El Salvador Reshapes Bitcoin Law to Unlock $3.5B in Funding

El Salvador has revised its Bitcoin Law, making significant changes to Bitcoin’s legal tender status to meet the International Monetary Fund’s (IMF) conditions for securing up to $3.5 billion in new financing.

While the country still promotes itself as “Bitcoin Country”, the January 29 modification of the Bitcoin Law softens its definition, aligning with the IMF’s loan requirements.

💰 IMF Approves $1.4 Billion Loan for El Salvador

🔹 The IMF board approved the deal on February 26, 2025.
🔹 El Salvador will receive an immediate disbursement of $113 million.
🔹 The funding package totals $1.4 billion, part of a broader $3.5 billion financing plan.

⚖️ Bitcoin’s Legal Status Redefined

Under the original Bitcoin Law (2021), BTC was clearly recognized as legal tender, with mandatory acceptance by merchants and use for tax payments.

🔹 The new version removes Bitcoin’s classification as “currency.”
🔹 BTC is now referred to as “curso legal” (legal course), an ambiguous term.
🔹 Merchants are no longer required to accept Bitcoin.
🔹 Bitcoin can no longer be used to pay taxes.
🔹 BTC remains exempt from capital gains tax.

🏛 IMF Pushes El Salvador to Phase Out Bitcoin Initiatives

The IMF required Bitcoin-related public sector activities to be phased out.

🔹 Chivo Wallet, the government-backed BTC payment system, will be unwound.
🔹 The government must halt Bitcoin accumulation.
🔹 Public sector involvement in Bitcoin transactions will be confined.

According to the IMF’s latest statement:

“The program also addresses risks arising from the Bitcoin project, including by making acceptance of Bitcoin voluntary and by confining public sector engagement in Bitcoin-related activities.”

💭 The Bottom Line: A Setback for El Salvador’s Bitcoin Experiment?

El Salvador’s Bitcoin experiment is shifting, driven by IMF pressure and the need for economic stability.

🔹 Bitcoin is no longer legally mandated but remains a payment option.
🔹 Public Bitcoin infrastructure, including Chivo Wallet, is being phased out.
🔹 The country traded Bitcoin freedom for financial backing.

While Bitcoiners may see this as a setback, others view it as a strategic move to stabilize El Salvador’s economy—but at the cost of weakening its Bitcoin-first approach.

The real question now: Will El Salvador continue to embrace Bitcoin, or is this the beginning of a rollback?