The Bitcoin Law (, )Diario Oficial, numero 110, tomo n° 431, 9 de junio de 2021 ,
Official Journal
A government gazette (also known as an official gazette, official journal, official newspaper, official monitor or official bulletin) is a periodical publication that has been authorised to publish public or legal notices. It is usually establish ...
Legislative Assembly of El Salvador
The Legislative Assembly () is the legislative branch of the government of El Salvador.
History
The organization was founded in 1824 as the Central American Congress ().
Structure
The Salvadoran legislature is a unicameral body.
Until ...
on 8 June 2021, giving the cryptocurrency
bitcoin
Bitcoin (abbreviation: BTC; Currency symbol, sign: ₿) is the first Decentralized application, decentralized cryptocurrency. Based on a free-market ideology, bitcoin was invented in 2008 when an unknown entity published a white paper under ...
the status of
legal tender
Legal tender is a form of money that Standard of deferred payment, courts of law are required to recognize as satisfactory payment in court for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything ...
within
El Salvador
El Salvador, officially the Republic of El Salvador, is a country in Central America. It is bordered on the northeast by Honduras, on the northwest by Guatemala, and on the south by the Pacific Ocean. El Salvador's capital and largest city is S ...
after 7 September 2021. It was proposed by President
Nayib Bukele
Nayib Armando Bukele Ortez (; born 24 July 1981) is a Salvadoran politician and businessman who has served as the 81st president of El Salvador since 2019.
In 1999, Bukele established an advertising company and worked at an advertising com ...
. The text of the law stated that "the purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out".
The law was substantially rescinded on January 29, 2025, after a Bukele government deal with the International Monetary Fund to remove bitcoin's official status in return for a loan.
History
Bitcoin use as a currency in El Salvador had been experimented with since at least 2019, and current President Bukele expressed interest in bitcoin while he was mayor of
San Salvador
San Salvador () is the Capital city, capital and the largest city of El Salvador and its San Salvador Department, eponymous department. It is the country's largest agglomeration, serving as the country's political, cultural, educational and fin ...
in 2017. Bloomberg News reported in June 2021 that Bukele and some members of the
Nuevas Ideas
Nuevas Ideas (; abbreviated N or NI) is the current ruling political party of El Salvador. The party was founded on 25 October 2017 by Nayib Bukele, the then-mayor of San Salvador, and was registered by the Supreme Electoral Court (El Salvado ...
party had owned Bitcoin for years.
The coastal village of
El Zonte
El Zonte is a town in La Libertad Department in El Salvador. A popular tourist destination, El Zonte has been described as a "world surfing mecca". Playa El Zonte ( English: ''El Zonte Beach''; nicknamed Bitcoin Beach) became one of the first lo ...
has had an active experiment underway to use bitcoin in the local economy since 2019, where some workers have received their salary and can pay bills in bitcoin, and others use it to buy food and other goods from local shops.
At a conference for bitcoin in Miami in June 2021, President Bukele announced that he would be looking to promulgate a law allowing bitcoin as legal tender, saying that it would "generate jobs and help provide financial inclusion to thousands outside the formal economy". According to Bukele, the law is aimed at the approximately 70% of Salvadorans without bank accounts, and will increase inclusion for them. Bukele argued that the bill would increase investment as well as reducing fees from current services for remittances. In pushing the bill, Bukele cooperated with Strike, a financial service firm which uses the
Lightning Network
The Lightning Network (LN) is a payment protocol built on the bitcoin blockchain. It is intended to enable fast transactions among participating nodes (independently run members of the network) and has been proposed as a solution to the bitcoin sca ...
for settlement, and Jack Mallers, its CEO.
The law was passed by the Legislative Assembly on 9 June 2021, with a majority vote of 62 out of 84. Bitcoin became legal tender on 7 September 2021, 90 days after the publication of the law in the official gazette, which makes El Salvador the first country to have bitcoin as legal tender. Bitcoin joined the
United States dollar
The United States dollar (Currency symbol, symbol: Dollar sign, $; ISO 4217, currency code: USD) is the official currency of the United States and International use of the U.S. dollar, several other countries. The Coinage Act of 1792 introdu ...
as the second official currency of El Salvador.
