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As per the terms of a new loan agreement with the International Monetary Fund (IMF), El Salvador is rolling back its efforts to promote the use of Bitcoin as a currency.
Last week, lawmakers in El Salvador amended the country’s Bitcoin Law so that merchants are no longer forced to accept Bitcoin as a method of payment for goods and services.
The amendments were passed almost unanimously, winning 55 votes from the 60 deputies that make up the country’s Legislative Assembly.
Previously, under the Bitcoin Law adopted in 2021, merchants were required to accept Bitcoin as a payment method.
The law also gave citizens the option to pay their taxes in Bitcoin.
In line with the IMF’s criteria for accessing $1.4bn in loans, both of these provisions have now been scrapped.
Acceptance of Bitcoin for payment of goods and services is now “voluntary”, and citizens can no longer make tax payments in Bitcoin.
Other provisions of the original law that were repealed include a guarantee from the state to convert any Bitcoin held by citizens into dollars on demand, and a programme to educate citizens about Bitcoin technology and transactions.
Lawmakers have not yet enacted any legislation that would prohibit the National Bitcoin Office (ONBTC) from purchasing additional units of Bitcoin using public funds.
Over the weekend, the ONTBC purchased six Bitcoin in total, bringing its total Bitcoin holdings to 6,056.18 BTC ($586bn).
Last December, the IMF confirmed to Vixio that, if El Salvador is to access the $1.4bn, it must abstain from purchasing additional units of Bitcoin.
Should the government break this promise and purchase more Bitcoin when the loan agreement is active, the agreement will be void, funds that have already been loaned will be recalled, and no future funds will be made available.
The agreement must first be approved by the IMF’s executive board before it becomes active.
Bitcoin experiment ends with a whimper
No jurisdiction has tried harder than El Salvador to promote the use of Bitcoin as a currency, but the experiment did not lead to mass adoption of the cryptocurrency as envisioned.
When the Bitcoin Law was passed in 2021, the government created its own Bitcoin wallet known as Chivo (which is slang for “cool” in El Salvador) with a $30 sign-up bonus.
As covered by Vixio, 60 percent of El Salvadorans opened an account, but only around four in ten of these users transacted via Chivo after receiving the free money.
In 2024, a team at El Salvador’s Francisco Gavidia University surveyed 1,200 people on economic and financial issues.
Respondents were asked whether they have “used Bitcoin to make a transaction” in the past year, and 92 percent of them said “no”.
Cesia Rivas de Lopez, the sole deputy of El Salvador’s Vamos party in the Legislative Assembly, described the Bitcoin Law as a “failure” that ought to be repealed.
Rivas de Lopez endorsed a bill filed by Claudia Ortiz, another deputy, to repeal the Bitcoin Law and repurpose the money that was allocated to the Chivo wallet.
“The public money used to set up Chivo Wallet cannot be wasted — it should be used to provide subsidies and facilitate payment of taxes and fines,” Ortiz posted on X.
“I proposed repealing the Bitcoin Law and that the assets related to it be used to make the delivery of subsidies, tax collection and public services more efficient.”
