El Salvador's Bitcoin U-Turn: IMF Concerns as BTC Loses Legal Tender Status

El Salvador's President Nayib Bukele has made significant changes to the country's laws, declaring Bitcoin (BTC) as a legitimate currency in accordance with the constitution. This move has led to the removal of Article 4 of the constitution, which previously did not recognize BTC as a legal tender.

The decision to adopt BTC as an official currency has raised questions about the country's international relations and trade parity with the United States. The International Monetary Fund (IMF) has expressed concerns about the use of Bitcoin as a legal tender for payments and exchange, as it does not have international legal tender status.

In El Salvador, the use of Bitcoin as a legal tender was once common, but critics argue that its use was not mandatory for merchants. A recent development on January 29, 2025, revealed that BTC is no longer classified as an official currency in the country. A new article has been introduced, emphasizing the importance of a currency with legal tender status. The government is also gradually moving away from excessive use of BTC, with some government bodies ceasing to accept payments in the cryptocurrency.

The El Salvador government, similar to the pro-crypto administration of Donald Trump, had previously encouraged the use of Bitcoin among both large and small agents. The future of the country's currency remains uncertain as BTC transactions become ineffective.