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El Salvador Modifies Bitcoin Law to Secure IMF Deal

  • BTC is no longer a unit of account or accepted for tax payments in El Salvador.
  • Law change aligns with IMF conditions for a $1.4 billion loan.
  • Government removes Bitcoin transaction infrastructure and Chivo wallet.

El Salvador has rolled back a key provision of its Bitcoin Law, removing BTC’s status as a unit of account. The country’s Congress passed a reform that makes Bitcoin acceptance voluntary, scaling back its role in the economy.

The move aligns with requirements set by the International Monetary Fund (IMF) as part of a $1.4 billion credit facility agreement.

The legislative change, approved without resistance in a Congress is controlled by President Nayib Bukele’s party. It marks a shift from El Salvador’s pioneering Bitcoin adoption.

The revised law eliminates the obligation for businesses to accept BTC and removes state support for Bitcoin transactions and conversions.

One of the most significant changes in the reform is the removal of Bitcoin’s status as a unit of account. Previously, merchants could price goods and services in BTC, but this option has been eliminated.

Additionally, Salvadorans can no longer use Bitcoin to pay taxes, reversing an earlier provision that allowed tax obligations to be settled in BTC.

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The government also eliminated the requirement for the state to provide infrastructure for Bitcoin transactions. Previously, El Salvador’s official Bitcoin wallet, Chivo, played a central role in the country’s crypto framework.

While the administration had already announced plans to sell or shut down Chivo, the new law cements Bitcoin’s reduced role in the national economy.

IMF Deal Drives El Salvador’s Bitcoin Law Rollback

The law change follows El Salvador’s agreement with the IMF, which set conditions for the country to access a $1.4 billion credit facility.

The funds will be used for critical payments and to support Bukele’s economic agenda. The IMF has consistently expressed concerns over Bitcoin’s role in El Salvador’s economy, citing financial stability risks.

While President Bukele downplayed the significance of the reforms, the rollback signals a partial retreat from the government’s earlier crypto-friendly stance.

When El Salvador adopted Bitcoin as legal tender in September 2021, it became the first country to integrate BTC into its financial system at a national level. The move attracted global attention but also criticism from institutions like the IMF and World Bank.

What’s Next for Bitcoin in El Salvador?

Despite the law change, El Salvador continues to accumulate Bitcoin. Bukele has ramped up BTC purchases, aligning with the global trend of building Bitcoin reserves. However, it remains unclear whether the government will impose additional restrictions on BTC transactions, as suggested in the IMF agreement.

Bitcoin maximalists see the rollback as a setback, while critics argue it reflects the financial realities of working within international frameworks. While BTC remains legal, its reduced role in the economy shifts El Salvador’s position on crypto regulation.

As Bitcoin’s price continues to fluctuate, El Salvador’s evolving policy will be closely watched. The country’s Bitcoin experiment is far from over, but its trajectory is now shaped by economic pressures beyond its borders.

Disclaimer

The contents of this page are intended for general informational purposes and do not constitute financial, investment, or any other form of advice. Investing in or trading crypto assets carries the risk of financial loss. The forecasted data (also called “price prediction”) on this page are subject to change without notice and are not guaranteed to be accurate.

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Arnold Kirimi
Arnold Kirimi
Arnold Kirimi is a crypto and Web3 journalist from Nairobi, Kenya. With a sharp eye for emerging trends and a talent for demystifying blockchain jargon, Kirimi turns complex concepts into compelling narratives. Featured in top outlets like Cointelegraph, DailyCoin and CryptoSlate.