Did El Salvador Really Abandon Bitcoin as Legal Tender? The Truth and Its Impact

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In early February 2025, while many in the Chinese-speaking world were still celebrating the Lunar New Year tradition of "welcoming the god of wealth" on the fifth day, a wave of panic swept through the crypto market. Reports claiming that El Salvador had abolished Bitcoin’s legal tender status went viral, triggering a sharp downturn across major digital assets.

Market data from OKX showed Bitcoin briefly dipping below the $100,000 mark, reaching a low of $99,026.50; Ethereum fell to $3,068.10; Solana dropped to $206.69. The sell-off was swift and severe.

As the world’s first country to adopt Bitcoin as legal tender in 2021, El Salvador’s bold move had long symbolized crypto’s potential leap into mainstream legitimacy. So if the nation had truly reversed course, it would be a major blow to the entire industry’s aspirations for global adoption.

But did El Salvador really abandon Bitcoin?

The answer is more nuanced than headlines suggest.

The Catalyst Behind the Change

In 2021, under the leadership of President Nayib Bukele—a vocal advocate for blockchain innovation—El Salvador made history by enacting a law that granted Bitcoin equal status with the U.S. dollar. The legislation mandated:

This radical shift positioned El Salvador at the forefront of financial experimentation. However, it also drew strong opposition from the International Monetary Fund (IMF), which warned that adopting a volatile cryptocurrency as legal tender posed serious risks to macroeconomic stability, financial integrity, and consumer protection.

For over two years, the IMF maintained pressure on El Salvador to scale back its Bitcoin commitments—especially as the country sought a crucial $1.4 billion loan to support economic reforms.

Finally, on January 29, 2025, El Salvador’s Congress—dominated by Bukele’s Nuevas Ideas party—voted 55 to 2 in favor of a legislative amendment submitted directly by the president. This update became the center of global speculation: Was this the end of Bitcoin as legal tender?

👉 Discover how global financial policies shape cryptocurrency adoption today.

The Misinformation: Timing and Wording Matter

Two critical factors explain why this news resurfaced so dramatically in early February—despite the vote occurring nearly a week earlier.

1. The Timing Wasn’t New—The Narrative Was

The legislative change wasn’t sudden. In fact, Reuters and other major outlets reported on it shortly after January 29, but the story initially gained little traction. Even earlier, on December 18, 2024, the IMF published an official statement revealing that negotiations with El Salvador had concluded during a mid-December mission. That means the decision to reform Bitcoin policy had been in motion for months.

So why the sudden market reaction?

2. It All Came Down to Framing

The IMF’s original statement used careful, technical language:

"Legal reforms will make Bitcoin adoption voluntary for the private sector. Public sector participation in Bitcoin transactions will be limited. Taxes will be payable only in U.S. dollars. The government's role in operating digital wallets like Chivo will be phased out. Regulatory oversight of digital assets will be strengthened."

Notice: No mention of revoking legal tender status.

Stacy Herbert, Director of El Salvador’s National Bitcoin Office (ONBTC), clarified on social platform X:

"Bitcoin remains legal tender."

Similarly, ruling-party lawmaker Elisa Rosales stated the reforms were designed to "ensure the permanent status of Bitcoin as legal tender" while improving real-world usability.

Yet one outlet changed the tone entirely: Spanish newspaper EL PAÍS, whose headline read:

"Nayib Bukele Changes His Mind and Cancels Bitcoin’s Legal Tender Status in El Salvador."

That framing spread rapidly, amplified by algorithms and fear-driven traders—proving how a single misleading headline can destabilize markets.

👉 See how media narratives influence crypto prices in real time.

Has El Salvador Really Changed Its Stance?

Despite regulatory tightening, El Salvador has not abandoned Bitcoin—in spirit or strategy.

Consider these facts:

John Dennehy, founder of Salvadoran Bitcoin startup Mi Primer Bitcoin, noted:

"To my knowledge, the national Bitcoin reserve plan remains unaffected by the IMF agreement—at least for now."

In essence: El Salvador compromised on implementation to secure financial aid—but kept its core vision intact.

It’s not a retreat; it’s a recalibration.

Key Takeaways and Ongoing Implications

While businesses are no longer required to accept Bitcoin and taxes must now be paid in dollars, Bitcoin retains its legal tender designation under national law. The changes reflect pragmatic concessions rather than ideological reversal.

This moment underscores several broader truths about crypto adoption:

Frequently Asked Questions (FAQ)

Q: Did El Salvador officially remove Bitcoin as legal tender?
A: No. Despite regulatory changes limiting government involvement and mandatory acceptance, Bitcoin remains legally recognized as legal tender in El Salvador.

Q: Why did El Salvador reform its Bitcoin laws?
A: To meet conditions set by the IMF for a $1.4 billion loan aimed at supporting economic reforms and fiscal stability.

Q: Can you still pay taxes in Bitcoin in El Salvador?
A: No. As part of the reforms, tax payments are now required to be made exclusively in U.S. dollars.

Q: Will El Salvador keep buying Bitcoin?
A: Yes. Officials have confirmed ongoing accumulation, and the national reserve has grown since the reforms passed.

Q: Does this hurt Bitcoin’s global adoption prospects?
A: Not necessarily. While short-term sentiment dipped, El Salvador’s continued holdings show long-term commitment, signaling resilience.

Q: What does “voluntary adoption” mean for businesses?
A: Companies can choose whether to accept Bitcoin. They’re no longer legally obligated, which reduces friction but may slow widespread usage.

Core Keywords

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