Who knew the IMF was capable of demanding a sensible reform?
Bitcoin was never used by most Salvadorans, its modern city was never built, and now it will cease to be legal tender in El Salvador, the first country in the world to adopt it in 2021: a complete failed economic bet by President Nayib Bukele. Congress, dominated by the ruling party, approved last Wednesday a confusing reform to the Bitcoin Law at the request of Bukele’s government, which had no other option to receive the $1.4 billion credit agreed in December with the International Monetary Fund (IMF).
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The use of bitcoin in El Salvador’s dollarized economy, according to the new rule, will be optional and will be at the discretion of the private sector to accept cryptocurrency payments for goods and services. Businesses are no longer required to convert dollar prices into this cryptocurrency. “Bitcoin no longer has that force of legal tender. That’s how it should have always remained, but the government wanted to force it and it didn’t work,” economist Rafael Lemus said.
The Bitcoin Law reform will take effect 90 days after it’s published in the Official Gazette, which could happen in the coming days. For Acevedo, former president of the former Central Bank, “it makes no sense” to have left in the reformed law that it is “legal tender.” “It’s a monstrosity that’s not understood and that should be corrected and made clear that bitcoin is no longer legal tender,” the economist argues.