At the Bitcoin Conference in Miami on June 5, 2021, President Nayib Bukele announced in English to the audience that El Salvador was going to legalize Bitcoin. This is not a place where most heads of state make monetary policy announcements. The room exploded. Twitter was ablaze with cryptocurrency. And somewhere in Washington, IMF analysts probably grabbed a cup of coffee and started writing memos. It’s difficult to argue that Bukele didn’t comprehend the situation he was in or the audience he was performing for, regardless of one’s opinion of what transpired over the next four years.
What transpired was one of the most closely watched economic experiments in recent memory, not because it succeeded but rather because it was the first of its kind: a sovereign nation of six million people, operating on US dollars, wagering a significant amount of its national reserves on a cryptocurrency that, according to a September 2021 poll, nine out of ten citizens were unable to adequately explain.
| Category | Details |
|---|---|
| Country | El Salvador, Central America |
| President | Nayib Bukele |
| Bitcoin Made Legal Tender | September 7, 2021 |
| Bitcoin Rescinded as Legal Tender | 2025 (following IMF agreement) |
| Government Crypto Wallet | Chivo Wallet |
| Total Bitcoin Purchased | ~$150 million (~4% of national reserves) |
| IMF Loan Agreement | $1.4 billion (December 2024), requiring Bitcoin policy rollback |
| Bitcoin Usage by 2024 | Only 8.1% of Salvadorans reported using Bitcoin for transactions |
| Remittances via Crypto (2021–2022) | 1.9% of total remittance payments |
| Population Without Bank Account | ~70% of households |
| Reference Website | nber.org — El Salvador Bitcoin Experiment |
On June 9, the Legislative Assembly approved the Bitcoin Law with 62 out of 84 votes. Businesses had to legally accept it by September 7. At a total cost of almost $75 million, the government gave away $30 in free Bitcoin to anyone who downloaded the Chivo Wallet, which is close to 1% of the average yearly per capita income. The preliminary figures appeared encouraging. The app was downloaded by about half of the households in the nation. With the enthusiasm of a day trader who had just learned about leverage, Bukele repeatedly declared victory on Twitter, announcing each Bitcoin purchase.
On the ground, things were quieter and far less victorious. If you were to stroll through the markets of San Salvador in late 2021 or early 2022, you would see vendors accepting Bitcoin in a manner similar to how they would accept a payment method they didn’t fully trust: cautiously, on occasion, primarily to comply with the law rather than out of true enthusiasm.
61% of Chivo users completely stopped using the app after using their sign-on bonus, according to a US National Bureau of Economic Research study. Twenty percent more never used the bonus at all. Despite the mandate requiring all businesses to accept Bitcoin payments, only an estimated 20% of them were doing so by 2022. According to the Salvadoran Chamber of Commerce, only 3% of companies thought using Bitcoin was actually beneficial.
The way this gap between announcement and adoption transpired is both instructive and a little unsettling. Simply put, there was insufficient infrastructure to support the requirements of the law. About 40% of Salvadorans did not have internet access, which is a pretty basic prerequisite for the introduction of digital currencies.
On the day of launch, the Chivo app had issues with identity verification, which made it possible for hackers to make fake accounts and steal the $30 sign-on bonuses. The wallet was downloaded by less than 60% of people with mobile phones and internet access. Ironically, researchers found that those who continued to use the platform were disproportionately young, male, banked, and educated—exactly the group that the financial inclusion argument was not meant to target.
Even though the experiment failed, it produced something truly valuable: a comprehensive, real-world dataset on what happens when a government introduces a volatile, poorly understood digital currency into a functioning economy without sufficient planning. This information is currently being used in policy briefings by dozens of governments, especially in the developing world, where leaders dealing with comparable issues of unbanked populations, costly remittances, and dollar dependency are wondering if El Salvador’s experience is a lesson learned or merely a badly implemented version of a good idea. The distinction is very important.
Without a doubt, the IMF came to its own conclusions. The organization finally got its demand included in a $1.4 billion loan agreement in December 2024 after years of pressuring El Salvador to stop using Bitcoin as legal tender, citing risks to financial stability, concerns about consumer protection, and fiscal opacity. El Salvador consented to discontinue accepting Bitcoin for tax payments, eliminate the mandatory merchant acceptance requirement, and reduce its use of the Chivo wallet. In February 2025, the Bitcoin Law was amended. The four years that Bitcoin was recognized as legitimate money were essentially over.
The more nuanced reality may be overlooked by the IMF’s framing, which holds that the experiment was merely an error that should be undone and forgotten. Bukele caught the bull market run that drove Bitcoin above $69,000, and by March 2024, his Bitcoin holdings were sitting at about a 50% profit.
There have been real increases in tourism in some parts of El Salvador, especially in El Zonte, the coastal village known as “Bitcoin Beach,” where some businesses reported 30% increases in revenue from cryptocurrency tourists. Due in part to the zero capital gains tax on Bitcoin transactions and the permanent residency granted to investors with more than three Bitcoin, there was an increase in the inflow of capital and businesses. These are not insignificant.
It seems like El Salvador got the sequencing wrong when viewing the entire arc from the outside. There was nothing wrong with the ambition. A low-friction digital payment system could actually solve the structural issues of 70% of Salvadoran households lacking bank accounts and remittances accounting for 23% of GDP being sent through pricey money transmitters.
However, the population was given an incentive to download an app before they were given a reason to trust it, and the execution proceeded at the speed of a politician rather than an economist. The nations that are currently closely examining El Salvador’s files are likely the ones who are asking a different question: not whether to do this, but rather how carefully and slowly it would need to be done in order to actually work.