El Salvador Bitcoin Law Now Amended Under Pressure From IMF

Legislative Assembly has amended El Salvador Bitcoin Law, shifting away from the cryptocurrency’s mandatory use in daily transactions.

The change, approved on January 29 with a 55-2 vote, removes Bitcoin’s status as legal currency while still maintaining its designation as legal tender.

The reform comes as a result of pressure from the International Monetary Fund (IMF), which had set the mitigation of Bitcoin risks as a condition for El Salvador’s $1.4 billion loan agreement. The IMF has been concerned about the potential financial instability linked to Bitcoin, prompting the country to reduce its exposure to the digital currency.

The revised El Salvador Bitcoin Law makes accepting BTC voluntary for businesses, reversing the previous requirement that compelled businesses to accept Bitcoin for goods and services. Additionally, cryptocurrency will no longer be allowed to pay taxes or settle government debts. The government will also distance itself from Chivo Wallet, the state-backed Bitcoin wallet that had been a significant part of the law’s implementation.

The legislative changes are expected to take effect 90 days after their official publication, which is anticipated soon. Critics, such as former Central Bank president Acevedo, argue that Bitcoin should be entirely removed from the legal framework and no longer be classified as legal tender.

However, the government maintains its commitment to Bitcoin, with El Salvador’s ambassador to the U.S., Milena Mayorga, framing the reforms as an adaptation to evolving circumstances. Despite the changes, President Nayib Bukele, a prominent Bitcoin advocate, has yet to publicly comment on the reform.