El Salvador revokes Bitcoin's status as legal tender to secure an IMF loan

By ramontomeydw // 2025-02-10

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El Salvador's Legislative Assembly voted to revoke Bitcoin's status as legal tender, ending its experiment as the first country to adopt it as official currency in 2021.
The revocation aligns with the conditions of a $1.4 billion loan from the International Monetary Fund (IMF), which pressured El Salvador to reduce Bitcoin-related risks for financial stability and transparency.
Despite initial hopes by President Nayib Bukele, the experiment faced high public skepticism, with surveys showing 92 percent of Salvadorans avoiding Bitcoin. The government will continue buying Bitcoin for reserves, highlighting the ongoing debate over its role.
The decision raises questions about the balance between national sovereignty and global financial oversight, with critics arguing that the IMF's demands undermined El Salvador's autonomy.
While Bitcoin's role in El Salvador is diminished, the debate over its potential as a tool for financial inclusion and the influence of global financial institutions on national policies remains contentious.

El Salvador's Legislative Assembly has revoked Bitcoin's status as legal tender, marking the end of a bold experiment that began in 2021 when the Central American nation became the first country to adopt the cryptocurrency as official currency. The revocation approved on Jan. 30, aligns with the requirements of a $1.4 billion loan San Salvador secured from the International Monetary Fund (IMF). Fifty-five lawmakers voted in favor of removing Bitcoin as legal tender, while only two voted against. Critics argue that the IMF strong-armed the country into abandoning its Bitcoin policies under the guise of mitigating financial risks, raising questions about the balance between national sovereignty and global financial oversight. The IMF has long pressured El Salvador to reduce Bitcoin-related risks, citing concerns over financial stability, consumer protection and transparency. In a press release from December 2024, the IMF stated that El Salvador's Bitcoin project would be significantly scaled back as part of a staff-level agreement for the Extended Fund Facility. The agreement stipulated that Bitcoin acceptance in the private sector must be voluntary, public sector involvement in Bitcoin-related activities must be limited and the government's role in the Chivo crypto wallet must be phased out. The IMF’s demands were non-negotiable for El Salvador, which desperately needed the $1.4 billion loan to stabilize its struggling economy. The government led by Salvadoran President Nayib Bukele swiftly amended its Bitcoin law to comply with the IMF's conditions. The legislative changes removed Bitcoin's mandatory acceptance, making its use entirely voluntary. While Bitcoin retains its legal status, the government no longer requires citizens or businesses to use it – effectively ending its trial as a national currency.

Bitcoin's unfulfilled promise in El Salvador: What went wrong?

The reversal is a significant blow to Bukele's vision of Bitcoin as a tool for financial inclusion and economic empowerment. In 2021, Bukele championed Bitcoin's adoption as a way to boost job creation, reduce remittance costs and provide financial access to the unbanked population. The government invested over $200 million in the rollout, including the creation of the Chivo digital wallet and the installation of Bitcoin ATMs across the country. However, public skepticism remained high, with surveys showing that 92 percent of Salvadorans refrained from using Bitcoin and 71 percent disapproved of its adoption as legal tender. Despite the reversal, Bukele's administration has indicated that it will continue buying Bitcoin to add to its reserves. Last year, the Salvadoran leader criticized the U.S. dollar, calling it "backed by nothing" and predicting the collapse of Western civilization due to the "farce" of unlimited money printing. His comments underscored his belief in Bitcoin as a hedge against traditional financial systems, even as his government bowed to IMF demands. (Related: El Salvador to continue purchasing Bitcoin despite agreement with IMF to scale back crypto policy.) The IMF's intervention has sparked debate about the role of global financial institutions in shaping national policies. While the IMF framed its demands as necessary to safeguard financial stability, critics argue that the organization undermined El Salvador's sovereignty by forcing it to abandon its Bitcoin experiment. El Salvador's Bitcoin experiment may have ended, but its legacy remains contentious. While the cryptocurrency's role in the country is diminished, the debate over its potential – and the forces that shape its adoption – is far from over. Watch this video explaining that the true value of Bitcoin lies in the freedom from tyranny it offers. This video is from the Recharge Freedom channel on Brighteon.com.

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Bitcoin's unfulfilled promise in El Salvador: What went wrong?

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