El Salvador has reportedly removed the legal tender status of Bitcoin (BTC) after less than four years because of pressure from the International Monetary Fund (IMF).
According to a new report from BBC, the reform to El Salvador’s Bitcoin Law that the country’s lawmakers approved last week modified six and removed three of the provisions from the 2021 legislation that made it the first country in the world to adopt a cryptocurrency as legal tender.
The report says the amendments make the acceptance of Bitcoin voluntary and abandon the official currency status of the asset.
Economist Julia Evelin Martínez tells BBC the implications of removing the term “currency” and leaving “legal tender” in the first article of the law, which reportedly caused confusion.
“The key is that the concept of currency disappears. For example: the euro is legal tender in the country because people can use it optionally if both parties agree, but it is not legal tender because no one is obliged to accept payments in euros.”
The legislative assembly passed the reforms while the government aims to secure a $1.4 billion funding deal from the International Monetary Fund (IMF) that is conditional on El Salvador reducing its Bitcoin-related risks.
Last year, IMF spokesperson Julie Kozack said that the global lender urged El Salvador to reconsider its policies on Bitcoin as part of a discussion to support the country’s economic reforms.
“What we have recommended is a narrowing of the scope of the Bitcoin Law, strengthening the regulatory framework and oversight of the Bitcoin ecosystem, and limiting the public sector exposure to Bitcoin.”
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