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LA LIBERTAD, EL SALVADOR - NOVEMBER 20: President of El Salvador Nayib Bukele speaks during the ... [+] inauguration of a new Vijosa Laboratories plant on November 20, 2023 in La Libertad, El Salvador. (Photo by Alex Peña/Getty Images)
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El Salvador’s Bitcoin Law Changes have reshaped the country’s approach to bitcoin as legal tender, making the definition difuse but helping to unlock up to $3.5 billion in new financing from multilateral institutions. Since 2021, El Salvador positioned itself as Bitcoin Country, mainly due to the recognition of bitcoin as legal tender, approved that year.
On January 29, the country modified this law to comply with the International Monetary Fund’s conditions for accessing a $1.4 billion loan announced in late 2024. The IMF board approved it on February 26, allowing the authorities an immediate disbursement of approximately $113 million.
El Salvador’s Bitcoin Law Changes Review
In the original text of the Bitcoin Law, the legal tender status was clear and aligned with widely accepted definitions. Even though it was never fully enforced, it explicitly defined bitcoin as currency, mainly through Articles 1 and 7. Now, the updated text omits this definition. In fact, the original Spanish version is ambiguous, defining Bitcoin as “curso legal” which can be translated to “legal course.”
The Bitcoin Law changes related to the legal tender status highlight that merchants are no longer compelled to accept BTC, and it is no longer an option for tax payments, removing key aspects of its previous legal tender status. Going forward, BTC acceptance will be voluntary. Thus, under the reviewed Bitcoin Law, bitcoin is no longer classified as "currency" but remains a payment method exempt from capital gains tax.
The public sector activities related to bitcoin will be phased out to comply with the "confined" status the IMF required in December. Chivo Wallet, El Salvador’s central infrastructure for bitcoin transactions, will be unwound. Despite the issues and criticism around it, it was one of the main ways for average Salvadoreans to use BTC during these years.
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