El Salvador Scales Down Bitcoin Use, No Longer Legal Tender

• El Salvador softens its Bitcoin stance, making it optional amid IMF loan pressure, marking a shift from Bukele’s bold crypto vision.
• Bitcoin adoption flopped—few used it, businesses resisted, and poverty rose, proving that a crypto revolution isn’t easy to force.
• IMF influence led El Salvador to rethink Bitcoin, showing the challenges of integrating digital currencies into national economies.

Under the changed legislation, Bitcoin is a means of payment, not legal tender in El Salvador. This move comes following close to two years of pressure from the IMF that called for a $1.4 billion loan to be pegged on the reduction in risks relative to Bitcoin. Lawmakers from the ruling party approved the changes with reluctant approval to modify six articles and repeal three.

Consequently, businesses and public institutions are no longer required to accept Bitcoin. Cryptocurrency also cannot be used to pay taxes. While the government maintains its Bitcoin reserves, these reforms mark a policy shift. Interestingly, President Nayib Bukele has remained silent despite his usual social media presence.

Bitcoin Adoption Falls Short of Expectations

El Salvador adopted Bitcoin as legal tender in September 2021, despite 71% of the population opposing the move. Bukele promised economic prosperity and financial inclusion, investing over $200 million in infrastructure. The government launched the Chivo Wallet, offering a $30 bonus to encourage adoption. 

However, Bitcoin usage remained low. By 2024, only 8.1% of citizens reported using it. A 2024 survey found that just 7.5% of the population used Bitcoin for transactions. Additionally, a Central Reserve Bank study revealed that 55,000 more people fell into poverty in 2024.

Businesses were initially required to accept Bitcoin unless they lacked the technology. However, adoption remained slow. Many small businesses preferred cash, citing price volatility as a major concern. Consequently, Bitcoin failed to integrate into everyday transactions. Despite government incentives, the population largely resisted using digital currency for purchases.

IMF Influence and Economic Implications

The IMF played a crucial role in El Salvador’s Bitcoin rollback. It demanded regulatory changes as a condition for approving the $1.4 billion loan. The government had until the end of January 2025 to implement these reforms. Consequently, Bitcoin’s status shifted from mandatory acceptance to voluntary usage. This signals a retreat from Bukele’s original vision of a Bitcoin-driven economy. While El Salvador continues to hold Bitcoin in its treasury, its practical use within the country has diminished.

Despite Bukele’s optimistic projections, Bitcoin adoption never reached critical mass. Citizens remained skeptical, and economic conditions did not improve as promised. The IMF’s pressure underscores the difficulty of using digital currencies as national tender. This shift is a turning point in El Salvador’s cryptocurrency experiment, raising questions about Bitcoin’s future role in global economies.