El Salvador has decided to amend its Bitcoin Law, removing its mandatory status as a unit of account, as part of an agreement with the IMF.
Bitcoin No Longer a Legal Unit of Account
One of the key changes in the reform is the removal of Bitcoin as a unit of account. Previously, merchants could price goods and services in BTC, but this option is now eliminated. Additionally, Salvadorans can no longer use Bitcoin to pay taxes, reversing an earlier provision. The government also removed the requirement to provide infrastructure for Bitcoin transactions, including the state-backed Chivo wallet.
IMF Deal Drives Law Changes
The law change follows El Salvador's agreement with the IMF, which outlined conditions for the country to access a $1.4 billion credit. The funds will be used for essential payments and to support President Bukele’s economic agenda, although the IMF has consistently raised concerns about Bitcoin's role in the Salvadoran economy.
What's Next for Bitcoin in El Salvador?
Despite the legal changes, El Salvador continues to accumulate Bitcoin. President Bukele has ramped up BTC purchases, in line with global trends. It remains unclear whether the government will impose additional restrictions as suggested in the IMF agreement. While Bitcoin remains legal, its reduced role in the economy signals a shift in El Salvador’s stance on crypto regulation.
El Salvador's relationship with Bitcoin illustrates the intersection of international economic influences and domestic policy choices. The legislative changes underline the power of external financial commitments over national fiscal decisions.
