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This $150 million loss represents approximately 5% of El Salvador's annual GDP.
The IMF loan in 2024 required cutting back on Bitcoin purchases and limiting its role in public finance.
On September 7, 2021, El Salvador did something no country had ever done: it made Bitcoin legal tender alongside the U.S. dollar. President Nayib Bukele called it a revolution - a way to cut out middlemen, help the unbanked, and attract global investment. But three years later, the reality is far more complicated. Bitcoin hasn’t transformed the economy. It’s created confusion, debt, and frustration.
Why Bitcoin? The Promise Behind the Policy
El Salvador’s economy has long been stuck. Over 70% of adults didn’t have a bank account. Remittances - money sent home by Salvadorans living abroad - made up more than 20% of the country’s GDP. Sending that money through Western Union or MoneyGram cost up to 10% in fees. That’s $800 million a year going to intermediaries instead of families. The government’s answer? Bitcoin. By making it legal tender, they claimed Salvadorans could send and receive money instantly, for free, using just a phone. The idea was simple: bypass banks, slash fees, and bring the unbanked into the digital economy. To make it stick, the government launched Chivo, a free wallet app. Download it, and you got $30 in Bitcoin. Use it to pay for gas? You got discounts. Pay taxes in Bitcoin? You could. It sounded like magic. But magic doesn’t scale when the foundation is shaky.The Chivo App: A Promising Start, Then a Bust
Half the country downloaded Chivo in the first month. That’s over 2 million people. But downloads aren’t usage. By early 2022, more than 60% of those who got the free Bitcoin never made another transaction. One in five still hadn’t spent their $30 bonus. Why? Because the app was buggy. Transactions failed. Wallets froze. People didn’t understand how to send Bitcoin. Older users, rural communities, and small shop owners - the very people the policy was meant to help - were left behind. The few who kept using it? Young, tech-savvy, urban men with bank accounts. Not the unbanked. Not the poor. The policy failed its own target audience.Bitcoin Volatility: A National Financial Risk
Bitcoin isn’t stable. In 2021, it hit $68,000. By 2022, it dropped below $20,000. The Salvadoran government bought Bitcoin at high prices, spending $150 million of public money. When prices crashed, those holdings lost value. The country didn’t just lose money - it lost credibility. International credit agencies like Moody’s and S&P warned: holding Bitcoin as a national reserve is reckless. It’s like storing your life savings in a stock that can swing 30% in a day. The IMF called it a threat to macroeconomic stability. And they weren’t wrong. In 2024, El Salvador had to turn to the IMF for a $1.4 billion loan. In exchange, they agreed to scale back Bitcoin’s role. No more public Bitcoin purchases. No more mandatory acceptance. The country still calls Bitcoin legal tender - but now, it’s more of a suggestion than a law.
Remittances Didn’t Change
One of the biggest promises? Cutting remittance costs. But in 2024, remittance fees were still around 5-7%. Why? Because most people still use traditional services. Why? Because Bitcoin is too unpredictable. A $500 wire from the U.S. might arrive as $480 worth of Bitcoin - or $520. No one knows until the transaction clears. For families relying on that money for food and rent, that uncertainty is a dealbreaker. Even the government’s own data shows little change. Remittance volumes didn’t spike. Costs didn’t drop. The system stayed the same - just with a few extra steps.Foreign Investment? Barely There
Bukele promised Bitcoin would attract tech investors and crypto startups. Some came - but not many. A few blockchain firms opened offices. A handful of Bitcoin mining operations started up, using geothermal energy from volcanoes. But the promised flood of capital? It didn’t happen. Why? Because investors don’t want to put money into a country with unstable fiscal policy. They don’t want to risk their capital on a government that spends public funds buying volatile assets. They don’t want to deal with unclear regulations. The “Bitcoin nation” label didn’t attract innovation. It scared off traditional investors.
