El Salvador Rushes to Approve Bitcoin Law Amendment to Comply With IMF Loan Terms

El Salvador has voted to scale back its radically pro-Bitcoin legislation after agreeing to a deal with the International Monetary Fund (IMF) in December 2024, Reuters reports.

The deal involved El Salvador making a basket of financial reforms in exchange for a $1.4 billion loan from the IMF’s Extended Fund Facility (EFF) to fund the government’s reform agenda.

In December 2021, the Central American nation became the first country in the world to make Bitcoin legal tender, forcing all businesses to accept it, at least on paper.  Under the terms of the new law, accepting Bitcoin will become voluntary for the private sector.

El Salvador also agreed to stop accepting tax payments in the cryptocurrency, and to “gradually unwind” the Chivo wallet, a government-issued crypto wallet. 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.

IMF pressure has not been stopping El Salvador from adding to its national Bitcoin reserves, with the country adding another 11 Bitcoin to its portfolio early this month at a cost of roughly $1 million. The country now holds Bitcoin worth roughly $637 million at current values, with an all-time return of 129%.

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.

Meanwhile, past surveys found that many Salvadorans merely used their government issued crypto wallets to hold and transfer U.S. dollars.

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.”

Edited by Stacy Elliott.