El Salvador changes its approach to Bitcoin
El Salvador’s groundbreaking venture into adopting Bitcoin as a legal form of payment seems to be undergoing a significant transformation. Businesses are no longer compelled to accept the digital currency, altering the dynamics of its usage within the country.
In December, a significant $1.4 billion loan agreement with the International Monetary Fund led to the decision to gradually phase out the government’s involvement with the Chivo digital wallet. El Salvador’s Legislative Assembly made changes to the Bitcoin law in late January, choosing to remove the term “currency” while maintaining its legal tender status. These modifications are set to come into effect on May 1, 90 days after being published in the official newspaper.
Economist Rafael Lemus highlighted that Bitcoin’s status as legal tender has been diminished, hinting that this adjustment was perhaps overdue. The government’s attempt to mandate Bitcoin’s acceptance seemed unsuccessful when juxtaposed with market realities.
Individuals now have the freedom to accept or reject Bitcoin as a form of payment, although it is no longer applicable for settling taxes or state-related expenses. Recognizing that the introduction of Bitcoin alongside the US dollar in September 2021 was met with controversy, President Nayib Bukele acknowledged that this decision, which was a global first, was one of the most contentious policies his administration had implemented.
Despite the changes, El Salvador still maintains a reserve of 688 Bitcoins valued at approximately $574 million, with a profit margin of $287 million. An initiative to accelerate global Bitcoin adoption was hence discussed by Bukele and Microstrategy’s Executive Chairman Michael Saylor on February 13. The National Bitcoin Office in El Salvador is considering the establishment of nodes in every household to showcase the practical applications of Bitcoin in everyday life.
El Salvador’s ambassador to the US, Milena Mayorga, shared insights during a Bitcoin conference, emphasizing that President Bukele remains committed to promoting Bitcoin. However, the journey has been challenging, with a mere 8% of Salvadorans reportedly using Bitcoin in 2024, averaging only 14 transactions per year. Notably, family remittances via digital wallets amounted to $7.22 million in December 2024, constituting less than 1% of the total remittances made.
The evolution of Bitcoin’s role in El Salvador continues to unfold, highlighting both the opportunities and hurdles associated with its adoption as a legal tender alongside the US dollar. While the landscape may be changing, the underlying mission to advance Bitcoin usage and understanding remains at the core of the government’s agenda.
