El Salvador drops Bitcoin as legal tender
The country scales back its crypto experiment, making Bitcoin voluntary as it negotiates an IMF loan
El Salvador has ended Bitcoin’s status as legal tender, marking a major shift in the country’s crypto experiment. The revised law, passed by Congress, makes Bitcoin use voluntary and removes its role in government transactions, including tax payments.
The move comes as El Salvador negotiates a $1.4 billion loan with the International Monetary Fund (IMF), which has long criticized Bitcoin’s risks to financial stability and consumer protection. Under the original 2021 law, businesses were required to accept Bitcoin unless they lacked the necessary technology. That mandate has now been scrapped.
When El Salvador became the first country to adopt Bitcoin as legal tender in September 2021, the decision was hailed as a groundbreaking financial experiment. The government poured more than $200 million into infrastructure, launching the Chivo Wallet app, installing Bitcoin ATMs, and offering citizens a $30 incentive to drive adoption.
However, enthusiasm was short-lived. A year after the rollout, only 21% of Salvadorans had ever used the Chivo Wallet. By 2024, that figure had plummeted to just 8.1%, according to pollster Ludop. Meanwhile, economic challenges persisted, with the Central Reserve Bank reporting a rise of 55,000 people living in poverty compared to the previous year.
El Salvador’s Bitcoin gamble has drawn repeated warnings from the IMF, which urged the country to reconsider its approach. Concerns over financial stability, regulatory risks, and fiscal integrity weighed heavily on negotiations for the IMF loan. In response, the government agreed to scale back Bitcoin’s role, paving the way for policy revisions.
A continued crypto commitment
Despite the rollback, President Nayib Bukele remains committed to Bitcoin. His administration plans to continue purchasing the cryptocurrency for national reserves and is pushing for new legislation to attract crypto investments.
El Salvador’s Bitcoin journey has been a bold experiment, but this latest shift underscores the complexities of integrating digital assets into a national economy. The country may no longer require businesses to accept Bitcoin, but its crypto ambitions are far from over.
