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.
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)
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.
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.
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.
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.
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.
"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.