In early February 2025, a wave of headlines claiming that El Salvador had "scrapped Bitcoin as legal tender" sent shockwaves through the global crypto market. Bitcoin dropped below $100,000 on OKX, briefly touching $99,026.50; Ethereum dipped to $3,068.10; Solana fell to $206.69. The narrative was clear: if the world’s first country to adopt Bitcoin as legal money was backtracking, what hope did the broader crypto movement have?
But as often happens in fast-moving digital markets, the truth was more nuanced — and far less dramatic — than the headlines suggested.
The Real Story Behind the “Repeal”
El Salvador made history in 2021 when President Nayib Bukele successfully pushed for Bitcoin to be recognized as legal tender alongside the U.S. dollar. The move required businesses to accept Bitcoin for payments, eliminated capital gains tax on crypto transactions, and allowed citizens to pay taxes using digital assets. It was a bold experiment — one celebrated by crypto advocates and criticized by traditional financial institutions.
Chief among the critics was the International Monetary Fund (IMF), which repeatedly warned that adopting Bitcoin posed significant risks to macroeconomic stability, financial integrity, and consumer protection. For over two years, the IMF urged El Salvador to roll back or modify its Bitcoin policies — especially if it hoped to secure a $1.4 billion loan to support economic reforms.
The compromise came on January 29, 2025, when El Salvador’s Congress — dominated by Bukele’s Nuevas Ideas party — approved a legislative amendment to the original Bitcoin law. This change, widely misinterpreted as a full repeal of Bitcoin’s legal tender status, was actually part of a negotiated reform with the IMF.
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What Actually Changed?
Let’s clarify what the new law does and does not do.
According to an IMF joint statement issued on December 18, 2024, following technical discussions in December, the reforms aim to:
- Reduce macroeconomic risks associated with Bitcoin adoption.
- Make Bitcoin acceptance voluntary for private businesses.
- Restrict government participation in Bitcoin transactions.
- Require taxes to be paid exclusively in U.S. dollars.
- Gradually phase out state involvement in the Chivo wallet — El Salvador’s government-run crypto platform.
- Strengthen transparency, regulation, and oversight of digital assets.
Crucially, nowhere in the official documents does it say that Bitcoin has lost its legal tender status.
Stacy Herbert, Director of El Salvador’s National Bitcoin Office (ONBTC), confirmed this on social media shortly after the reform passed:
"Bitcoin remains legal tender."
Similarly, ruling-party lawmaker Elisa Rosales stated that the reform was designed precisely to ensure Bitcoin’s permanent status as legal money while improving its real-world usability.
Reuters reported the event accurately:
"El Salvador accelerates Bitcoin reform after IMF deal... aimed at securing its role as legal tender."
So why did so many outlets report that Bitcoin had been “dethroned”?
The Power of Headlines: How Misinformation Spread
The misleading narrative appears to have originated from a February 2, 2025 article by Spanish newspaper EL PAIS, titled:
"Nayib Bukele Changes His Mind and Cancels Bitcoin's Legal Tender Status in El Salvador."
While attention-grabbing, this headline oversimplified a complex policy adjustment. By focusing on the removal of mandatory adoption and tax payments in Bitcoin, EL PAIS framed the reform as a reversal — even though the core designation of Bitcoin as legal tender remains intact.
Other media outlets picked up the story without verifying the original sources or checking statements from ONBTC or IMF officials. In the age of algorithmic news feeds and social media virality, nuance is often sacrificed for speed.
It’s important to recognize:
- The IMF never demanded a full repeal — only risk mitigation.
- El Salvador never formally declared an end to Bitcoin’s legal status.
- Government officials consistently reaffirmed their commitment.
Has El Salvador Changed Its Stance on Bitcoin?
Despite external pressure, El Salvador’s strategic commitment to Bitcoin appears stronger than ever.
Just one day after the IMF statement in December 2024, Stacy Herbert announced that El Salvador would continue buying Bitcoin for its national reserves — possibly at an accelerated pace.
Since then, ONBTC data shows that the country has consistently added to its holdings. As of early 2025, El Salvador holds approximately 6,055 BTC — worth over half a billion dollars at current prices.
John Dennehy, founder of Salvadoran Bitcoin startup Mi Primer Bitcoin, noted:
"From what I know, the national Bitcoin reserve plan hasn’t been affected by the IMF agreement — at least not initially."
This suggests a pragmatic strategy: comply with international financial institutions on operational details while preserving the symbolic and long-term financial benefits of holding Bitcoin.
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So… Is Bitcoin Still Legal Tender?
Yes — technically and legally.
While businesses are no longer required to accept it, and taxes must be paid in dollars, Bitcoin retains its official designation as legal tender under Salvadoran law. This means:
- Citizens can still use it for transactions where both parties agree.
- It remains a recognized unit of account.
- The government continues to invest in it.
- Infrastructure like Chivo ATMs and wallets still operates (though state involvement will decrease).
The change is less about ideology and more about practical governance under international financial scrutiny.
Why This Matters for Global Crypto Adoption
El Salvador’s situation highlights a growing tension in the crypto world:
- Innovation vs. Regulation
- Sovereignty vs. Global Financial Standards
- Decentralization vs. Institutional Oversight
Other nations watching this experiment may draw different lessons. Some might see El Salvador’s compromise as a sign that full Bitcoin integration is impractical without international buy-in. Others may view it as proof that even under pressure, pro-crypto policies can survive — and evolve.
What’s clear is that legal tender status doesn’t mean universal adoption, nor does regulatory adjustment mean abandonment.
Key Takeaways
- El Salvador did not abolish Bitcoin’s legal tender status.
- The changes were part of an IMF-backed reform package focused on risk reduction.
- The government continues to buy and hold Bitcoin.
- Misinformation played a major role in triggering short-term market panic.
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Frequently Asked Questions (FAQ)
Q: Did El Salvador remove Bitcoin as legal tender?
A: No. While businesses are no longer required to accept it and taxes must be paid in dollars, Bitcoin remains legally recognized as tender in El Salvador.
Q: Why did El Salvador change its Bitcoin laws?
A: To meet conditions set by the International Monetary Fund for a $1.4 billion loan, aimed at supporting broader economic reforms.
Q: Will El Salvador keep buying Bitcoin?
A: Yes. Officials have confirmed ongoing purchases, and national reserves have grown since the law was amended.
Q: Did the IMF force El Salvador to abandon Bitcoin?
A: No. The IMF recommended reducing economic risks but did not demand elimination of Bitcoin’s legal status.
Q: How has the market reacted to these changes?
A: Initially negative due to misinformation, but fundamentals remain strong as El Salvador maintains its long-term strategy.
Q: Can other countries follow El Salvador’s model?
A: Possibly — but they’ll likely face similar pressures from global financial institutions unless regulatory frameworks evolve.
Core Keywords:
- Bitcoin legal tender
- El Salvador Bitcoin law
- IMF crypto policy
- Bitcoin adoption 2025
- BTC market crash
- Sovereign cryptocurrency reserves
- Chivo wallet
- Nayib Bukele crypto
This episode serves as a reminder: in the world of digital assets, understanding context is just as important as watching price charts.