The reform has reportedly been adopted to comply with conditions set by the IMF for a $1.4 billion loan
El Salvador’s Congress has approved a reform revoking Bitcoin’s status as legal tender, in a reversal of the country’s landmark 2021 decision, according to media reports. The amendments to its Bitcoin law come after a loan deal with the International Monetary Fund, which requires that the acceptance of the cryptocurrency be made voluntary in the country.
In 2021, El Salvador became the first country to adopt cryptocurrency as legal tender, officially recognizing Bitcoin alongside the US dollar, which had been the nation’s primary currency for two decades.
The legislative changes passed on January 30 removed Bitcoin’s mandatory acceptance in El Salvador, making its use entirely voluntary. The reform was approved with 55 votes in favor and two against.
The amendments reportedly come after nearly two years of pressure from the IMF, which urged the country to mitigate Bitcoin-related financial risks in exchange for a $1.4 billion loan, which was agreed to in December, to stabilize the country’s struggling economy.
The IMF specifically pushed for Bitcoin acceptance to be voluntary in the private sector, according to Reuters.
The move marks a significant policy reversal for El Salvador, as President Nayib Bukele championed Bitcoin’s legal tender status as a way to boost financial inclusion, particularly for the unbanked population.
However, recent surveys show that 92% of Salvadorans have refrained from using Bitcoin since its official adoption, highlighting public skepticism toward the digital currency, despite government efforts.
Although Bitcoin has lost its legal tender status, the government has recently indicated that it will continue buying the cryptocurrency to add to its reserves.
Last year, Bukele slammed the US dollar, claiming it is backed by nothing, and that the US economy is based on the “farce” of printing unlimited amounts of money. He went on to predict that Western civilization will collapse when this bubble “inevitably bursts.”
