Author: Azuma, Odaily
On the morning of February 2nd Beijing time, while the Chinese-speaking region was still hoping for the "Welcoming the God of Wealth on the 5th", news about "El Salvador has canceled the legal tender status of Bitcoin" began to spread rapidly, causing the market to plummet.
OKX market data shows that BTC fell below the $100,000 mark, with a low of 99,026.5 USDT; ETH hit a low of 3,068.1 USDT; SOL once fell to 206.69 USDT.
As the first country to adopt Bitcoin as legal tender, El Salvador's strong support for Bitcoin was once seen as a sign of the cryptocurrency's mainstream adoption. If the "legal tender status is lost" now, it is naturally a heavy blow to the mainstream of the entire industry... But is this really the case? Has El Salvador really changed its attitude towards Bitcoin? We will reveal these answers in the following text.
Reasons for the Change
In 2021, under the strong support of the crypto-friendly President Nayib Bukele, El Salvador became the first country in human history to adopt Bitcoin as legal tender.
Subsequently, El Salvador required that all commodity prices in the country could be expressed in Bitcoin; any economic entity must accept Bitcoin payments; Bitcoin transactions would not be subject to capital gains tax, and taxes could be paid in cryptocurrency.
However, El Salvador's radical strategy was strongly opposed by the International Monetary Fund (IMF).
The IMF is an international organization established in Washington on December 27, 1945, based on the Articles of Agreement of the International Monetary Fund signed at the Bretton Woods Conference in July 1944. The IMF and the World Bank were established simultaneously and are the two major financial institutions in the world, responsible for monitoring exchange rates and trade conditions in various countries, providing technical and financial assistance, and ensuring the normal operation of the global financial system.
In the view of the IMF, El Salvador's adoption of Bitcoin as legal tender poses "enormous risks" and may lead to "a series of macroeconomic, financial and legal problems". Therefore, over the past two years, the IMF has been putting pressure on El Salvador to mitigate the relevant risks.
Returning to the recent timeline, as El Salvador urgently needs a $1.4 billion loan from the IMF to advance government reforms, but the IMF still requires El Salvador to amend the Bitcoin-related laws by the end of January at the latest. Therefore, on January 29 local time, the El Salvador Congress (mainly composed of members of Nayib Bukele's New Ideas party) quickly approved a bill to amend the Bitcoin law - the so-called "cancellation of Bitcoin's legal tender status" - with 55 votes and 2 votes against, at the personal request of President Nayib Bukele.
Core Controversy: Timing and Wording
Note that there are two key points that need to be emphasized and explained.
The first is the timing of the passage of this bill amendment. As mentioned earlier, Nayib Bukele's proposal was passed on January 29, which was 4 days ago. In fact, major media outlets such as Reuters had reported on this event at the time, but it did not attract much market attention.
Going back further in the historical reports, it can be found that the IMF website had already made a relevant statement on this matter on December 18, 2024. The statement was jointly issued by the IMF Western Hemisphere Department Deputy Director Luis Cubeddu and the head of the El Salvador delegation Raphael Espinoza after an IMF team visited El Salvador from December 5 to 14, 2024 - in other words, El Salvador and the IMF had reached a consensus as early as last December that the Bitcoin law would be amended.
So why did this event become a hot topic again today, causing the market to plummet? The answer lies in the second key point: "wording".
Let's review the statements made by the IMF and El Salvador in their joint statement:
According to IMF policies, the potential risks of Bitcoin-related projects will be greatly reduced. Legal reforms will make the private sector voluntarily accept Bitcoin. For the public sector, participation in Bitcoin-related economic activities and the trading and purchase of Bitcoin will be restricted; taxes can only be paid in US dollars; the government's involvement in the Chivo digital wallet will be gradually phased out. The transparency, regulation and supervision of digital assets will be strengthened to ensure financial stability, consumer and investor protection, and financial integrity.
The day after the statement was released, Stacy Herbert, the director of El Salvador's National Bitcoin Office (ONBTC), also responded on X:
Bitcoin will remain legal tender.
In its reporting, Reuters used the following wording:
The El Salvador Congress accelerated Bitcoin reforms after reaching an agreement with the IMF... Ruling party lawmaker Elisa Rosales said the reform was to ensure Bitcoin's "permanent status as legal tender" and promote its "actual adoption".
It can be seen that the IMF and El Salvador only emphasized the word "reform" in their joint statement, without explicitly stating that "El Salvador will cancel Bitcoin's legal tender status". The Reuters report also emphasized "reform", and officials and lawmakers like Stacy Herbert and Elisa Rosales from El Salvador responded that "Bitcoin will continue to be legal tender".
The reason why this event is being rehashed and causing market turmoil today is due to some media outlets noticing the report by the Spanish media EL PAIS - the original title of which was "Nayib Bukele changes his mind and cancels Bitcoin's legal tender status in El Salvador" - which accelerated the secondary dissemination of this event.
As a news professional, it is difficult for me to criticize EL PAIS's wording. Among the different statements about the same event, each party seems to have its own reasons:
The IMF's goal is to weaken El Salvador's involvement with Bitcoin, and this goal has been achieved through the amendment of the law. The specific wording is not important;
El Salvador seems to be hoping to handle this event in a low-key manner (after all, it is an initiative personally pushed by the current president), so apart from officials like Stacy Herbert and Elisa Rosales, President Nayib Bukele and the government's main departments have not publicly responded to it;
Reuters' report follows the rigorous expression style of traditional media, only using the content of official statements and actual interviews;
Although EL PAIS may be accused of "clickbait", under the reforms of "no longer mandatory to accept" and "cannot be used for tax payments", Bitcoin in El Salvador does indeed no longer have the attributes of traditional legal tender, and this conclusion does not seem to be too much...
Has El Salvador "Changed Its Mind" on Bitcoin?
Rather than getting bogged down in whether El Salvador has actually canceled Bitcoin's legal tender status, another question seems easier to answer - has El Salvador really changed its attitude towards Bitcoin?
We can clearly give a negative answer.
From the process of El Salvador pushing through the Bitcoin law reform, the reason why El Salvador chose to compromise after being under pressure for two years is most likely due to the need for the $1.4 billion loan and having no choice.
More importantly, the IMF's official statement shows that the final negotiations between the two parties took place in December 2024, and the statement was made on December 18. Just one day later, ONBTC director Stacy Herbert announced that El Salvador would continue to purchase Bitcoin as its strategic Bitcoin reserve and might do so at an even faster pace.
Since then, El Salvador has indeed accelerated the pace of Bit purchases, and has continued to make multiple buy-in operations after the January 29 bill reform. ONBTC official data shows that El Salvador's strategic Bit reserve currently holds a total of 6,055 Bits.
John Dennehy, the founder of the local Bit startup Mi Primer Bitcoin in El Salvador, said, "As far as I know, El Salvador's Bit reserve plan will not be affected by the IMF agreement, at least not at the beginning."
In short, we can perhaps describe the current situation in a very simple sentence - El Salvador bowed to the pressure of the IMF, but found a new way.
