El Salvador made headlines in 2021 when it became the first country to adopt Bitcoin as legal tender. However, just a few years later, the government reversed this decision, largely due to pressure from the International Monetary Fund (IMF). What went wrong in this ambitious crypto experiment?
The Initial Push for Bitcoin
When the law was enacted, Bitcoin was not merely legal; it was mandatory. Merchants had to accept it, and the government began collecting taxes in Bitcoin. To make transactions easier, the government launched the Chivo wallet, a mobile app designed to help citizens use Bitcoin. Users received $30 in Bitcoin as an incentive to download the app.
Despite these efforts, many Salvadorans remained skeptical. Polls showed only 15% of the population trusted Bitcoin, while 70% opposed its adoption. People could still use the U.S. dollar, the country’s official currency since 2001, meaning many opted to avoid Bitcoin altogether.
Public Reaction and Challenges
While the international crypto community supported the law, many Salvadorans protested in the streets. Critics pointed out that most merchants were unprepared to accept Bitcoin. Additionally, a significant portion of the population lacked bank accounts, and cash remained the preferred payment method for many businesses. The volatility of Bitcoin made merchants hesitant, as fluctuations in value could lead to losses.
Outcomes of the Bitcoin Experiment
The experiment lasted nearly four years and yielded mostly negative results. While there was a positive spike in tourism—a 20% increase in arrivals in 2024—most Salvadorans ignored Bitcoin. By 2024, a report revealed that 92% did not use Bitcoin for transactions, and only 1.3% of remittances were sent using the cryptocurrency.
The Chivo wallet faced technical difficulties and multiple hacking incidents, further eroding public trust. A 2022 survey indicated that 86% of local businesses had no Bitcoin transactions, and 91.7% reported no impact from Bitcoin adoption.
The Reversal Decision
In January 2025, the Salvadoran Congress agreed to amend the Bitcoin law to secure a $1.4 billion loan from the IMF. A key condition was removing Bitcoin’s legal tender status. Now, businesses can choose whether to accept Bitcoin for payments, addressing concerns about its volatility.
Even with this policy shift, the government remains pro-crypto. On February 4, 2025, El Salvador’s Bitcoin Office reported purchasing 12 BTC for over $1.1 million. This brings the country’s total Bitcoin reserves to 6,068 BTC, valued at over $592 million.
As El Salvador moves forward, the future of Bitcoin in the country remains uncertain.