What’s Left? A Legal Tender in Name Only
Today, Bitcoin is still legal in El Salvador. But you won’t find many shops accepting it. Gas stations that offered discounts now take dollars only. Restaurants, markets, and street vendors? They still use cash. The Chivo app still exists - but it’s mostly used to cash out Bitcoin into dollars, not to spend it. The government no longer promotes it like before. No more free Bitcoin bonuses. No more ads on TV. The enthusiasm has faded. What remains is a $150 million loss, a damaged reputation, and a policy that didn’t deliver on its promises.The Bigger Lesson: Technology Alone Doesn’t Fix Economics
El Salvador didn’t fail because Bitcoin is bad. It failed because it treated a financial tool like a silver bullet. No currency, no matter how new or flashy, can fix deep problems like poverty, weak infrastructure, or lack of education. You can’t force adoption with incentives if people don’t trust the system or understand how it works. Countries like Nigeria and Kenya built digital payment systems using simple mobile money - no blockchain, no Bitcoin. Millions use them daily. Why? Because they’re reliable, easy to use, and tied to real money. El Salvador’s experiment wasn’t about innovation. It was about spectacle. And spectacles don’t pay bills.What Now?
El Salvador still holds Bitcoin. It still has the law on the books. But the real policy shift happened quietly: they stopped pushing it. The government is now focusing on rebuilding trust with the IMF, stabilizing the dollar-based economy, and fixing basic services - roads, schools, electricity. Bitcoin didn’t save El Salvador’s economy. It nearly broke it. The lesson? Financial inclusion doesn’t come from flashy tech. It comes from simple, reliable systems that work for everyone - not just the tech-savvy few. And sometimes, the best move isn’t to leap into the future. It’s to fix the ground you’re standing on.Is Bitcoin still legal tender in El Salvador?
Yes, Bitcoin is still legally recognized as tender alongside the U.S. dollar under the 2021 Bitcoin Law. But in practice, the government no longer enforces mandatory acceptance, and most businesses and citizens use U.S. dollars. The law exists on paper, but daily use has collapsed.
Did Bitcoin reduce remittance costs in El Salvador?
No. Despite claims, remittance fees remain around 5-7%, similar to pre-Bitcoin levels. Most Salvadorans still use traditional services like Western Union because Bitcoin transactions are unpredictable, slow to settle in practice, and harder to understand. The promised cost savings never materialized for the average household.
Why did the IMF intervene in El Salvador’s Bitcoin policy?
The IMF stepped in because El Salvador’s Bitcoin purchases created fiscal risk. The government spent $150 million buying Bitcoin at high prices, then watched its value drop. This threatened the country’s ability to repay debt. In exchange for a $1.4 billion loan in 2024, El Salvador agreed to stop buying Bitcoin and limit its role in public finance to avoid further instability.
How many people in El Salvador actually use Bitcoin daily?
Fewer than 5% of the population uses Bitcoin regularly for transactions. Most who downloaded the Chivo app used it once - to cash out their free $30 bonus - and then stopped. The active user base is small, mostly young, urban, and already banked. The unbanked majority never adopted it.
Did Bitcoin attract foreign investment to El Salvador?
Not meaningfully. A few crypto firms opened offices, and some Bitcoin mining operations began using volcanic energy. But overall foreign direct investment didn’t increase. Investors avoided El Salvador due to policy uncertainty, lack of transparency, and the government’s risky handling of public funds. The “Bitcoin nation” branding didn’t attract capital - it raised red flags.
What’s the current status of the Chivo wallet app?
The Chivo app still exists but is largely inactive. The government stopped promoting it. Free Bitcoin bonuses ended. Discounts on gas and other services were dropped. Most users abandoned it after cashing out their initial bonus. It now serves mainly as a tool to convert Bitcoin to dollars, not as a payment platform.
Could another country copy El Salvador’s Bitcoin experiment?
Unlikely. El Salvador’s move was a political gamble tied to President Bukele’s popularity and centralized control. Other nations have seen the risks: price volatility, IMF backlash, failed adoption, and public distrust. Countries like Panama and Ukraine have explored crypto, but none have made it legal tender. Most prefer regulated digital currencies or stablecoins instead.
