Key Points
- El Salvador has amended its Bitcoin law under pressure from the International Monetary Fund (IMF).
- The amendment makes Bitcoin optional for businesses, rather than mandatory.
El Salvador, a country known for its Bitcoin-friendly policies, has been compelled to modify its Bitcoin legislation due to pressure from the International Monetary Fund (IMF). This move has decreased the nation’s exposure to the leading cryptocurrency.
As reported by Reuters on January 29, the Legislative Assembly of El Salvador approved a bill introduced by President Nayib Bukele to adjust Bitcoin regulations. This action aligns with the conditions of a $1.4 billion loan agreement with the IMF that was established in December 2024.
Bitcoin Becomes Optional for Businesses
A significant part of this deal involved El Salvador agreeing to modify its Bitcoin laws. This alteration has made the use of the cryptocurrency optional for businesses, rather than a compulsory form of payment.
President Bukele presented the proposal to Congress after weeks of discussions, and it was swiftly approved within minutes. The reform was passed with 55 votes in favor and only two against. Prior to this change, businesses were legally obligated to accept Bitcoin as payment.
Elisa Rosales, a lawmaker from the ruling party, stated that this amendment was necessary to ensure Bitcoin’s “permanence as legal tender” and to facilitate its “practical implementation”.
Despite these legislative changes, El Salvador remains committed to its Bitcoin strategy. The country has continued to purchase Bitcoin even after acquiring the IMF loan.
El Salvador’s Bitcoin office recently announced the acquisition of an additional 12 BTC, bringing its total holdings to approximately 6,049 BTC, valued at around $633 million.
El Salvador’s Bitcoin Journey Amid Global Criticism
In 2021, El Salvador made history by becoming the first country to adopt Bitcoin as a legal tender alongside the US dollar. This decision, however, was heavily criticized by global organizations, including the World Bank, which described it as reckless due to the volatility of the crypto market.
Despite the criticism, El Salvador remained dedicated to its Bitcoin experiment, pioneering innovative use cases. For instance, the country utilized its volcanic geothermal energy to mine Bitcoin, becoming one of the first nations to incorporate renewable energy into crypto mining.
In May 2024, the government revealed that it had mined 474 Bitcoin worth $29 million since 2021 using geothermal energy. According to a Reuters report, the mining operation utilized power from the Tecapa volcano, where 300 mining processors were deployed. The state-owned power plant allocated 1.5 megawatts (MW) of its 102 MW capacity to Bitcoin mining.
In addition to mining, El Salvador has continued to expand its crypto ecosystem. Shortly after adopting Bitcoin, the country launched Chivo Wallet, a government-backed digital wallet to facilitate BTC transactions.
El Salvador also has plans to launch a “Bitcoin City”, which has already attracted international investment. Yilport, a Turkish holding company, recently announced a $1.62 billion investment in two of El Salvador’s seaports, marking the largest private investment in the country’s history.
While El Salvador’s approach to Bitcoin continues to be controversial, the nation continues to push forward with its crypto-focused initiatives, balancing regulatory adjustments with long-term blockchain adoption.
