El Salvador, recognized as the first nation to embrace Bitcoin as legal tender, is navigating a complicated regulatory landscape following revisions to its Bitcoin law intended to align with an International Monetary Fund (IMF) loan agreement.
According to Jan3 CEO Samson Mow, Bitcoin (BTC) “both is and isn’t legal tender” in El Salvador after the government modified its Bitcoin law to satisfy conditions set by the IMF.
“The Bitcoin situation in El Salvador is intricate, and several questions remain unresolved,” Mow shared in a post on X on February 13.
A pioneer in Bitcoin and a proponent of national BTC adoption, Mow characterized El Salvador’s Bitcoin status as a “glass is half full” scenario.
Why are changes being made to El Salvador’s Bitcoin law?
El Salvador’s amendments to its Bitcoin law were enacted roughly three years after the country officially recognized BTC as legal tender in September 2021.
The original legislation required all local businesses to accept Bitcoin as payment, facilitating its adoption. The government conducted its inaugural BTC purchase in September 2021.
The IMF, an international body aligned with the United Nations, has consistently expressed opposition to El Salvador’s Bitcoin initiative, cautioning about potential risks to financial stability.
In December 2024, the IMF reached a $1.4 billion agreement with the Salvadoran government, offering a loan contingent on a reduction in the country’s Bitcoin adoption.
Following this agreement, Salvadoran lawmakers approved legislation to revise its Bitcoin law by the end of January 2025 as part of the arrangement.
Conflicting changes
“The alterations to the Bitcoin Law are quite strategic, facilitating compliance with the IMF agreement while allowing the Salvadoran government to maintain its image,” Mow noted on X.
However, these changes also introduce contradictions, as the law no longer classifies Bitcoin as a currency while simultaneously designating it as “voluntary legal tender,” he pointed out.
Source: Samson Mow
“Excluding the term currency diminishes the practicality of the Bitcoin Law,” Mow added, noting that the newly passed amendments also restrict the use of BTC for tax payments and other government fees.
Future Bitcoin acquisitions by El Salvador uncertain
An additional significant point from the Bitcoin Law amendments is that they prohibit the Salvadoran government from “interacting with BTC,” as Mow stated.
Article 8 of the amendments specifies that the state isn’t obligated to facilitate BTC transactions, which could signal a possible discontinuation or sale of the government-operated crypto wallet, Chivo.
Beyond the Bitcoin Law modifications, uncertainties remain regarding the agreement between the IMF and El Salvador, Mow highlighted, referring to ambiguous language in the agreement released on December 18, 2024.
Related: El Salvador purchases 12 Bitcoin in a single day, raising its reserve to 6,068 BTC
He questioned the unclear phrasing concerning whether El Salvador would be allowed to continue accumulating Bitcoin.
Source: Excellion (Samson Mow)
“I assume that the government can keep acquiring Bitcoin as an asset, but there’s a possibility that it may be halted in the future. It all hinges on what ‘confined’ entails. We’ll have to wait and see,” Mow remarked.
“Political leadership changes. Laws can be amended with relative ease. What truly matters is genuine Bitcoin adoption — whether it stems from the top down or grassroots movements; the objective is for real people to understand and utilize Bitcoin,” he concluded.
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