Reception
The law was commented on as something of good "PR value" for Bukele, as a "young president trying to capitalise on a popular image". It was also criticized due to the volatility of bitcoin when used as an investment, and the high transaction fees when used as a method of payment.
Siobhan Morden of Amherst Pierpont commented that the law could bring complications to Bukele's talks with the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...
. She noted that the law would "likely only compound concerns about corruption, money laundering and the independence of regulatory agencies." Carlos de Sousa of Vontobel Asset Management expressed concerns that the decentralized system would lead to easier money laundering and tax avoidance. According to
Ernst & Young
EY, previously known as Ernst & Young, is a multinational corporation, multinational professional services partnership, network based in London, United Kingdom. Along with Deloitte, KPMG and PwC, it is one of the Big Four accounting firms, Big F ...
, the adoption of bitcoin as legal tender by El Salvador could have consequences for US taxpayers holding the cryptocurrency, because "If more countries adopt bitcoin as legal tender, the US federal income tax treatment of bitcoin could change. Instead of being treated as an investment that is a capital asset, bitcoin could be treated as generating ordinary income under Section 988."
In an August 2021 poll conducted by Salvadoran newspaper La Prensa Gráfica, a majority of people polled said they opposed the Bitcoin Law, and almost three quarters of respondents said they would not accept bitcoin as payment.
According to a December 2021 survey done by the Central American University 100 days after the Bitcoin Law came into force: 34.8% of the population had no confidence in Bitcoin, 35.3% had little confidence, 13.2% had some confidence, and 14.1% had a lot of confidence. In the first six months after the establishment of the Bitcoin Law, 56.6% of respondents had downloaded the government Bitcoin wallet; among them 62.9% had not yet used it or only once whereas 36.3% used Bitcoin at least once a month. 48.5% of respondents thought then that the Bitcoin Law should be abolished., pp. 34-37
Implementation
The new law took effect on 7 September 2021. In the early hours after the law took effect and the official launch of new technologies to deal with a major change to the national currency infrastructure, the government had to take its bitcoin e-wallet, Chivo, offline due to excessive load. The Bukele government increased server capacity and brought the e-wallet back online by mid-day. 7 September 2021 also saw a crash in bitcoin to its lowest in almost a month, causing the country to experience a 3 million USD paper loss. The Salvadoran government tried to rectify this by buying bitcoin, allowing the price to rise above 52,000 USD. Due to concerns about bitcoin's volatility, as a result, over 1,000 protestors gathered outside the
Supreme Court of El Salvador
The Supreme Court of Justice of El Salvador () is the highest court of El Salvador. The court sits in San Salvador. The current president is Henry Alexander Mejía.
Composition and criteria
The Supreme Court is part of the judicial branch of El ...
to protest the law. Chivo was initially rejected by many platforms early on the first day, but became increasingly accepted by them.
A month after adoption of the Bitcoin Law, more El Salvadorans have Bitcoin wallets than traditional bank accounts. The most popular bitcoin wallet—the government's officially-sponsored Chivo wallet—had been downloaded by three million people, "amounting to 46 percent of the population. By contrast, as of 2017, only 29 percent of Salvadorans had bank accounts." The use of the Chivo wallet has been incentivized by the government with seed money deposited into every Salvadoran's account. Other Lightning-enabled bitcoin wallets may be used by Salvadorans in lieu of Chivo. In addition, many of the largest gas stations in the country are offering a 20 cents per gallon discount on gasoline for those who pay through the Chivo app. One month on, 12 percent of Salvadoran consumers have used the cryptocurrency, but 93 percent of companies surveyed reported receiving no payments in bitcoin during the first month.
Venezuela
Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and many Federal Dependencies of Venezuela, islands and islets in the Caribbean Sea. It com ...
* Bitcoin City, a planned smart city project announced in 2021
Legislative Assembly of El Salvador
The Legislative Assembly () is the legislative branch of the government of El Salvador.
History
The organization was founded in 1824 as the Central American Congress ().
Structure
The Salvadoran legislature is a unicameral body.
Until ...