El Salvador’s Bitcoin Law has undergone significant modifications, altering the country’s approach to Bitcoin as legal tender. The changes, enacted on January 29, were driven by conditions set by the International Monetary Fund (IMF) to secure a $1.4 billion loan, approved on February 26.
While the law originally positioned Bitcoin as an official currency, the revisions now define it in more ambiguous terms, allowing for voluntary acceptance rather than mandatory use. These adjustments have helped unlock up to $3.5 billion in new financing from multilateral institutions, ensuring economic stability but diminishing the prominence of Bitcoin in El Salvador’s financial landscape.
Key Changes to the Bitcoin Law
Previously, Bitcoin had clear legal tender status under Articles 1 and 7 of the law. However, the revised version omits this explicit classification. Merchants are no longer required to accept Bitcoin, and it is no longer an option for tax payments. Instead, Bitcoin is now a legal payment method, but its use is entirely optional. Additionally, public sector involvement in Bitcoin transactions is being phased out to comply with the IMF’s requirements.
A major consequence of this shift is the planned unwinding of the Chivo Wallet, the state-backed digital wallet that played a crucial role in Bitcoin transactions for everyday Salvadorans. While controversial, Chivo Wallet was a key enabler of Bitcoin adoption among locals. Its discontinuation has sparked concerns about the accessibility of digital payments, especially for those who had integrated Bitcoin into their financial activities.
Paciencia y confianza 🇸🇻 https://t.co/oy42paSnBF
— Nayib Bukele (@nayibbukele) February 26, 2025
El Salvador remains a focal point for Bitcoin enthusiasts worldwide. However, these legal changes have introduced uncertainty. Content creator and journalist Joe Nakamoto, who recently visited El Salvador, noted a shift in sentiment among Bitcoin supporters. "Many Bitcoiners moved to El Salvador because of the Bitcoin Law. Now, doubts about the country’s future with Bitcoin have emerged," he stated.
Lina Seiche, founder of the Little Hodler project, believes the changes have minimal impact on private Bitcoin initiatives. "Bitcoin use remains legal; it’s just not mandatory," she explained. Similarly, Evelyn Lemus of Bitcoin Berlin, a prominent Bitcoin-based circular economy, emphasized that local Bitcoin adoption continues despite the policy shift. She pointed out that in communities like Berlín, over 150 merchants still accept Bitcoin, and usage patterns remain unchanged.
Economic and Political Implications
Since 2021, El Salvador’s Bitcoin experiment has faced skepticism from the IMF, which cited risks related to financial stability and regulatory concerns. The latest deal with the IMF marks a shift, as the government has complied with demands to scale back its Bitcoin policies. In exchange, El Salvador has gained access to crucial financial support, potentially exceeding $3.5 billion.
While critics argue that the IMF has now secured influence over El Salvador’s Bitcoin policy, others see this as a pragmatic step toward economic sustainability. The Bitcoin Law remains, but its original vision has been significantly diluted.
HODL Team
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