El Salvador’s government has moved swiftly to amend its Bitcoin law after reaching a $1.4 billion agreement with the International Monetary Fund (IMF). On Wednesday, the country’s Congress—dominated by President Nayib Bukele’s New Ideas Party—approved a bill modifying Bitcoin’s legal status to align with IMF recommendations.
A Major Shift in Bitcoin Policy
In 2021, El Salvador became the first country in the world to recognize Bitcoin as legal tender alongside the U.S. dollar. The decision put the small Central American nation in the global spotlight, making Bukele one of Bitcoin’s most vocal advocates. However, the policy also faced significant criticism from financial institutions, including the IMF, which warned about economic risks.
To secure the IMF loan, El Salvador agreed to scale back its Bitcoin ambitions. The newly approved amendment makes Bitcoin acceptance voluntary for businesses, a move designed to reduce regulatory concerns while still maintaining the cryptocurrency’s legal status. Previously, businesses were required to accept Bitcoin as payment, which led to backlash from many sectors.
Congress Moves at Lightning Speed
The new bill was introduced to Congress just minutes before lawmakers voted. The measure passed easily, with 55 votes in favor and only two against. Elisa Rosales, a ruling party lawmaker, defended the reform, stating that it ensures Bitcoin’s “permanence as legal tender” while making its use more practical.
Bitcoin’s Soaring Value and Bukele’s Crypto Strategy
Despite modifying its stance, El Salvador remains committed to Bitcoin. The government has indicated that it will continue purchasing Bitcoin for its national reserves, particularly as the cryptocurrency’s value has surged to new highs. Bitcoin’s recent rally was fueled by expectations of a more favorable U.S. regulatory environment following Donald Trump’s election victory.
Bukele has consistently promoted Bitcoin as a tool for financial inclusion and economic growth. However, the government’s large-scale Bitcoin investments have sparked concerns over volatility and financial risk. The IMF had previously urged El Salvador to increase transparency regarding its Bitcoin holdings and limit its exposure to potential losses.
What’s Next for Bitcoin in El Salvador?
With this reform, El Salvador appears to be striking a balance between its Bitcoin ambitions and international financial stability. The move is expected to ease tensions with the IMF while still allowing Bitcoin to play a role in the country’s financial ecosystem.
As Bitcoin continues to gain mainstream acceptance globally, all eyes will be on El Salvador to see how this policy shift impacts its economy and cryptocurrency strategy.
