In 2021, El Salvador became the first country to give the Bitcoin's legal tender status, marking a milestone in the crypto universe. However, now in 2025, it is also the first to withdraw this credential from the world's leading digital currency.
The Central American nation's decision was not unilateral. It was not that its president, Nayib Bukele, changed his mind about the viability of the use of cryptocurrency, but the need to obtain financial assistance from the International Monetary Fund (IMF) led him to capitulate on his decision that El Salvador should become a crypto-state. The multilateral organization demanded “mitigate the risks of bitcoin” in exchange for giving him millions of dollars in a loan.
The measure was implemented after the Legislative Assembly of El Salvador - dominated by the ruling party - approved a reform to the Bitcoin Law, in force since 2021, which removed crypto's legal tender status. This allowed the Bukele government to obtain a $1.400 billion loan.
BUY BITCOINBackground
Bukele is one of the most popular Latin American presidents in the region. His style of governing is radical, or as it is known in political jargon, heavy-handed, on key issues in the exercise of government, such as security and finance. But he is also seen as disruptive in taking non-traditional measures to respond to different needs that the country has.
One of these actions was to promote Bitcoin as a means to achieve “economic prosperity and financial freedom” in El Salvador. He proclaimed that “The Bitcoin law will facilitate financial inclusion for vulnerable sectors, streamline payments, attract investment, and increase business opportunities for everyone.”
This is how a 2021-article law was passed in 16 that named the currency as legal tender. BTC. The legal text stipulated, among other measures, the obligation of businesses and state agencies to accept Bitcoin, unless they lacked the technology required to carry out the transactions. Furthermore, enabled tax collection with crypto.
In order to promote the use of cryptocurrency, the government injected huge resources. This included $200 million to facilitate the installation of the technology necessary for its operation, creation of a digital wallet and the installation of ATMs throughout the country.
In addition, to ensure that citizens would become involved in the use of the new legal currency, Bukele gave a $30 bonus to each citizen who installed it. the official Chivo Wallet on your phone.
BUY ETHEREUMLegal reform
The crypto era in El Salvador had to be tempered by the government's need for external financing. To receive money from the IMF, the Executive branch had to abandon one of its most vaunted economic policies; hence, the reversal was passed under the table by the authorities. Even President Bukele, accustomed to posting on X (formerly Twitter) about any measure or expressing his opinion on domestic or international policy, has remained silent on the issue.
In detail, the legal reform involved the amendment of six articles and the elimination of three, which meant that in addition to the virtual currency ceasing to be official currency, its use was limited to exchanges between citizens and private companies, since the State will no longer be able to operate with the BTC blockchain and its acceptance has gone from being mandatory to voluntary.
The IMF also demanded that companies not be forced to receive the digital asset as payment, that taxes be prohibited from being collected with Bitcoin, that the public administration be prohibited from continuing to store Bitcoin, and that all state contracts and obligations be in dollars.
According to the official Bitcoin Office website, at least shortly before it removed BTC as legal tender, it was detailed that the Salvadoran government possessed a reserve of 6.049,18 bitcoins. It is currently unknown whether El Salvador maintains its reserves of this cryptocurrency, but it is clear that to date the IMF has not called for disposing of these digital assets.
Certificate
Course on the Main Cryptocurrencies
Basic levelBit2Me Academy brings you a new course in which you will learn everything you need about the most important cryptocurrencies that exist today.
The Bukele crypto plan
President Bukele's idea regarding Bitcoin is structural. In addition to making it the official currency, he facilitated the installation of the infrastructure for its use in the country. Therefore, the Salvadoran president's plan fell through, as he had previously announced the construction of a city dedicated to Bitcoin mining now cryptocurrency called “Bitcoin City,” which would be created near a volcano to use geothermal energy.
Although Bukele and his government backed down on BTC, forced by the need for resources, they continue to find in the digital currency the currency of the future.
