In September 2021, El Salvador became the first country in the world to adopt Bitcoin as an official currency, alongside the U.S. dollar. President Nayib Bukele argued that this decision would attract investments, lower remittance costs, and improve the nation’s economic standing. The government even established a national Bitcoin fund and deployed thousands of Bitcoin ATMs to facilitate transactions.

However, despite high expectations, the initiative failed to deliver the promised results. Most Salvadorans did not use Bitcoin for daily transactions, and businesses reported low levels of cryptocurrency adoption. Additionally, international financial institutions, including the International Monetary Fund (IMF), criticized the move and warned of potential economic instability.

Over the past two years, Bitcoin’s value fluctuated significantly, causing instability in the nation’s finances. When El Salvador initially began its Bitcoin investments, the asset traded at around $50,000 per coin, but it later fell below $20,000, before experiencing a partial recovery. Losses from the national Bitcoin fund amounted to tens of millions of dollars, further straining the country’s budget.

In addition, citizens struggled with Bitcoin adoption due to technical issues with the Chivo digital wallet, which the government introduced to promote cryptocurrency transactions. Lack of education and trust also contributed to the low acceptance rate.

Reactions and Consequences

The decision to revoke Bitcoin’s legal tender status has triggered mixed reactions from different sectors:

• Economists view it as a necessary step toward stabilizing the economy and restoring confidence in the government’s financial policies.

• Crypto enthusiasts see it as a missed opportunity for financial innovation and digital transformation.

• International financial organizations, such as the IMF, have welcomed the move, stating that it will help reduce macroeconomic risks.

Meanwhile, the Salvadoran government has shifted its focus to traditional economic reforms, aiming to attract foreign investments through conventional financial channels.

Although Bitcoin will no longer be an official currency, the government is not completely abandoning digital assets. Cryptocurrency investments will still be permitted, but under a more regulated framework. The administration also plans to retain some blockchain-related projects that could help improve public sector efficiency.

El Salvador’s Bitcoin experiment serves as an important case study for other countries considering cryptocurrency integration into their financial systems. While the decision to revoke Bitcoin’s legal tender status disappointed many crypto supporters, it underscores the importance of careful planning and economic analysis before implementing similar policies.

This experience highlights that while cryptocurrencies offer innovative solutions, their adoption must be backed by strong regulations, public education, and clear macroeconomic strategies to be successful.

02/16/2025