What happened
El Salvador's Legislative Assembly approved Legislative Decree 199 on 29 January 2025, amending the Bitcoin Law of 8 June 2021. It was sanctioned on 30 January and published the same day in the Diario Oficial No. 21, Tomo 446, and takes force ninety days later (Article 8), so around 30 April 2025.
Most headlines say bitcoin stopped being legal tender. The text says otherwise: the words curso legal stay, and recital IV says the reform guarantees bitcoin's "eficacia y permanencia como curso legal". What was removed is not the label but the effects.
What it changes
Article 1 called bitcoin a "moneda de curso legal, irrestricto con poder liberatorio, ilimitado" for natural and legal persons "públicas o privadas". It now reads "curso legal, definido por su poder liberatorio ilimitado, con aceptación voluntaria por las personas naturales o jurídicas con total participación privada únicamente". The word moneda, currency, is deleted. So is irrestricto. So is the state.
Article 7 said "Todo agente económico deberá aceptar Bitcoin". It now says "Únicamente las personas naturales, o jurídicas con total participación privada, podrán aceptar Bitcoin": deberá becomes podrán, must becomes may. Article 3 turns a price "expresado en Bitcoin" into one "convertido en Bitcoin".
Three articles are repealed: Article 4, taxes payable in bitcoin; Article 8, under which the state provided transaction alternatives and automatic, instantaneous convertibility into dollars; and Article 9, its conversion rules. Article 14, the BANDESAL trust that guaranteed convertibility, stays in the text with nothing to do: it existed to serve Article 8. Article 12, which had exempted anyone evidently without access to the technology, now says state monetary obligations "deberán ser pagadas en las monedas que fueron contraídas".
As our post on the original law argued, that trust was what made the scheme work: a merchant compelled to accept a volatile asset needs somewhere to put it immediately. Compulsion and backstop leave together.
What it does not change
Bitcoin stays lawful to hold, to price against, to accept and to use. The capital gains exemption in Article 5 survives, minus the clause "al igual que cualquier moneda de curso legal". Article 13 is untouched, so a dollar debt may still be settled in bitcoin where the parties agree. Dollarisation is unchanged, and was never displaced by any of this. Nothing here reaches the protocol, self-custody, or anyone's ability to transact: the repeal removed an obligation, not a capability.
Context
The reform is a prior action for the IMF programme whose staff-level agreement was announced on 18 December 2024. The Fund's wording is a "narrowing of the Bitcoin Law by redefining bitcoin's legal tender status to remove from the Law the essential features of legal tender". The essential features, not the label. Board approval is still pending.
Legal tender is a liability rule: a creditor must accept the thing in discharge of a debt. A state can command that at the counter. It cannot command the two things that make money money: that people want to hold it, and that prices are quoted in it. Salvadorans went on pricing, saving and settling in dollars, so the mandate produced compliance rather than circulation. Measured adoption never got far: at the peak 20 percent of firms accepted bitcoin and 4.9 percent of sales were paid in it, and 1.2 percent of remittances arrived through a crypto wallet. A UCA survey published in December 2024 (n=1,266, margin 2.75 percent) found 91.8 percent had not used bitcoin in 2024 and 76.2 percent never have.
A mandate on which almost nothing rests is cheap to repeal. Our earlier post ended on the line that a state can make a currency permissible far more easily than it can make it used. The statute book has now conceded it. Note the direction of the money too: what binds here is not the Bitcoin Law but a credit line denominated in somebody else's unit of account.