El Salvador has changed its Bitcoin law to comply with a deal with the International Monetary Fund (IMF).
The Legislative Assembly passed a reform bill that removes the requirement for businesses to accept bitcoin as payment, making it optional instead. This smooths the path to securing a $1.4 billion loan from the IMF.
In 2021 El Salvador became the first country to adopt bitcoin as legal tender along with the US dollar. The move was global news and President Nayib Bukele was the biggest champion of it as a way to promote financial inclusion and economic growth.
But the policy was criticized by international financial institutions, including the IMF, which told El Salvador to limit its exposure to Bitcoin.
Related: IMF Criticizes El Salvador’s Bitcoin Strategy, Urges Reconsideration
And now, on January 29, 2024, El Salvador’s Congress approved a bill to change those Bitcoin laws.
The bill was rushed through, getting 55 yes votes and 2 no votes just minutes after President Bukele sent it. The main change is that businesses no longer have to accept bitcoin as payment, making it completely voluntary in the private sector.
Despite the change, El Salvador is still committed to Bitcoin. The country still holds a big bitcoin reserve, 6,049 BTC valued at around $636 million. The government also plans to increase its bitcoin holdings in the future.
El Salvador’s Bitcoin experiment has been praised and criticized. Some see it as a leader in financial innovation, others say it’s not happening as fast as expected. Reports say only a small percentage of the population uses Bitcoin regularly.
One of the main problems was the government backed Chivo wallet that was supposed to make Bitcoin transactions easy for Salvadorans.
But the wallet had technical issues, security problems and low adoption. The new bill reportedly dissolves the Chivo wallet, another step back from the original Bitcoin plan.
President Bukele once said Bitcoin would be a game changer for El Salvador’s economy, that it would bring tourism and foreign investment and help the unbanked population.
The country’s Bitcoin adoption proved successful in boosting tourism, increasing the number of tourist arrivals by 40.4% since 2019.
But a survey in October 2024 showed only 7.5% of Salvadorans use Bitcoin for daily transactions.
As El Salvador moves forward with the reforms in its Bitcoin plan, President Bukele also took the opportunity to defend his initiatives against those who opposed his Bitcoin policy, highlighting former U.S. Senator Bob Menendez’s recent sentencing.
Menendez, one of the most vocal critics, was just sentenced to 11 years in prison for corruption, including taking bribes in gold and cash.
Bukele tweeted about Menendez’s conviction saying: “This guy said we used Bitcoin for money laundering and corruption.”
Despite the rollback, Bukele’s government will still keep Bitcoin in focus. Officials said they will still buy bitcoin and will “intensify” their purchases in 2025. El Salvador has already issued bitcoin bonds and is building more Bitcoin-friendly infrastructure.
