El Salvador’s Bitcoin Gamble
A Bold Vision That Fell Short
The Bold Leap into Crypto
In 2021, El Salvador made history by becoming the first country to adopt Bitcoin as legal tender. Led by President Nayib Bukele, this daring move aimed to position the nation as a global leader in cryptocurrency and financial innovation. The goal? To boost financial inclusion, lower remittance costs, and attract foreign investment.
Bitcoin’s Rise in El Salvador
On June 9, 2021, the Legislative Assembly passed the Bitcoin Law, requiring businesses to accept Bitcoin as payment. To encourage adoption, the government launched the Chivo wallet, offering citizens $30 in Bitcoin as a welcome bonus. Bukele also announced ambitious projects, including a futuristic "Bitcoin City" powered by volcanic geothermal energy and Bitcoin-backed bonds to lure international investors.
Reality Hits: Resistance and Repeal
Despite the initial hype, Bitcoin struggled to gain traction among Salvadorans. A 2021 survey found that 68% opposed the law, and by 2022, 92% reported they weren’t using Bitcoin at all. Many businesses faced technical difficulties and feared the cryptocurrency’s price volatility. Meanwhile, most citizens stuck to cash and the US dollar.
Internationally, the backlash was strong. The International Monetary Fund (IMF) warned of money laundering risks and economic instability. These concerns limited financial aid, pushing El Salvador closer to default. By early 2025, under IMF pressure during a $1.4 billion loan deal, the government rolled back key provisions of the Bitcoin Law, businesses were no longer required to accept Bitcoin, and taxes had to be paid in US dollars.
The Economic Fallout
The grand experiment failed to deliver its promised benefits. Investment and tourism saw little impact, while the government’s Bitcoin spending, estimated at $375 million, far outweighed any gains. Credit rating agency Moody’s noted that rather than easing economic burdens, the policy added to them.
A Cautionary Tale
While El Salvador remains a hot topic in crypto circles, its Bitcoin experiment serves as a warning about the risks of integrating volatile digital assets into national economies. Bukele still champions Bitcoin, but for now, his vision of a crypto-powered utopia remains unrealized. The dream was big, but reality proved even bigger.
