shrugged off jitters in the bond market and nudged megacap tech shares back near records.
Now, as the post-Labor Day stretch begins, a number of new challenges lie ahead: ever-shifting odds of an interest-rate increase from the Federal Reserve. Sky-high expectations after a stunning earnings season. The persistent threat of higher consumer prices as fighting in the Middle East drags on.
“You’re moving from this earnings-driven market to this macro-driven market with the Fed, inflation and interest rates in focus,” said Keith Lerner, chief investment adviser for Truist Advisory Services. “It tends to be a choppier period.”
Historically, every major U.S. stock index experiences its worst average return in September. The Dow Jones Industrial Average has slid an average 1.1% in the ninth month of the year, in data that dates back to the 19th century. The S&P 500 has seen the same average decline—and for every September dating back to 1928, the benchmark ends the month lower more than half of the time.
Analysts caution against reading too much into those seasonal patterns. But in recent weeks, new reasons for investor caution have emerged. One of the largest: the looming threat of an interest-rate increase from the Fed, which announces its next policy decision on Sept. 16.
Chairman Kevin Warsh’s decision to ditch forward guidance and take more of his cues from markets has muddied the waters for investors when it comes to monetary policy. That has left traders scouring Fed governor speeches and economic-data reports for clues on the central bank’s next move.
“There’s going to be a lot of eyes on those numbers,” said John Luke Tyner, head of fixed income and portfolio manager at Aptus Capital Advisors.
The past couple of weeks offered just one example of how frequently those expectations can change. After Warsh struck a hawkish tone during remarks on Aug. 28, the odds of a hike at the Fed’s next meeting jumped from 35% before the speech to 58%, according to CME FedWatch data.
On Thursday, Fed governor Christopher Waller made a case for leaving rates where they are. Interest-rate futures showed coin-flip odds between a hike and a hold. Then Friday’s robust jobs report amped up rate-hike bets once more, back to a roughly 60% chance of higher rates after the meeting.
“Rates have really been driving the car for equities the last few weeks,” said Ross Mayfield, an investment strategist at Baird.
That uncertainty comes as an unruly bond market could put pressure on stocks. Treasury yields have marched higher for much of the summer, driven by concerns about rising oil prices, growing U.S. budget deficits and a deluge of tech-company bonds now competing for investors’ cash. Last week, the rout went global, pushing yields to multiyear highs in Japan, Germany and the U.K.
Higher bond yields can drag on stock prices and lift borrowing costs for companies and consumers across the economy.
Rising prices remain the top concern for bond traders, and continued fighting between the U.S. and Iran has done little to ease those worries. The national average price of diesel climbed to a record of $5.850 on Friday, according to AAA. That is up from $3.712 a year ago.
Investors will get more insight on the path of prices this week, with the much-awaited consumer-price index report due Friday and a reading on producer prices Thursday.
With another blockbuster earnings season in the books, some analysts have also warned that any boost from the third-quarter reports due in the coming months could be minimal. Back-to-back quarters of standout profits have raised expectations and made it especially difficult to impress traders. Custom-chip company Broadcom, for example, said Wednesday that it more than tripled its earnings and nearly doubled its revenue. Shares slipped 2.7% the next session.
Many analysts note there are plenty of reasons not to panic. The economy is in impressive shape, thanks to a healthy labor market and the rippling effects of the artificial-intelligence investment boom. Profits are booming at America’s biggest companies. The Cboe Volatility Index has dropped to its lowest levels of 2026. Credit spreads are tight, a sign bond investors aren’t concerned about economic conditions that could hurt companies.
But the mood has shifted from the euphoria that felt tangible when the Nasdaq was notching back-to-back records early this summer. The question, Mayfield said, is whether the fundamentals that have bolstered the bull market so far can stretch the rally into 2027.
“There are more anxieties or uncertainties about the backdrop,” he said. “It does feel like a transitional moment.”
