- El salvador has modified its Bitcoin legislation, removing the requirement for BTC to be accepted as payment for taxes.
- Merchants are no longer legally required to accept Bitcoin as a payment method.
- Government institutions have shifted to USD-only payments for services and fees.
- Bitcoin’s legal classification changed from “legal tender currency” to “like legal tender” in January 2025.
- The changes align with IMF conditions for $1.4 billion in loans, with additional funding from other institutions.
El Salvador, once hailed as the first nation to adopt Bitcoin as legal tender, has significantly scaled back its cryptocurrency initiatives to secure international funding. The country’s recent legislative modifications reflect a dramatic shift in its stance on digital assets, primarily driven by negotiations with the International Monetary Fund (IMF).
The most significant change comes from the deletion of Article 4’s provision allowing tax payments in Bitcoin. This modification effectively removes one of the fundamental characteristics of legal tender status, marking a substantial retreat from the country’s pioneering 2021 Bitcoin adoption law.
President Nayib Bukele’s administration has also eliminated the requirement for merchants to accept Bitcoin payments, though this rule was reportedly never strictly enforced. The government has further withdrawn from expressing prices in BTC, limiting such expressions to US dollar conversions at market rates.
A critical legal revision dated January 29, 2025, reclassified Bitcoin’s status from “moneda de curso legal” (legal tender currency) to “curso legal” (like legal tender), representing a significant downgrade in its official standing.
The Chivo wallet, El Salvador’s state-backed digital payment system, faces an uncertain future as the IMF expects its closure or sale. The wallet’s troubled launch and low adoption rates among Salvadoreans contributed to its challenges.
Despite these restrictions, the country maintains certain crypto-friendly policies, including capital gains tax exemptions on Bitcoin transactions. The government retains the ability to hold Bitcoin as a reserve asset.
These policy changes are part of a broader agreement with the IMF to secure $1.4 billion in financing, supplemented by an additional $2.1 billion from the World Bank and Inter-American Development Bank, marking a significant pivot in El Salvador’s economic strategy.
The reversal illustrates the ongoing tension between traditional financial institutions and cryptocurrency adoption at the national level, highlighting the challenges developing nations face when attempting to integrate digital assets into their financial systems.
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