El Salvador and BTC: A New Reform or Capitulation?

The Story Behind El Salvador’s Bitcoin Adoption

In 2021, President Nayib Bukele made history by declaring Bitcoin a legal tender alongside the US dollar. Under this policy, all businesses were required to accept BTC as payment, commodity prices could be denominated in Bitcoin, and taxes—including capital gains and VAT—could be paid using the cryptocurrency. 

For a deeper dive into the specifics of this reform, check out our article: “Crypto Regulations in El Salvador.”

However, this ambitious strategy faced intense pushback from international financial institutions. The International Monetary Fund repeatedly warned that Bitcoin adoption carried substantial macroeconomic, financial, and legal risks. Over the next two years, the IMF pressured El Salvador to reconsider its stance, warning that failure to do so could jeopardize financial assistance for the country’s already fragile economy.

Causes and Consequences of El Salvador’s Bitcoin Reform

On January 29, 2025, El Salvador’s parliament, controlled by the ruling Nuevas Ideas (New Ideas) party led by the sitting president, approved amendments to the Bitcoin Law with 55 votes in favor and only 2 against. These changes are part of an agreement with the IMF, a crucial step for the country to secure a long-awaited $1.4 billion loan.

Notably, although the amendments were officially passed on January 29, the IMF had already reported El Salvador’s policy adjustments on its website as early as December 18, 2024.

The key changes include:

1. Bitcoin remains legal tender, but its use by the private sector is now optional.
2. Government agencies are no longer required to process transactions in BTC, and taxes must be paid exclusively in U.S. dollars.
3. The government’s role in managing the national crypto wallet, Chivo, will be reduced.
4. Stronger transparency, regulatory oversight, and compliance measures for digital assets will be introduced.

Despite these mandated changes, El Salvador’s government continues to emphasize Bitcoin’s central role in the national economy. Stacy Herbert, Director of the National Bitcoin Office (ONBTC), reaffirmed this stance on her X account, stating that BTC remains legal tender and that her department will continue shaping crypto policies, attracting investors, and expanding blockchain education initiatives.

She also noted that while the government-backed Chivo wallet will be discontinued, El Salvador’s Bitcoin economy will still be supported by dozens of private BTC wallets.

The Future of Bitcoin in El Salvador

While the recent reforms initially sparked controversy, with critics accusing President Nayib Bukele of compromising his Bitcoin stance to secure IMF funding, the fundamental reality remains unchanged. 

El Salvador continues to accumulate Bitcoin as part of its strategic reserves. According to ONBTC, as of early February 2025, the country holds 6,055 BTC, with its most recent purchase occurring after the parliament ratified the crypto law amendments.

Additionally, key figures in El Salvador’s Bitcoin ecosystem, such as John Dennehy, founder of Mi Primer Bitcoin, have stated that these legislative changes will not affect the country’s long-term BTC reserve strategy. This indicates that the agreement with the IMF is not a retreat from Bitcoin but rather a move to balance economic priorities.

Despite pressure from international financial regulators, El Salvador remains committed to its Bitcoin strategy, albeit with slight adjustments. Nayib Bukele’s administration continues to integrate BTC into the nation’s economy, proving that its Bitcoin journey is far from over.