El Salvador's Bitcoin Law Faces Shifting Landscape After IMF Deal

El Salvador’s Bitcoin experiment, the first of its kind globally, is facing a new chapter as the country adjusts its legal framework to comply with an agreement with the International Monetary Fund (IMF). The nation’s Bitcoin Law, which made Bitcoin (BTC) legal tender in 2021, has been amended to meet the conditions of a $1.4 billion loan deal with the IMF.

A Complex and Evolving Bitcoin Status

Samson Mow, CEO of Jan3 and an advocate of Bitcoin adoption by nation-states, described the situation as “complex.” He stated that the status of Bitcoin in El Salvador is now a paradox — Bitcoin “both is and isn’t legal tender.” The amendments to the Bitcoin Law, which were finalized by Salvadoran lawmakers in January 2025, have introduced significant changes, raising important questions about the future of Bitcoin in the country.

“The Bitcoin situation in El Salvador is complex, and there are many questions that still need to be answered,” Mow commented on X (formerly Twitter) on February 13, 2025.

The country’s decision to adopt Bitcoin as legal tender was groundbreaking, making it the first nation to officially recognize Bitcoin as a medium of exchange. However, the IMF has consistently opposed this move, citing concerns over the potential risks to financial stability.

The Amendments to El Salvador’s Bitcoin Law

El Salvador’s Bitcoin Law was initially passed in September 2021, mandating that all local businesses accept Bitcoin as a means of payment. The government even made its first Bitcoin purchase that same month, signaling a bold commitment to cryptocurrency adoption.

However, after negotiations with the IMF, El Salvador agreed to amend its Bitcoin law as part of the terms of the $1.4 billion loan secured in December 2024. The IMF required El Salvador to scale back its Bitcoin adoption to reduce perceived financial risks. As a result, the Salvadoran government passed amendments to its Bitcoin Law by the end of January 2025.

The Contradictions of the New Law

While the amendments are seen as a necessary step for securing IMF funding, Mow pointed out that they create contradictions within the law. One of the most significant changes is that Bitcoin is no longer classified as a currency, yet it remains “voluntary legal tender.” This shift weakens the original intent of the law and raises doubts about the long-term viability of Bitcoin as a fully recognized payment method within the country.

Moreover, the amendments have introduced prohibitions on using Bitcoin for tax payments and government fees, further diminishing the practical use of Bitcoin in day-to-day activities. Mow highlighted that these changes make the Bitcoin Law “a lot less useful,” and questioned whether the government would continue to encourage Bitcoin adoption.

Uncertainty Around Future Bitcoin Purchases

Another crucial aspect of the amendments is that they prohibit the Salvadoran government from acquiring Bitcoin in the future. Under Article 8 of the revised law, the government is also no longer required to facilitate Bitcoin transactions. This provision has led to speculation about the eventual phase-out of El Salvador’s Chivo Wallet, the government-backed crypto wallet used by citizens for Bitcoin transactions.

The amendments’ vague language also raises questions about the government’s ability to continue acquiring Bitcoin as an asset. Mow noted that while the government may still be allowed to stack Bitcoin for now, the language in the IMF deal—particularly the word “confined”—leaves room for interpretation. “It could also be that it may be stopped at a later time,” he said.

What’s Next for Bitcoin in El Salvador?

While El Salvador’s political landscape is subject to change, Mow emphasized that the future of Bitcoin in the country will depend on both top-down policies and grassroots adoption. As political leadership evolves, so too could the laws surrounding Bitcoin, which could lead to further amendments or reversals.

Ultimately, Mow argued that what matters most is continued Bitcoin adoption, regardless of how it is shaped by government policies. "The goal is real people understanding and using Bitcoin,” he concluded, underscoring the importance of widespread grassroots education and integration.

The evolving situation in El Salvador is a pivotal moment in the ongoing global experiment with Bitcoin as legal tender. The nation’s commitment to its Bitcoin experiment may be wavering, but the broader questions surrounding cryptocurrency adoption, financial stability, and regulatory compliance continue to shape the future of digital currencies worldwide.

As El Salvador navigates these changes, the world will be watching to see how the country's approach to Bitcoin evolves—and what it means for the future of decentralized finance.