LA LIBERTAD, EL SALVADOR – NOVEMBER 20: President of El Salvador Nayib Bukele speaks during the … [+]
El Salvador’s Bitcoin Law changes have made the legal tender status of bitcoin at least diffuse in the country while unlocking up to $3.5 billion in new financing from multilateral institutions. Since 2021, El Salvador positioned itself as Bitcoin Country, mainly driven by the recognition of bitcoin as legal tender, approved that year.
On January 29, the country modified this law to comply with the International Monetary Fund conditions for accessing a 1.4 billion dollar loan announced in late 2024. Finally, the board approved it on February 26 allowing the authorities an immediate disbursement equivalent to around US$113 million.
El Salvador’s Bitcoin Law Changes Review
In the original text of the Bitcoin Law, the legal tender status was clear and aligned with the most commonly accepted definitions. Even though it was never enforced, it was explicitly defined as currency, mainly through articles 1 and 7. Now, the text doesn’t mention this, and in fact, the original Spanish is confusing as it defines Bitcoin as a “legal course.”
The legal tender changes underscore that merchants aren’t compelled to accept BTC, and it’s no longer an option to pay taxes with it, removing the most significant parts of the legal tender concept from the law. Going forward, BTC will be voluntarily accepted. Thus, under the new Bitcoin Law, bitcoin is no longer classified as “currency” but can still be used as a payment method without incurring capital gains.
The public sector activities related to bitcoin will be over to comply with the “confined” state the IMF required in December. Chivo wallet, El Salvador’s central infrastructure for bitcoin transactions, will be unwind. Despite the issues and criticism around it, it was one of the main ways for average Salvadoreans to use BTC during these years.
In the latest IMF statement, it’s clear that El Salvador’s administration needs to halt many of its strategies. “The program also addresses risks arising from the Bitcoin project, including by making acceptance of Bitcoin voluntary and by confining public sector engagement in Bitcoin-related activities and transactions in and purchases of Bitcoins,” the document states.
The Community Reacts To The Bitcoin Law Changes
El Salvador is one of the main focuses of the global Bitcoin community. As the first country to make BTC legal tender, it became relevant far beyond its borders, becoming home to many expats and Bitcoin enthusiasts wanting to support the project’s success.
I spoke with some of them and also some local bitcoin educators to better understand the impact the reported changes could have on their projects and on the broader interest in the country. “Among many Bitcoiners I spent time with in El Salvador, the mood was somewhat subdued,” content creator and journalist Joe Nakamoto explained to me in an interview while he was visiting the country.
“A lot of international Bitcoiners moved to El Salvador for the Bitcoin Law; some Salvadorans returned. Now, doubt about the country’s future with regards to Bitcoin has crept in,” he added. The reporter also said that it’s too early to foresee how deep the changes to the law could impact the local and booming efforts around bitcoin education and adoption.
For Lina Seiche, Founder of the Little Hodler project and based in El Salvador, the modifications to the law “do not change anything for private projects, and the Bitcoin Office initiatives are unaffected as well.” She underscored that the changes do not prohibit the use of BTC. “It’s not as if using Bitcoin has been outlawed; it has just been made optional,” Seiche said.
Salvadoreans Unaffected Despite The Bitcoin Law Changes
“For Salvadorans, not much changes,” Evelyn Lemus, Founder of the circular economy and educational project Bitcoin Berlin, explained in an interview. Three and a half years after the law was introduced, Bitcoin adoption remains low. For the few who do use it, the biggest change is the uncertainty surrounding the future of the Chivo wallet, leading people to withdraw or transfer their funds to other wallets,” Lemus detailed.
Berlin is among the most active circular economies in El Salvador, with over 150 merchants accepting Bitcoin. “Not much has changed regarding people accepting or not accepting it since the announcement. For Berlín, nothing changes. Bitcoin is now part of the town, and people will keep using it regardless of what the law says,” Lemus argued.
According to a poll published in January by Universidad Centroamericana and reported by the local outlet elsalvador.com, 92% of Salvadoreans didn’t use BTC in 2024, which explains why the law modifications didn’t negatively impact the government.
El Salvador Secured $3.5 Billion With The Bitcoin Law Changes
Since day 1 of the Bitcoin Law, the IMF has been against it. They pointed to different risks and issues regarding the Bitcoin project and were very vocal. However, the tone changed after the agreement was reached and announced in late 2024. A lot. What happened?
For Seiche, this deal “went down in such a way that allowed all sides to run with their favorite version of the narrative.” El Salvador still has its Bitcoin Law, and the agreement could help catalyze additional financial support of over US$3.5 billion from other multilateral institutions, while the IMF had the problematic concepts removed.
But there are some who take a more critical position around the agreement and the changes. “The IMF got what they wanted–a seat at the table to decide Bitcoin policy in El Salvador. They don’t need to be vocal anymore,” educational project My First Bitcoin founder John Dennehey told me in an interview. He’s been critically commenting on the agreement since December, pointing to the conditions the fund usually imposes on countries like El Salvador that are looking for financial support.
“El Salvador challenging the IMF with the Bitcoin Law was becoming a dangerous example for other countries,” Evelyn Lemus from Bitcoin Berlin pointed.
“Now the IMF has successfully imposed changes to the law, making a statement that El Salvador is not so different from other countries that make deals with them and can also be influenced,” she concluded regarding the Bitcoin Law changes.
