El Salvador’s Legislative Assembly approved reforms to the nation’s Bitcoin Law, altering key aspects of its applicability.
Bitcoin remains a recognized asset in El Salvador, although this development effectively weakens its official classification as legal tender.
Key Amendments to El Salvador Bitcoin Law
With 55 votes in favor, lawmakers eliminated the requirement for economic agents to accept Bitcoin (BTC). They also removed the state’s role in providing infrastructure for its use and erased references to Bitcoin as legal tender.
“With 55 votes in favor, we reform the Bitcoin Law to improve its applicability,” El Salvador’s Legislative Assembly announced.
The reforms notably eliminate mandatory Bitcoin acceptance, making its use voluntary for private sector participants. This marks a significant departure from the original law, which mandated businesses to accept Bitcoin as a payment method. Additionally, the state will no longer facilitate Bitcoin transactions through mechanisms such as the Chivo Wallet.
“…only natural or legal persons, with full private participation, may accept Bitcoin as a form of payment when it is offered to them,” the report said, citing Article 7.
It entailed the repealing of Articles 4, 8, and 9, which had allowed tax payments in Bitcoin. These clauses also required the government to provide infrastructure for Bitcoin-to-dollar convertibility.
The changes align with an agreement with the International Monetary Fund (IMF) for a $1.4 billion loan intended to strengthen fiscal sustainability. Government debt obligations must now be settled in the currency in which they were originally contracted, further reducing Bitcoin’s role in national financial matters.
IMF Agreement and Economic Considerations
Indeed, the IMF’s loan agreement with El Salvador played a crucial role in shaping these reforms. In December 2023, the Salvadoran government committed to scaling back Bitcoin’s mandatory use and reducing its involvement in Bitcoin-related infrastructure.
These legislative changes reflect the broader sentiment of El Salvador’s population. Local media reported a recent survey, which revealed that 92% of citizens did not use Bitcoin in transactions throughout 2024.
“Various studies by reputable pollsters in El Salvador have indicated that 92% of the population did not use Bitcoin in 2024, the year in which it recorded its lowest use since 2021,” the report said.
Despite these regulatory shifts, El Salvador continues to engage with Bitcoin on multiple fronts. The country expanded its Bitcoin reserves a week before the reforms, signaling its long-term commitment to the digital asset. Additionally, El Salvador has been eyeing discounted Bitcoin acquisitions amid the US government’s planned $6.7 billion BTC sale.
Bitcoin has also brought economic benefits to El Salvador. Three months ago, the government leveraged Bitcoin’s price surge to repurchase national debt, strengthening its fiscal position.
“We promised to eliminate the Political Debt. People complained to us that we had not yet fulfilled our promise. It took us a while, but we listened to the people, and today we are delivering. No more financing of political parties with the people’s money,” El Salvador president Nayib Bukele said in an X post.
These moves highlight the administration’s strategic approach to utilizing Bitcoin while adapting to international financial pressures. Meanwhile, El Salvador continues to attract major crypto firms. Stablecoin issuer Tether recently relocated to the country after securing a significant license.
“Today a meeting that will change the course of history happened. Great minds around a table in El Salvador,” Tether CEO Paolo Ardoino shared on X.
Additionally, video platform Rumble is reportedly considering moving its operations to El Salvador. These highlights cement the country’s appeal as a crypto-friendly jurisdiction.
While the state’s role in Bitcoin adoption diminishes, private sector involvement remains active. Similarly, the country’s strategic Bitcoin acquisitions continue. As the IMF agreement progresses and crypto firms establish operations in El Salvador, the nation’s Bitcoin experiment remains a focal point for global financial and cryptocurrency markets.
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