El Salvador Decreto Legislativo 199 — Bitcoin Legal-Tender Repeal (IMF EFF Conditionality)

Mechanism

The Ley Bitcoin (Decreto 57, 8 June 2021) made El Salvador the first country to grant Bitcoin unlimited legal-tender status ("curso legal con poder liberatorio ilimitado"), mandating that all economic agents accept BTC as payment and that the State provide the Chivo Wallet digital wallet with a US$30 BTC bonus per citizen to drive adoption. Decreto 199 reverses the compulsory-acceptance architecture across six amended articles and three repealed articles:

• Articles 1, 3, 5 amended: Bitcoin redesignated from "legal tender" (moneda de curso

legal) to a voluntary means of exchange. The obligation on merchants and public-sector entities to accept BTC is eliminated. "Unlimited liberatory power" language struck.

• Articles 7 and 12 amended: State subsidy mechanism supporting Chivo Wallet reformed;

State exits compulsory promotion and facilitation of BTC use.

• Article 11 amended: Tax-payment-in-BTC provision repealed; taxes and public-sector

obligations must now be settled in USD only.

• Articles 4, 8, 9 repealed: Chivo Wallet operational mandate articles and BTC-to-USD

state conversion guarantee repealed entirely. The government no longer guarantees automatic BTC-USD conversion for merchants via the Chivo trust fund.

IMF conditionality nexus: IMF Country Report 25/58 identifies the Bitcoin Law reform as a "prior action" that the Bukele government was required to complete before the IMF Executive Board approved the US$1.4 billion EFF programme. The legislative vote on 29 January 2025 preceded the IMF Executive Board approval by approximately two weeks, meeting the conditionality deadline.

Operational-status asymmetry: Despite the legal-tender repeal, the Government of El Salvador continues its BTC strategic-reserve accumulation programme (begun September 2021, approximately 6,000 BTC held as of early 2025). This creates a notable policy asymmetry: BTC purchases continue under "strategic investment" framing rather than monetary-policy operation, even as the domestic monetary-status backstop is removed.

Downstream implications

• Chivo Wallet infrastructure: The AlphaPoint-provided Chivo platform loses its statutory

mandate; the government's transition plan for the state-backed wallet system remains unclear as of effective date.

• BTC-denominated commercial contracts: Private-sector BTC payment rails (Strike SV

operations, Athena Bitcoin ATM network, Bitfinex SV regulatory licences) are not prohibited but lose the legal-tender backstop that previously compelled merchant acceptance — a material commercial-risk shift for operators whose SV business models relied on universal acceptance.

• IMF/multilateral-conditioned crypto reversal precedent: SV's reversal is the first

instance of IMF programme conditionality directly compelling the repeal of a cryptocurrency legal-tender designation. The precedent is relevant to Central African Republic (BTC legal tender April 2022, revoked March 2023) and any future jurisdiction considering BTC legal- tender adoption, since the international-financial-architecture cost is now empirically documented.

• Peer group: Structurally analogous to IMF/World Bank conditionality-driven policy

reversals registered for Argentina, Pakistan, Sri Lanka, and Egypt — all involve statutory rollbacks of flagship economic-policy experiments as conditions for multilateral programme access.

Open questions

• Will the Chivo Wallet be wound down, privatised, or maintained as a voluntary USD/BTC

wallet without its statutory underpinnings?

• Does the Bukele government's continuing BTC strategic-reserve accumulation create tension

with IMF EFF programme conditionality on "sound monetary policy"?

• What transitional arrangements apply to private-sector BTC payment contracts entered

before 30 April 2025?

• Will the removal of legal-tender status affect Tether's USDT operations in El Salvador,

which were partly predicated on the broader crypto-friendly regulatory environment?