El Salvador’s Bitcoin Law Changes Have Reshaped the Country’s Approach to Bitcoin as Legal Tender

LA LIBERTAD, EL SALVADOR - NOVEMBER 20: President of El Salvador Nayib Bukele speaks during the ... [+] inauguration of a new Vijosa Laboratories

El Salvador has modified its Bitcoin Law to comply with the International Monetary Fund (IMF) conditions for accessing a $1.4 billion loan.

The modifications, which eliminate the legal tender status of Bitcoin and introduce changes to the tax regime, among other changes, come after the IMF highlighted these factors as problematic for granting the loan.

The country, positioning itself as Bitcoin Country, mainly due to the recognition of bitcoin as legal tender, began the year with the possibility of the loan being rejected. However, in a surprising turn of events, the IMF approved the loan in February after El Salvador implemented the requested changes to the Bitcoin Law.

The changes to the legislation, initially approved in 2021, were a key factor preventing the lending institution from granting the loan despite the pressing need for economic support following the pandemic and the 2001 earthquake.

The updates to the law, published in the official gazette on January 29, also include changes to the tax regime and the introduction of new taxes, aiming to increase fiscal revenue and promote economic activity.

The Community Reacts To The Bitcoin Law Changes

El Salvador remains a focal point for the global Bitcoin community. As the first country to make BTC legal tender, it gained international relevance, attracting expats and Bitcoin enthusiasts eager to support its success.

I spoke with some bitcoin Advocates, including local bitcoin educators, to better understand the impact of these Bitcoin Law changes on their projects and broader interest in the country.

"Among many Bitcoiners I spent time with in El Salvador, the mood was somewhat subdued," content creator and journalist Joe Nakamoto shared during an interview while visiting the country.

"A lot of international Bitcoiners moved to El Salvador for the Bitcoin Law; some Salvadorans returned. Now, doubt about the country’s future with regards to Bitcoin has crept in," he added. The reporter also noted that it's too early to assess the full impact of these legal modifications on local bitcoin education and adoption efforts.

For Lina Seiche, Founder of the Little Hodler project and based in El Salvador, the modifications to the law "do not change anything for private projects, and the Bitcoin Office initiatives are unaffected as well." She emphasized that the law still permits BTC use. "It’s not as if using Bitcoin has been outlawed; it has just been made optional," Seiche said. Seiche is also part of the team behind and educational work-book that aims to educate Salvadorean kids in a national scale.

"For Salvadorans, not much changes," Evelyn Lemus, Founder of the circular economy and educational project Bitcoin Berlin, explained in an interview. "Three and a half years after the law was introduced, Bitcoin adoption remains low. For the few who do use it, the biggest change is the uncertainty surrounding the future of the Chivo wallet, leading people to withdraw or transfer their funds to other wallets," Lemus detailed.

Berlin is among the most active circular economies in El Salvador, with over 150 merchants accepting Bitcoin. "Not much has changed regarding people accepting or not accepting it since the announcement. For Berlín, nothing changes. Bitcoin is now part of the town, and people will keep using it regardless of what the law says," Lemus argued.

According to a poll published in January by Universidad Centroamericana and reported by the local outlet elsalvador.com, 92% of Salvadoreans didn’t use BTC in 2024, which explains why the government was not affected by the Bitcoin law changes.

El Salvador Secured $3.5 Billion With The Bitcoin Law Changes

Since day 1 of the Bitcoin Law, the IMF has been against it. They pointed to different risks and issues regarding the Bitcoin project and were very vocal. However, the tone changed after the agreement was reached and announced in late 2024. A lot. What happened?

For Seiche, this deal "went down in such a way that allowed all sides to run with their favorite version of the narrative." El Salvador still has its Bitcoin Law, and the agreement could help catalyze additional financial support of over US$3.5 billion from other multilateral institutions, while the IMF had the problematic concepts removed.

But there are some who take a more critical position around the agreement and the changes. "The IMF got what they wanted—a seat at the table to decide Bitcoin policy in El Salvador. They don’t need to be vocal anymore," educational project My First Bitcoin founder John Dennehey told me in an interview. He’s been critically commenting on the agreement since December, pointing to the conditions the fund usually imposes on countries like El Salvador that are looking for financial support.

“El Salvador challenging the IMF with the Bitcoin Law was becoming a dangerous example for other countries,” Evelyn Lemus from Bitcoin Berlin pointed.

“Now the IMF has successfully imposed changes to the law, making a statement that El Salvador is not so different from other countries that make deals with them