El Salvador negotiates the sale of Bitcoin Wallets, where will the 659 million USD BTC go?

The International Monetary Fund (IMF) confirmed on Monday that Salvadoran authorities are negotiating the sale of the state-owned Bitcoin wallet Chivo, and that “progress is going smoothly.” This is one of the key conditions for the $1.4 billion loan agreement provided by the IMF in May. As of now, El Salvador holds 7,509 Bitcoins, worth approximately $659 million at the time of publication, and this Bitcoin game between the IMF and Bukele is entering a critical moment.

Political Exchanges Behind the IMF 1.4 Billion Dollar Loan

(Source: IMF)

The head of the International Monetary Fund (IMF) delegation to El Salvador stated on Monday that the El Salvador government is still negotiating with the Fund's officials regarding Bitcoin-related matters, and that “negotiations for the sale of the government Wallet Chivo are also progressing smoothly.” An IMF spokesperson stated that both parties are still engaged in separate discussions about purchasing Bitcoin, but declined to disclose the details of the transactions.

The negotiations stem from an agreement reached in May 2025, in which the IMF agreed to provide the first disbursement of $120 million for a $1.4 billion loan program to El Salvador. In exchange, the Salvadoran government must make three key commitments: to stop purchasing Bitcoin, to limit public sector participation in Bitcoin-related economic activities, and to gradually exit the Chivo Wallet program. The agreement also explicitly states that private sector acceptance of Bitcoin will be based on voluntary principles rather than mandatory requirements.

However, this protocol has been controversial from the very beginning. The IMF's July report stated that the Salvadoran government had not purchased any Bitcoin since December 2024, but the public statements from the Salvadoran Bitcoin Office tell a different story. The office has continuously announced the purchase of cryptocurrencies on social media, including a large-scale purchase of 1,090 Bitcoins worth approximately $100 million in November. This contradiction has raised questions about the implementation of the protocol.

The sale negotiations for the Chivo Wallet are the most complex part of the protocol. This state-owned Bitcoin wallet launched by the Salvadoran government in 2021 was the core infrastructure of President Bukele's Bitcoin legal tender plan. The government airdropped the equivalent of $30 in Bitcoin to every registered user in an attempt to promote the use of Bitcoin in everyday transactions. However, the Chivo Wallet has faced numerous issues since its launch, including technical failures, security vulnerabilities, and user attrition. It is currently unclear who the potential buyers are and what the sale price range will be, with the IMF stating that it cannot comment on the details of the transaction.

Bugley’s Bitcoin Belief and Reality Pressure

Despite the pressure from the IMF, President Bukele publicly stated in March that the government will continue to implement its Bitcoin investment strategy, buying at least one Bitcoin every day. “This momentum will not stop” became his iconic slogan in response to external doubts. This tough stance reflects Bukele's deep faith in Bitcoin, but it also places El Salvador in an awkward position of direct conflict with the IMF agreements.

El Salvador became the first country in the world to recognize Bitcoin as legal tender in 2021, a historic decision largely driven by Bukele's strong push. According to data provided by the country's Bitcoin office, as of Monday, the El Salvador government holds 7509 Bitcoins, which at the then market price of approximately $87294, has a total value of about $659 million. Although this investment does not account for a huge proportion of the country's GDP, it is still a considerable bet for a small economy with an annual budget of about $8 billion.

Bukele's Bitcoin strategy faces dual pressure. On one hand, the IMF's loans are crucial for El Salvador's fiscal stability, as the country needs these funds to cope with debt repayments and infrastructure development. On the other hand, abandoning Bitcoin purchases and selling the Chivo Wallet would be seen as an admission of failure for the Bitcoin legal tender experiment, which would severely damage Bukele's political image and reform agenda.

It is currently unclear how Bukele's public statement will affect the agreement with the IMF. One possible interpretation is that the Salvadoran government has adopted a strategy of “superficial compliance, actual resistance,” cooperating with the IMF's demands at the official level while continuing to purchase through semi-official entities like the Bitcoin office. Another possibility is that both parties are renegotiating the terms of the agreement, seeking a compromise that satisfies the IMF's regulatory requirements while retaining some of the Bitcoin strategy.

The Three Major Dilemmas of the Salvadoran Bitcoin Experiment

1. The Game of Fiscal Pressure and IMF Conditions

· 1.4 billion USD loan is crucial for debt repayment, but at the cost of giving up Bitcoin sovereignty.

· Selling the Chivo Wallet means exiting the state-run crypto infrastructure, weakening policy tools.

2. The Conflict Between Political Image and Reform Commitment

· The legal tender for Bitcoin is Bukele's iconic policy; giving it up is tantamount to admitting failure.

· The strong push for the Bitcoin law in 2021 has sparked controversy both domestically and internationally, and a retreat would damage political credibility.

3. The Trade-off Between Market Volatility and Long-term Value

· Holding 7509 Bitcoins value fluctuates wildly with the market, financial risks are unpredictable.

· If Bitcoin appreciates in the long term, selling early will miss out on huge profit opportunities.

The future direction of 659 million USD Bitcoin reserves

The sale negotiations for the Chivo Wallet are “progressing smoothly,” but this does not mean that El Salvador's Bitcoin experiment is about to come to an end. The key issue is whether the El Salvador government will continue to hold the existing 7509 Bitcoins after the sale of Chivo and whether it will completely stop purchasing new Bitcoins.

From a technical perspective, selling the Chivo Wallet does not necessarily require El Salvador to sell its Bitcoin reserves. The Chivo Wallet is a payment infrastructure, while the Bitcoin held by the government is a national reserve asset, and the two can be legally and financially separated. El Salvador can sell the operating rights of the Chivo Wallet to private enterprises while retaining its Bitcoin reserves as a long-term investment. This arrangement meets the IMF's requirement to reduce public sector involvement in Bitcoin economic activities while preserving Bukele's belief in Bitcoin.

However, the true goal of the IMF may not only be to sell the Chivo Wallet, but to completely reverse El Salvador's Bitcoin policy. The IMF has always been cautious about cryptocurrencies, believing that Bitcoin's high volatility poses systemic risks to small economies. If El Salvador continues to hold hundreds of millions of dollars in Bitcoin, a market crash could trigger a financial crisis, ultimately requiring IMF assistance. Therefore, the IMF is likely to pressure El Salvador in subsequent negotiations to gradually reduce its Bitcoin reserves.

The market's evaluation of El Salvador's Bitcoin experiment is polarized. Supporters believe it is a brave attempt by a small country to challenge the hegemony of the dollar and explore financial sovereignty, and in the long term, the appreciation of Bitcoin will bring huge returns to El Salvador. Critics point out that the Bitcoin legal tender policy exacerbates financial instability, ordinary people suffer losses due to their unfamiliarity with cryptocurrencies, and the government gambling valuable fiscal resources on speculative assets is extremely irresponsible.