The IMF Just Improved El Salvador’s Bitcoin Law

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The IMF yesterday announced they have reached a $1.4 billion loan deal with El Salvador. In return, the Central American country that in 2021 made bitcoin legal tender had to remove some of its pro-Bitcoin policies.

I spent about three months in El Salvador around the time the Bitcoin law went into effect. I thought then that it was a positive development for the country, but there were aspects of the law that I strongly disliked. Exactly these aspects are now being removed.

Most importantly, Salvadoran merchants will no longer be obligated to accept bitcoin. Great! I don’t think Bitcoin should be forced on anyone, nor do I believe Bitcoin needs that. Bitcoin is an emergent form of free market money, and adoption should happen voluntarily.

(In practice, this aspect of the law was barely enforced anyways. I’ve heard from one relative insider that some of the big fast food chains received phone calls from the government telling them to comply — which would explain why McDonald’s and Wendy’s did it — but otherwise I don’t think any merchants got in trouble for not accepting bitcoin.)

Additionally, El Salvador will have to wind down operations of its Chivo wallet. Maybe the software has improved over the years, but in 2021 the wallet was incredibly buggy; the open source community and free market are much more capable of building such tools. Good riddance!

That said, it is slightly disappointing that Salvadoran citizens won’t be able to pay tax in bitcoin anymore — though, again, I doubt many did. This is probably little more than a nuisance, however. Now, bitcoin-accepting merchants need to sell some of their BTC for USD before paying the taxman.

To succeed, Bitcoin benefits from an equal playing field. El Salvador still goes a long way to offer just that.

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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