Narayan AmmachchiFour years after making history as the first country to embrace Bitcoin as legal tender, El Salvador is scaling back its Bitcoin Law, apparently due to pressure from the International Monetary Fund (IMF).
Bitcoin will no longer be accepted for tax payments or government-related transactions. Additionally, the government is withdrawing from its role in Chivo Wallet, the state-backed digital wallet that once symbolized El Salvador’s ambitious crypto experiment.
Under the new reforms, it is up to private exchanges, citizens, and businesses whether or not to use the crypto. In other words, what was once a mandatory payment method is now purely optional.
Previously, businesses and public institutions were legally required to accept Bitcoin unless they lacked the necessary technology. With the reforms, this obligation has been erased, making Bitcoin acceptance voluntary.
These changes are expected to take effect 90 days after their official publication, which is anticipated in the coming days.
The shift comes as the country seeks a crucial $1.4 billion loan from the IMF, a deal contingent on “mitigating the risks of Bitcoin.” Negotiations have been underway for months, and in December, Salvadoran authorities reached a technical agreement with the international lender.
Back in 2021, President Nayib Bukele boldly declared Bitcoin as El Salvador’s official currency, envisioning a future where digital money would revolutionize banking for the unbanked and attract foreign investors. In 2022, more Salvadorans had Bitcoin Lightning wallets than traditional bank accounts, highlighting the rapid adoption of cryptocurrency.
Now, that chapter is closing. As the country pivots back toward traditional financial systems, El Salvador’s Bitcoin experiment serves as a cautionary tale of bold ambition, global pressure, and economic reality.
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