El Salvador's Bitcoin Law: A Half-Full Glass of Confusion

El Salvador, the first country to adopt Bitcoin as legal tender, is grappling with a complex regulatory shift following amendments to its Bitcoin law aimed at complying with an International Monetary Fund (IMF) loan agreement. The amendments, approved in late January 2025, have left the status of Bitcoin in El Salvador in a state of confusion.

According to Jan3 CEO Samson Mow, Bitcoin is in a "glass is half full" situation in El Salvador. The amendments to the Bitcoin law, pushed by the IMF, have left many questions unanswered about the cryptocurrency's status in the country.

The IMF, an international organization operating within the United Nations, has long opposed El Salvador's Bitcoin experiment, warning about financial stability risks. In December 2024, the IMF struck a $1.4 billion deal with the Salvadoran government, offering the loan in exchange for the country scaling back its Bitcoin adoption. Subsequently, Salvadoran lawmakers approved legislation to amend its Bitcoin law.

The amendments to the Bitcoin Law are cleverly crafted to allow compliance with the IMF agreement while allowing the El Salvador government to save face, according to Mow. However, the amendments are prone to contradictions. The law no longer classifies Bitcoin as a currency but at the same time makes it "voluntary legal tender." The passed amendments also prohibit tax payments and essentially any government fees with BTC.

Another important takeaway from the Bitcoin Law amendments is that the changes prohibit the Salvadoran government from "touching BTC." Article 8 of the amendments also stipulated that the state doesn’t need to help facilitate BTC transactions, paving the way for a potential phase-out or sale of El Salvador’s government-provided crypto wallet, Chivo.

Separately from the Bitcoin Law changes, there are still questions pending from the agreement between the IMF and El Salvador. Mow raised questions over the vague language regarding whether El Salvador would be allowed to continue stacking Bitcoin. He noted that the government can continue to acquire Bitcoin as an asset, but it could also be stopped at a later time, depending on the interpretation of the agreement.

Mow concluded that political parties in power change, and laws can be changed easily. What matters is real Bitcoin adoption, whether it's top-down or grassroots; the goal is real people understanding and using Bitcoin.