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Crypto Law/Level VIII · Around the world/8.1 The Americas/Lesson 5

El Salvador’s bitcoin law and its retreat

How El Salvador made bitcoin legal tender in 2021, built a digital-asset issuance regime in 2023, and then rolled back the core of its experiment under an IMF programme from 2025.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. El Salvador’s Digital Assets Issuance Law (Decree 643 of 2023), article 36(b) in the CNAD-published text, exempts gains on transferring digital assets from all taxation. Catch: swaps for goods or services outside article 19 are not covered, and the law has since been amended.
  2. Since 29 January 2025 nobody in El Salvador must accept bitcoin, and taxes are paid only in dollars, so holding bitcoin carries no compliance burden. Catch: a merchant may refuse it, so keep dollars for debts and taxes.
  3. Use a provider registered with the CNAD, the supervisor created by Decree 643, which survived the 2025 Bitcoin Law reform. Catch: the regime has since been amended, so check the CNAD register and rules for the exact activity before depositing.
  4. Moving to El Salvador for the exemption works only if your home country releases you. Catch: the United States taxes its citizens wherever they live, and many countries apply exit or residence tests, so the home rules decide.

MaterialsThe IMF press release of 26 February 2025 approving El Salvador’s 40-month Extended Fund FacilityThe IMF press release of 1 October 2026 on the second and third reviews of that arrangementEl Salvador’s Ley de Emisión de Activos Digitales (Legislative Decree No. 643 of 2023), on the CNAD website

Wonder

  1. What did it actually mean for bitcoin to be legal tender in El Salvador?
  2. Why did El Salvador change the law in 2025, and what is left of it?
  3. Did the government really stop buying bitcoin?

Explore

  1. El Salvador has used the US dollar as its currency since 2001. In June 2021 its Legislative Assembly passed the Bitcoin Law with 62 of 84 deputies voting in favour, and on 7 September 2021 the law came into force. It made bitcoin legal tender alongside the dollar, which no country had done before. Its stated purpose was to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction. Legal tender is a precise idea: a means of payment that a creditor must accept to settle a debt (lesson 1.2.2), which is very different from simply allowing people to use something.
  2. The original design pushed bitcoin into daily life. Every economic agent was required to accept bitcoin when offered it, and taxes could be paid in it. The government launched a state wallet, Chivo, and offered US$30 in bitcoin to people who signed up, and it bought bitcoin for public holdings. The mandatory-acceptance rule drew the most criticism, from international lenders and from businesses that did not want price risk. For a lawyer, the useful point is that the statute did the work: the change came from a single law passed quickly by a large majority, so it could be reversed the same way.
  3. El Salvador also built a broader regime. The Ley de Emisión de Activos Digitales, Legislative Decree No. 643, was approved on 11 January 2023 and published on 24 January 2023. It sets rules for public offerings of digital assets, licenses service providers and created the Comisión Nacional de Activos Digitales (CNAD) as the supervisor. This law is separate from the Bitcoin Law, and it was not repealed with the 2025 reform; it has since been amended rather than abandoned. It is the reason El Salvador still presents itself as open to crypto firms, even after bitcoin’s special status was cut back.
  4. The retreat came with money. El Salvador reached a staff-level agreement with the IMF in December 2024, and on 29 January 2025 the Assembly amended the Bitcoin Law by 55 votes to 2. Acceptance of bitcoin by the private sector became voluntary, taxes could no longer be paid in bitcoin, and the public sector’s role was to be limited, including winding down state involvement in Chivo. Reports differ on whether bitcoin keeps the formal label of legal tender, but without compulsory acceptance it no longer works as legal tender in practice. The IMF board approved a 40-month arrangement of about US$1.4 billion on 26 February 2025.
  5. The programme has been tested since. The government said after the deal that it would keep adding bitcoin to its reserves, and IMF reviews became the way to measure what had actually happened. On 1 October 2026 the IMF Executive Board completed the second and third reviews, releasing SDR 101.96 million, about US$138 million. It granted waivers for unmet performance criteria on bitcoin accumulation, based on corrective measures and renewed commitments, and recorded that no further bitcoin accumulation is envisaged beyond documented donations. Majority ownership and control of Chivo had been transferred to a private operator, with remaining public exposure still to be unwound.
  6. The episode carries three lessons. A legal-tender law depends on enforcement and acceptance, and once acceptance is voluntary the label matters little. Promises to an international lender can override a national policy, so a country’s crypto status should be read together with its loan conditions. And headline claims about state purchases are best checked against official documents, such as IMF reviews and public disclosure of holdings. A practical check for anyone relying on El Salvador’s regime: read the CNAD’s rules for the specific activity, and remember that home-country tax and residence rules still apply (lessons 7.2.1 and 7.2.6).

Key facts

  • El Salvador’s Bitcoin Law came into force on 7 September 2021, making bitcoin legal tender alongside the US dollar.
  • The Bitcoin Law was approved in June 2021 with 62 of the Legislative Assembly’s 84 deputies voting in favour.
  • El Salvador’s Digital Assets Issuance Law, Legislative Decree No. 643, was approved on 11 January 2023 and created the National Commission of Digital Assets (CNAD).
  • On 29 January 2025 the Legislative Assembly voted 55 to 2 to amend the Bitcoin Law so that private-sector acceptance of bitcoin is voluntary.
  • The IMF Executive Board approved a 40-month Extended Fund Facility of about US$1.4 billion for El Salvador on 26 February 2025.
  • On 1 October 2026 the IMF completed the second and third reviews of El Salvador’s arrangement, granting waivers for unmet bitcoin-accumulation performance criteria and releasing about US$138 million.

Exercise nine, six, three, one

9CollectList up to 9 things that changed, or stayed the same, for a shop owner, a taxpayer and the government of El Salvador between 2021 and 2026.
6ClusterSort them into 6 groups: legal status, merchant duties, taxes, the state wallet, government holdings, and the digital-asset issuance regime.
3DistillReduce the 6 to 3: the changes that mattered most to ordinary people.
1CrystallizeWrite 1 sentence explaining why compulsory acceptance, not the words legal tender, was the heart of El Salvador’s 2021 law.

Fact check

Dates, figures and claims checked against the published sources listed below.

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