El Salvador 3 Years Later: Did Bitcoin Adoption Really Work?​

In September 2021, El Salvador made history by becoming the first country to adopt Bitcoin as legal tender, a bold move championed by President Nayib Bukele. Three years on, the nation’s ambitious crypto experiment has undergone significant transformations, prompting a reevaluation of its outcomes and implications.​

The Genesis of a Crypto Nation

President Bukele's announcement at the Bitcoin 2021 conference set the stage for a rapid legislative process, culminating in the approval of the Bitcoin Law by El Salvador's Legislative Assembly on June 8, 2021. The law came into effect on September 7, 2021, positioning Bitcoin alongside the U.S. dollar as official currency. The government introduced the Chivo Wallet, offering citizens a $30 incentive to encourage adoption.​

The initiative aimed to enhance financial inclusion and attract foreign investment. However, it faced skepticism domestically and internationally, with concerns about Bitcoin's volatility and the country's economic stability.​

Public Reception and Usage

Despite government efforts, Bitcoin's adoption among Salvadorans remained limited. A year after implementation, only 21% of the population had used the Chivo Wallet, and by 2024, usage had declined to 8.1%. Surveys indicated that 71% of citizens opposed the Bitcoin Law at its inception, and by mid-2024, the country had 55,000 more people living in poverty compared to the previous year.

Critics pointed to issues such as technical glitches, lack of education on cryptocurrency, and concerns over transparency and corruption in the implementation process.​

Economic Implications and Policy Reversals

In response to mounting pressure from the International Monetary Fund (IMF) and the need for a $1.4 billion loan, El Salvador amended the Bitcoin Law in January 2025. The reforms, effective April 1, 2025, removed Bitcoin's status as legal tender, making its acceptance by businesses voluntary and excluding it from tax payments. These changes aimed to mitigate financial risks and align with IMF recommendations to narrow the scope of Bitcoin's use and strengthen regulatory oversight.

Government Holdings and Continued Investment

Despite policy shifts, the Salvadoran government has continued to invest in Bitcoin. As of March 2025, El Salvador held over 6,102 BTC, valued at approximately $550 million at the time. President Bukele has emphasized a long-term strategy, stating that the country will continue to purchase Bitcoin at an "accelerated rate," even after the currency's declassification as legal tender.​

The administration maintains that these holdings represent a strategic reserve, potentially offering financial benefits as Bitcoin's value fluctuates.​

Infrastructure Projects and Environmental Concerns

The government's vision extended beyond currency adoption to infrastructural developments like "Bitcoin City," planned at the base of the Conchagua volcano. This project aimed to create a tax-free, crypto-friendly hub powered by geothermal energy. However, it has faced criticism for environmental degradation, including the destruction of mangrove forests and the displacement of local communities.

These issues have raised questions about the project's sustainability and the balance between economic ambition and environmental stewardship.​

Conclusion: A Mixed Legacy

El Salvador's foray into Bitcoin adoption has been a pioneering endeavor with a complex legacy. While it positioned the country at the forefront of cryptocurrency integration, the initiative faced significant challenges in public acceptance, economic impact, and international relations.​

The recent policy reversals and continued investment in Bitcoin suggest a nuanced approach moving forward, balancing innovation with pragmatism. As the global financial landscape evolves, El Salvador's experience offers valuable insights into the potential and pitfalls of embracing digital currencies at a national level.​