El Salvador Removes Bitcoin Status as Legal Currency
El Salvador’s parliament has approved a reform that removes Bitcoin’s status as legal tender, marking a major reversal of the country’s landmark 2021 decision to adopt the cryptocurrency as an official currency.
Reforms Bitcoin Law
The legislative changes, passed in the last days of January, eliminate Bitcoin’s mandatory acceptance in El Salvador, making its use entirely voluntary.
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Businesses and public institutions are no longer required to accept Bitcoin as payment, it will not be used for tax payments also. Previously, the Bitcoin Law had mandated Bitcoin’s acceptance nationwide.
The reform follows nearly two years of pressure from the International Monetary Fund (IMF), which urged El Salvador to mitigate Bitcoin-related financial risks in exchange for a $1.4 billion loan to stabilize the country’s struggling economy.
The Government Keeps Buying Bitcoin
While Bitcoin has lost its legal tender status, El Salvador’s government remains committed to accumulating it.
According to Arkham Intelligence, the government currently holds over 6,000 Bitcoins, valued at approximately $577.38 million based on Bitcoin’s Monday price of $95,600.
In the past three days alone, the El Salvador government’s wallet has added seven more Bitcoins, signaling that Bukele’s administration is not abandoning its Bitcoin strategy entirely.
El Salvador’s government currently holds more than 6K Bitcoins. Source: Arkham
Corruption Clouds El Salvador’s Bitcoin Adoption
Despite President Nayib Bukele’s strong promotion of Bitcoin as a success and an opportunity to establish El Salvador as a crypto hub, the law was met with widespread skepticism. Over 70% of the population reportedly opposed Bitcoin’s adoption as legal tender at the time of its introduction in September 2021.
Additionally, local media uncovered issues such as corruption in the rollout, allegations of bonus fraud, money laundering violations, and a significant $840,000 theft from government-managed Bitcoin Chivo wallets .
By 2024, only about 8% of Salvadorans reported using Bitcoin for payments, highlighting its limited real-world adoption despite government efforts.
On The Flipside
- Talks of Bitcoin integration into national and corporate treasuries are gaining momentum, especially after US President Donald Trump hinted at its potential inclusion in US strategic reserves.
Why This Matters
El Salvador’s adoption was more of a symbolic milestone than a market-moving event, with its actual economic influence on the global crypto market remaining minor.
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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