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El Salvador · Policy · · 5 minute readLawmakers voted 55 to 2 on January 29 to end the rule that businesses must accept bitcoin, meeting a key condition of a planned US$1.4 billion loan from the International Monetary Fund.
El Salvador has rewritten the law that made it famous in financial circles. On the evening of January 29, 2025, the Legislative Assembly approved changes to the Bitcoin Law that remove the obligation on businesses to accept bitcoin as payment. The reform passed by 55 votes to 2, minutes after President Nayib Bukele's government sent it, under a fast track procedure that skipped committee study and floor debate.
The change is the price of an agreement with the International Monetary Fund (IMF), the Washington based institution that lends to countries in exchange for policy commitments. In December the two sides reached a staff level agreement, meaning IMF staff and the government have agreed the terms, subject to approval by the Fund's executive board, on a loan of about US$1.4 billion.
El Salvador adopted bitcoin as legal tender in 2021, the first country to do so, and the law took effect on September 7 that year. Its most ambitious feature was article 7, which said every economic agent had to accept bitcoin when a customer offered it. The law also allowed taxes to be paid in bitcoin and obliged the state to provide instant conversion between bitcoin and US dollars, a role filled by Chivo, the government's digital wallet.
In practice, take up stayed low. A survey cited in local reporting found that 91.9% of Salvadorans said they did not use bitcoin for their transactions in 2024. President Bukele himself has called its introduction the least popular measure of his government.
The word "moneda", currency, was also dropped from the law's first article. Ruling party lawmakers presented the reform as a way to secure bitcoin's permanence and make its use more practical, and the government has said it will keep adding to its reserve of about 6,000 bitcoin. What has clearly gone is compulsion: bitcoin remains legal to use, but nobody has to accept it.
According to the IMF's announcement of December 18, 2024, the loan is a 40 month arrangement under the Extended Fund Facility, the IMF's lending tool for countries with longer term structural problems. It is worth SDR 1,033.9 million, about US$1.4 billion. SDRs, or special drawing rights, are the IMF's own unit of account, based on a basket of major currencies. With expected support from the World Bank, the Inter American Development Bank and regional lenders, total financing is expected to exceed US$3.5 billion over the program.
The program's goals are mainly fiscal: improving the government's underlying budget balance by about 3.5% of GDP over three years and putting public debt, which the IMF expects to peak at about 85% of GDP in 2024, on a firm downward path. On bitcoin, the government committed to making private acceptance voluntary, limiting public sector involvement, gradually unwinding its role in Chivo and strengthening oversight of digital assets. The January 29 vote delivers the legal part of that. The IMF executive board is expected to consider the arrangement in February.
For residents, investors and anyone opening accounts, very little changes in practice. El Salvador has used the US dollar as its official currency since 2001, and banks, salaries, contracts and now all taxes run in dollars. Bitcoin becomes what it already was for most people, an optional extra. For clients who want a bank account in a dollarised country, that is arguably a simplification: the rules for business and tax are now clearly dollar based.
El Salvador's Freedom Visa, which grants citizenship for a US$1 million contribution paid in bitcoin or USDT, a dollar backed digital token, is a separate program and is not mentioned in the reform. The government's stated intention is to keep its bitcoin policy alive in a narrower form, but the episode is a useful reminder that a program built around a national policy can be reshaped by outside financial pressures. A financing deal with the IMF should, on the other hand, support fiscal stability, which matters to anyone who will hold the country's passport for decades. We help clients assess and apply for the program, work with our local team, and quote our fixed fee in writing.
This article is general information, not legal, tax or investment advice.
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