El Salvador Bitcoin law changes mark end of mandatory crypto acceptance, as IMF loan requirements reshape the country’s pioneering digital currency experiment.
El Salvador has amended its Bitcoin law to make acceptance of the digital currency voluntary, a change required by the International Monetary Fund (IMF) as a condition for a $1.4 billion loan package. The modification comes just as the country hosts a major crypto conference highlighting its continued commitment to Bitcoin.
The legislative assembly voted on Wednesday to end mandatory Bitcoin acceptance by businesses and public institutions. The reforms remove Bitcoin’s designation as “currency,” make its acceptance voluntary for private businesses and individuals, and require tax payments to be made in U.S. dollars. Government obligations, both domestic and international, must now be paid in the currency in which they were originally contracted.
These changes represent the IMF’s long-standing concerns about El Salvador’s Bitcoin adoption. The international lender had made clear that changes to the country’s Bitcoin policies were necessary to secure the loan agreement.
El Salvador fue la primera nación del mundo en adoptar el bitcoin como moneda de curso legal y ahora es también la primera en abandonarlo. https://t.co/zWXZfbWNvJ
— EL PAÍS (@el_pais) January 30, 2025
Conference Continues Despite Policy Shift
Despite the policy reversal, El Salvador is currently hosting the Plan B crypto conference, where government officials maintain an optimistic stance about the country’s future in digital assets. “Welcome to the country of Bitcoin,” declared Milena Mayorga, El Salvador’s ambassador to the United States, at the conference’s inauguration, asserting that “President Bukele has the personality to challenge institutions like the International Monetary Fund.” Her statements came just hours after the assembly voted to modify the Bitcoin law to meet IMF requirements.
The conference showcases El Salvador’s evolving role in the cryptocurrency space. Stacy Herbert, director of the National Bitcoin Office (ONBTC), outlined plans for continued engagement with digital assets, including educational initiatives and technology training programs. The CUBO+ programming training program has already benefited around 300 Salvadorans with tech industry job placements, and the government has trained 80,000 public officials on digital asset use in 2024.
Herbert announced plans to phase out the government’s Chivo Wallet platform while emphasizing continued investment in crypto infrastructure and education. “We’re attracting the best talent and training young people to be part of the digital economy,” she explained.
🇸🇻HEADLINE: The National Bitcoin Office will strengthen El Salvador’s bitcoin policies in 2025
The country will continue to focus on bitcoin. The reserve will increase and educational programs will be strengthened, said Stacy Herbert, director of the ONBTC. pic.twitter.com/ZCU0iENe8D
— The Bitcoin Office (@bitcoinofficesv) January 30, 2025
Public Response Mixed
Local reaction to these developments suggests the policy change may have limited practical impact. Recent surveys show that approximately 92% of Salvadorans did not use Bitcoin in 2024, despite the government’s significant investment in infrastructure and promotion.
“It was mandatory but never enforced because people didn’t accept crypto as exchange,” noted one local resident on social media, a sentiment echoed by many others. Another commented, “Even major businesses never had their POS systems working for Bitcoin.” This suggests that while the law technically required Bitcoin acceptance, in practice many businesses had already been operating on a de facto voluntary basis.
Other citizens point to unfulfilled promises associated with the cryptocurrency initiative. “Where did the Bitcoin city go? Where are the 1,000 remodeled schools per year?” questioned one resident, referencing various development projects that were announced alongside the original Bitcoin adoption but have yet to materialize.
Context and Market Impact
El Salvador made history in September 2021 when it became the first country to adopt Bitcoin as legal tender, investing over $200 million in cryptocurrency infrastructure, including the creation of the Chivo digital wallet and nationwide Bitcoin ATMs. To encourage adoption, citizens were offered a $30 bonus for downloading the Chivo wallet. However, usage remained limited – by 2024, only 8.1% of the population reported using the wallet, according to recent surveys.
The country’s Bitcoin holdings have seen dramatic swings in value through crypto market cycles. While initially facing criticism during the 2022 market downturn, El Salvador’s Bitcoin reserves are now worth over $630 million amid a broader cryptocurrency market surge that has seen both Bitcoin and Ethereum, the world’s second-largest cryptocurrency, reach new highs. The country has continued to attract major players in the digital asset space, most notably Tether, the world’s largest stablecoin issuer, which announced the relocation of its headquarters to El Salvador earlier this month.
Tether moves headquarters to El Salvador as the Bitcoin-friendly nation continues to attract major players in the cryptocurrency industry.https://t.co/iKkXyXdJBG
— Central America Living (@VidaAmerica) January 14, 2025
A Delicate Balance
The latest reforms mark a shift in El Salvador’s cryptocurrency experiment. While rolling back mandatory acceptance requirements to secure IMF funding, the government maintains its commitment to cryptocurrency through educational programs, investment, and business attraction efforts.
However, concerns about transparency persist. Information about the government’s Bitcoin operations has been classified since the law’s implementation, with details primarily shared through President Bukele’s social media accounts. Local media have reported various implementation challenges, including duplicate wallet registrations for bonus payments and alleged security breaches in the Chivo wallet system.
As El Salvador navigates this new phase of its cryptocurrency experiment, the country’s experience offers valuable lessons about the challenges of implementing digital currency adoption at a national level while managing international relationships and domestic economic needs.