tl;dr
El Salvador has agreed to scale back its pro-Bitcoin legislation after reaching a deal with the International Monetary Fund (IMF) in December 2024. The deal involves making financial reforms in exchange for a $1.4 billion loan from the IMF's Extended Fund Facility. As a result, El Salvador will now ...
El Salvador has agreed to scale back its pro-Bitcoin legislation after reaching a deal with the International Monetary Fund (IMF) in December 2024. The deal involves making financial reforms in exchange for a $1.4 billion loan from the IMF's Extended Fund Facility. As a result, El Salvador will now make accepting Bitcoin voluntary for the private sector, stop accepting tax payments in cryptocurrency, and gradually unwind the government-issued Chivo wallet.
Despite IMF pressure, El Salvador continues to add to its national Bitcoin reserves, with plans to accelerate its Bitcoin acquisition. However, on-the-ground adoption of Bitcoin in El Salvador has been low, with only 7.5% of the population using Bitcoin for transactions according to a government survey from October 2024.
The law was passed with 55 votes in its favor and only two against. The IMF had been pressuring El Salvador since 2021 to scale back its pro-Bitcoin fiscal policy, claiming the approach raised “a number of macroeconomic, financial and legal issues.” But President Nayib Bukele had previously brushed off pressure from the lender, posting memes on social media in response.
In fact, the head of El Salvador’s National Bitcoin Office announced in December that the country intends to accelerate its Bitcoin acquisition going forward. Though El Salvador may have led the world when it came to pro-Bitcoin legislation, on-the-ground adoption had been lukewarm. According to a government survey from October 2024, only 7.5% of the population used Bitcoin for a transaction in the past year.
While the IMF has extensively warned about the dangers of cryptocurrencies for countries in Latin America that have historically struggled with high corruption, they have also argued that a blanket ban on Bitcoin, such as in countries like China, “may not be effective in the long run.”