El Salvador Drops Bitcoin as Legal Tender Amid IMF Pressure

El Salvador has reportedly reversed its decision to make Bitcoin (BTC) a legal tender, following pressure from the International Monetary Fund (IMF). The Central American nation became the first country to adopt a cryptocurrency as legal tender in 2021, but lawmakers have now amended the Bitcoin Law, removing its official currency status and making its acceptance voluntary.

The legislative assembly passed the reforms last week, with the aim of securing a $1.4 billion funding deal from the IMF. The global lender has been urging El Salvador to reconsider its policies on Bitcoin as part of a discussion to support the country's economic reforms. IMF spokesperson Julie Kozacksaid that the fund recommended a narrowing of the scope of the Bitcoin Law, strengthening the regulatory framework and oversight of the Bitcoin ecosystem, and limiting the public sector exposure to Bitcoin.

Economist Julia Evelin Martínez told BBC that the implications of removing the term "currency" and leaving "legal tender" in the first article of the law have caused confusion. She explained that the concept of currency disappearing means that people can use it optionally if both parties agree, but no one is obliged to accept payments in that currency.

The reversal of Bitcoin's legal tender status in El Salvador comes amid ongoing concerns about the cryptocurrency's volatility and potential risks to the country's financial stability. The IMF has been critical of El Salvador's Bitcoin policies, warning that they could lead to financial instability and undermine the country's economic reforms.

The decision to make Bitcoin a legal tender in El Salvador was controversial from the start, with critics arguing that it exposed the country to unnecessary risks. The IMF's pressure on El Salvador to reverse its decision reflects the global lender's concerns about the potential impact of cryptocurrencies on financial stability and economic growth.