El Salvador’s heralded adoption of Bitcoin as legal tender appears to be undergoing a significant downgrade as businesses are no longer obliged to accept the cryptocurrency.
As part of a $1.4 billion loan agreed with the International Monetary Fund in December, the government’s involvement with the digital Chivo wallet will be “gradually unwound.” At the end of January, on a vote of 55-2, El Salvador’s Legislative Assembly passed modifications to the Bitcoin law, eliminating the word “currency” but keeping it legal tender. The changes will take effect May 1, 90 days after the legislation appeared in the official newspaper.
“Bitcoin no longer has the strength of legal tender,” economist Rafael Lemus told AFP. “It should have always been that way, but the government tried to force it into existence, and it didn’t work.”
Users are now free to accept Bitcoin or not, but it cannot be used to pay taxes or state bills. President Nayib Bukele admitted that introducing Bitcoin as an official currency alongside the US dollar in September 2021—the world’s first such move—had been his government’s “most unpopular” measure, alongside stringent anti-gang security measures.
El Salvador still has 688 Bitcoin in reserve, worth an estimated $574 million, of which $287 million is profit.
On February 13, Bukele and Microstrategy Executive Chairman Michael Saylor discussed how Bitcoin adoption could be accelerated worldwide, with El Salvador’s National Bitcoin Office considering establishing nodes in each household. The aim was to boost public perception of how Bitcoin can work in daily settings.
“President Bukele continues to buy Bitcoin, we have a Bitcoin Office, we have the Bitcoin Law, Bitcoin can be used in El Salvador,” El Salvador’s ambassador to the US, Milena Mayorga, assured at a Bitcoin conference.” But, “it has not been an easy road.” A survey published by the Jesuit Central American University in January revealed 92% of Salvadorans had not used Bitcoin in 2024. Of the 8% who said they had done so, the average was only 14 times a year. Family remittances via digital wallets amounted to $7.22 million in December 2024, less than 1% of the total sent.
