Legislative Changes to Bitcoin Law in El Salvador in Light of IMF Loan
El Salvador’s lawmakers have approved significant amendments to the country’s Bitcoin Law as part of a strategic move to secure a $1.4 billion loan from the International Monetary Fund (IMF). This change follows the IMF’s request to discontinue the mandatory acceptance of Bitcoin as a legal tender within national borders.
During a parliamentary session, Ernesto Castro, President of the Legislative Assembly, announced that the reform of the Bitcoin Law, which had originally been enacted in 2021, received the backing of 55 out of 84 deputies. El Salvador was historically notable for becoming the first nation in the world to adopt Bitcoin alongside the US dollar as legal tender in September 2021, earning the designation of the "Bitcoin capital."
Initially, the legislation mandated the acceptance of Bitcoin for transactions, which garnered international attention but also faced criticism from institutions like the IMF and the World Bank. Following these amendments, the obligation for both individuals and legal entities to transact in Bitcoin has been removed, making acceptance voluntary.
As it stands, El Salvador holds 6,049 Bitcoin in its reserves, valued at approximately $636 million, yielding a return of 127% on its investments in the digital currency. This figure was recently updated according to government statistics. El Salvador’s parliament consists of 60 deputies, with President Naguib Bukele’s Nuevas Ideas party holding 54 seats.
Key Amendments to the Bitcoin Law
The recent reforms pertain specifically to Article One, where the mandatory requirement for all economic agents to accept Bitcoin as a means of payment has been eliminated. The previous stipulation, outlined in Article Seven, mandated that Bitcoin must be accepted upon demand; this has also been revised to reflect voluntary participation.
Furthermore, a recent survey indicated that 91.9% of Salvadorans expressed a reluctance to utilize Bitcoin in their transactions over the past year.
In December 2024, as part of the loan agreement with the IMF, the Salvadoran government committed to shifting the use of cryptocurrencies onto a voluntary basis within the private sector, thereby reducing the associated risks linked to Bitcoin. This 40-month program is anticipated to receive the approval of the IMF’s Board of Directors in February.
These legislative changes represent a strategic pivot for El Salvador as it seeks to stabilize its economy while navigating the complexities of cryptocurrency integration into its financial system.
In conclusion, the recent adjustments to the Bitcoin Law underscore the government’s responsiveness to international advisory bodies and the economic realities faced by its citizens. The move serves to align El Salvador’s financial practices with global standards while attempting to foster a more sustainable economic environment.