Cryptocurrency in El Salvador: after legal tender ended
In short. El Salvador made bitcoin legal tender in September 2021 and took that status away in January 2025, as a condition of a 1.4 billion dollar IMF programme. Shops no longer have to accept it and the treasury no longer takes it for taxes. The reform left the tax articles alone. Gains on bitcoin still fall outside capital gains tax, and businesses licensed under the 2023 digital assets law pay no income tax on that activity.
- LEGAL TENDER
- Ended January 2025acceptance is voluntary now
- GAINS ON BITCOIN
- No capital gains taxthe reform left that article standing
- LICENSED BUSINESS
- 0% income taxon digital asset activity under the 2023 law
- PAYING TAX IN BITCOIN
- No longer possiblethe reform repealed that article
- STATE RESERVE
- 6,000+ BTCthe government keeps buying and holding
- NATIONAL CURRENCY
- US dollarsince 2001, and now the only legal tender
What the IMF programme changed
On 29 January 2025 the Legislative Assembly rewrote the Bitcoin Law. The vote came as a condition of the extended fund facility the IMF board approved a month later, worth 1.4 billion dollars.
The reform struck three articles. Merchants lost the obligation to accept bitcoin, so acceptance became voluntary. The state stopped providing the conversion machinery it had promised and stopped accepting bitcoin in payment of taxes. Deputies also removed the language describing bitcoin as currency, and the government wound down Chivo, the state wallet it had launched in 2021.
The dollar has been El Salvador's money since 2001 and is now its only legal tender. Paying in bitcoin remains lawful wherever both sides agree.
The tax treatment survived
Article 5 of the Bitcoin Law put exchanges in bitcoin outside capital gains tax. Deputies repealed articles 4, 8 and 9 and left article 5 where it was.
Read article 5 closely and a problem appears. It grants the exemption by comparing bitcoin to legal tender, and the same reform removed bitcoin's legal tender status, so the article now compares bitcoin to a category it has left. Practitioners continue to read gains as exempt and the government has not challenged that reading. Take local advice before you move a large position on the strength of it.
The licensing regime nobody touched
El Salvador passed a separate digital assets law in 2023, and the reform of 2025 left it intact.
That law created the national digital assets commission, which issues two authorisations: one for bitcoin service providers and one for providers of other digital assets. Licensed firms pay no income tax on their digital asset activity. That exemption is why companies domicile here.
Tether moved its headquarters to El Salvador in January 2025, and Bitfinex Securities runs a licensed securities business from the country. Other exchanges, custodians and token issuers hold authorisations too.
The state kept its coins
The government sold nothing when it gave up legal tender status.
El Salvador holds more than six thousand bitcoin in a public reserve and has kept adding to it. The IMF programme constrains what the public sector may accumulate, and fund staff have questioned how the government reports its purchases during programme reviews, without either side changing its practice.
What this means if you are moving there
You get an unusually good tax position resting on unusually loose drafting.
No capital gains tax on bitcoin and no income tax on licensed digital asset business beats what Portugal, the Emirates or Singapore offer, and the residency route is straightforward. Against that, bitcoin buys you nothing that dollars do not, since no merchant has to take it; the exemption rests on wording the 2025 reform undercut; and the country has already rewritten its crypto policy once under external pressure. Keep your position portable.
Allowed
- Hold and sell bitcoin without capital gains tax
- Pay in bitcoin wherever the other side agrees to take it
- Run a licensed digital asset business and pay no income tax on that activity
- Use the dollar for everything, since it is the only legal tender
Restricted
- Expecting a shop to accept bitcoin, which became voluntary in January 2025
- Paying your taxes in bitcoin, which the reform ended
- Providing digital asset services without an authorisation from the commission
- Relying on the capital gains exemption for a large position without local advice
How the rules took shape
Bitcoin becomes legal tender. Merchants must accept it, and the state launches the Chivo wallet.
A digital assets law creates the national commission and its licensing regime, separate from the Bitcoin Law.
The Legislative Assembly removes legal tender status under the IMF programme. Acceptance turns voluntary and the treasury stops taking bitcoin for taxes.
The IMF board approves the 1.4 billion dollar facility. Tether moves its headquarters to the country.
The licensing regime and the tax exemptions stand, and the state keeps its bitcoin reserve.
Worth knowing
A geothermal plant beside the Tecapa volcano mined roughly 474 bitcoin over three years. The treasury holds more than 5,700 BTC — the only sovereign reserve in the world built partly by the state's own mining.
Common questions
Is bitcoin still legal tender?
No. The Legislative Assembly removed that status in January 2025 under the IMF programme. You may still pay in bitcoin when the other side agrees.
Do I pay tax when I sell bitcoin?
The Bitcoin Law puts bitcoin exchanges outside capital gains tax and the reform left that article standing. Its wording ties the exemption to legal tender, which bitcoin no longer has, so take local advice on a large position.
What do licensed businesses pay?
Nothing on income from digital asset activity. The 2023 law grants that exemption to firms authorised by the national digital assets commission.
Can I still pay my taxes in bitcoin?
No. The reform repealed the article that allowed it.
Does the state still hold bitcoin?
Yes, more than six thousand coins in a public reserve, and it has continued adding to the position.
Sources
Other countries
Updated 20.08.2026 · this is reference material, not investment or tax advice