Key Takeaways:
- El Salvador's Congress passed Bitcoin law reforms on January 29 under IMF pressure, not a full revocation of legal tender status.
- The government continues accumulating BTC (6,055 coins in reserve) despite reforms.
- Media misinterpretations triggered a BTC price drop below $100K on February 2.
- IMF negotiations focused on reducing mandatory BTC adoption while allowing voluntary use.
The Bitcoin Rollercoaster: What Actually Happened?
On February 2, rumors about "El Salvador abandoning Bitcoin as legal tender" spread rapidly across Chinese-language communities during Lunar New Year celebrations. This caused:
- BTC to plunge below $100K (low: $99,026)
- ETH and SOL dropping to $3,068 and $206 respectively
👉 Why Bitcoin's volatility matters for long-term investors
Tracing the Origins
In 2021, President Nayib Bukele made history by adopting Bitcoin as legal tender. The law required:
- All businesses to accept BTC payments
- Tax-free BTC transactions
- Dollar-denominated prices with BTC conversion options
IMF's Stance: The International Monetary Fund repeatedly warned this posed "macroeconomic risks" and demanded reforms to secure a $1.4B loan for El Salvador.
The Reform: Key Details
1. Timeline of Events
- Dec 2024: IMF and El Salvador reached initial agreement on Bitcoin law adjustments
- Jan 29: Congress approved reforms with 55-2 votes
- Feb 2: Market panic ensued after Spanish outlet EL PAIS framed it as "canceling legal tender status"
2. What Changed?
The reforms:
- Made BTC acceptance voluntary for businesses
- Restricted government BTC transactions
- Mandated tax payments in USD only
Official Clarifications:
- ONBTC Director Stacy Herbert: "Bitcoin remains legal tender."
- Lawmaker Elisa Rosales: Reforms ensure BTC's "permanent status as currency."
Beyond Headlines: El Salvador's True Stance
Evidence suggests no fundamental policy shift:
- The government continues buying BTC (6,055+ coins held)
- Local startups confirm reserve plans remain unchanged
- President Bukele's X account never announced a BTC policy reversal
Expert Insight:
"Salvadorans still use Bitcoin daily. The reforms just reduce institutional exposure," notes John Dennehy of Mi Primer Bitcoin.
👉 How governments are integrating crypto reserves
FAQs: Quick Answers to Critical Questions
Q1: Can Salvadorans still use Bitcoin?
A: Yes – businesses may voluntarily accept it, and Chivo wallet remains operational.
Q2: Why did the IMF push for changes?
A: To mitigate risks from mandatory BTC adoption while allowing organic usage.
Q3: Will this affect other countries' crypto policies?
A: Unlikely – each nation evaluates based on local economic conditions.
Q4: How often does media misinformation impact crypto markets?
A: Frequently. Always verify with primary sources before trading.
Final Thought:
While headlines screamed "policy reversal," the reality reveals pragmatic adjustments – not abandonment. El Salvador's Bitcoin experiment continues, just with fewer IMF-induced constraints.