El Salvador Ditches Bitcoin as Legal Tender After Rushed Deal With IMF

San Salvador and President Nayib Bukele wanted a loan from the IMF for $1.4 billion dollars and the IMF agreed so long as the country agreed to scale back

El Salvador has scaled back its pro-Bitcoin laws following pressure from the International Monetary Fund (IMF).

The country's congress passed legislation on a vote of 55-2 that modifies six articles of the Bitcoin law and repeals three others.

Bitcoin will remain legal tender in El Salvador, but it is no longer considered "currency," and its adoption is now optional.

Businesses can choose whether or not to accept Bitcoin, and the state will no longer accept it as a form of payment for taxes and debts.

The government is also scaling back its investment in the Chivo Wallet, the state-backed crypto-wallet.

El Salvador adopted Bitcoin as legal tender in 2021, with President Nayib Bukele pushing through the legislation as part of a broader plan to overhaul the country's economy.

Bukele has hyped up several grand projects, including a Bitcoin city to be built around a volcano and a plan to use geothermal energy from the volcano to mine cryptocurrency.

The plan was to build the city in the shape of a physical Bitcoin, complete with laser-eyes and a light show.

The project, however, never materialized, and El Salvador's economy has struggled in recent years.

The country has now turned to the IMF for a $1.4 billion loan to help stabilize itself.

The IMF has long been critical of El Salvador's Bitcoin law.

"There are large risks associated with using Bitcoin as legal tender, especially given the high volatility of its price. We don't recommend it. In the short-term, the costs and risks largely outweigh the benefits," the IMF said in a 2022 statement on El Salvador's economy.

Bukele's allies in congress, however, insist that El Salvador is still a Bitcoin-friendly country.

"This is not a setback for Bitcoin. El Salvador is still the freest country in Latin America when it comes to Bitcoin," said Christian Guevara, a Bukele ally and lawmaker.

Despite the government's efforts, however, the push to adopt cryptocurrency has been a flop among normal people.

Less than 12% of the country has used Bitcoin, and Bukele himself admitted that it "has not had the widespread adoption we hoped" in an interview with TIME.

Bukele told the magazine that the Bitcoin push built the country's brand and made people think of things other than violence and prison when they thought of El Salvador.

But violence and prison are back in the news following Bukele's meeting with U.S. Secretary of State Marco Rubio.

El Salvador is famous for its massive supermax prisons, which house tens of thousands of prisoners in horrifying conditions.

Bukele and Rubio met over the weekend, and the El Salvadorian president offered up prison space to America.

The U.S. could, he said, put anyone they want inside his concrete nightmares, including American citizens.

Ruibo and the Trump administration are shopping around for places to house people the country is deporting as part of its immigration crackdown.

Rubio and the White House have said there are no plans to deport and house American citizens in foreign prisons.

But the offer is on the table. In El Salvador, Bitcoin is out of fashion and prisons are very much in.