In a surprising turn of events, El Salvador is revising its groundbreaking decision to adopt Bitcoin as legal tender. Following a significant international loan agreement and legislative changes, businesses are no longer required to accept the cryptocurrency. This shift marks a notable change in the country's approach to digital currencies, reflecting both economic pressures and public reception.

Legislative Changes and Economic Implications

In the wake of a substantial $1.4 billion loan from the International Monetary Fund (IMF), El Salvador has embarked on a series of reforms regarding its involvement with Bitcoin. The government's relationship with the Chivo digital wallet, which was initially promoted aggressively, will be gradually phased out. By the end of January, the Legislative Assembly voted overwhelmingly to amend the Bitcoin law, removing the term "currency" while maintaining its status as legal tender. These modifications will take effect 90 days after publication in the official gazette.

According to economist Rafael Lemus, this adjustment signifies a recognition that Bitcoin's role as a mainstream currency faced significant challenges. Users now have the option to accept or reject Bitcoin transactions, but it cannot be used for tax payments or government bills. President Nayib Bukele acknowledged that introducing Bitcoin alongside the US dollar in September 2021 was one of his administration's least popular measures, alongside stringent anti-gang policies.

Despite these setbacks, El Salvador retains a substantial reserve of 688 Bitcoins, valued at approximately $574 million, with an estimated profit of $287 million. Efforts to accelerate global Bitcoin adoption continue, with discussions between President Bukele and Microstrategy Executive Chairman Michael Saylor focusing on expanding household access to Bitcoin nodes. However, a recent survey by the Jesuit Central American University revealed that only 8% of Salvadorans used Bitcoin in 2024, averaging just 14 times per year. Family remittances via digital wallets amounted to $7.22 million in December 2024, less than 1% of the total sent.

El Salvador's ambassador to the United States, Milena Mayorga, emphasized that despite the challenges, the country remains committed to exploring the potential of Bitcoin in everyday life. Yet, the road ahead is undoubtedly complex and filled with uncertainties.

From a journalist's perspective, this development underscores the delicate balance between innovation and practicality in financial policy. While El Salvador's initial bold move captured global attention, the subsequent adjustments highlight the importance of aligning new technologies with societal needs and economic realities. The experience serves as a valuable lesson for other nations considering similar initiatives, emphasizing the need for careful planning and public engagement.