El Salvador has ended Bitcoin’s status as legal tender. The decision was made under pressure from the International Monetary Fund (IMF) in an effort to secure a $1.4 billion loan. The new regulations make the use of Bitcoin entirely voluntary, allowing merchants and institutions to reject it, and it can no longer be used for tax payments.
President Nayib Bukele had been advocating for the adoption of Bitcoin as a national economic solution since 2021. However, a recent poll shows that only 8.1% of the population still uses the Chivo Wallet digital wallet, and most respondents believe the program has not benefited them. Does this signify the end of the national Bitcoin experiment?
Many are wondering if Bukele has truly abandoned his vision of making El Salvador a global Bitcoin hub. Despite losing its legal tender status, the government still plans to hold Bitcoin in its strategic reserves, indicating that they are not completely abandoning it.
However, this decision is clearly influenced by pressure from the IMF. The international banking institution has long viewed El Salvador’s Bitcoin approach as a significant financial risk. In order to qualify for billions of dollars in loans, the government has decided to limit the nation’s exposure to Bitcoin.
The adoption of Bitcoin in El Salvador has proven to be challenging since its implementation. Technical obstacles have plagued the crypto-based payment system, leading most companies to choose US dollars over Bitcoin. Some small businesses have even reported difficulty in accepting Bitcoin payments due to the drastic price fluctuations.
With this change, businesses that have been burdened by Bitcoin can now relax. If they do not want to accept Bitcoin, they are not obligated to do so. However, for the crypto community, this decision could be seen as a setback to the national efforts for Bitcoin adoption.
Despite these developments, El Salvador’s Bitcoin ecosystem is not completely dead. Bitfinex Securities will issue BMN2 in the country, as previously reported by CNF. With a more flexible regulatory environment, this new Bitcoin mining investment is expected to be more accessible.
There are notable differences between BMN1 and BMN2. BMN1 requires a minimum investment of $100,000 and is targeted at wealthy investors, while BMN2 has a lower investment restriction, allowing more people to participate in the Bitcoin mining industry without significant capital requirements. This could be a new approach for El Salvador to remain involved in the crypto scene, even with the altered Bitcoin policy.
Although Bitcoin is no longer legal tender, the Salvadoran government still shows interest in the digital asset. Keeping Bitcoin in a strategic reserve indicates that they have not completely given up on it. However, the past few years have presented numerous challenges for El Salvador’s Bitcoin experiment, including low adoption, price volatility, and pressure from global financial institutions, which have led to policy changes.
Can El Salvador still be a “Bitcoin nation” in the future? For now, it seems that they prefer to take the safer route by maintaining investment opportunities that do not compromise the economic stability of the country.