How El Salvador Uses Bitcoin for National Economy

Ben Bevan 11 November 2025 14 Comments

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El Salvador didn’t just experiment with Bitcoin-it made it legal money. On September 7, 2021, the country became the first in the world to give Bitcoin the same status as the U.S. dollar. That meant you could pay for coffee, rent, or taxes with Bitcoin. The government even handed out $30 in free Bitcoin to every citizen who downloaded the official Chivo wallet app. At first, it looked like a bold step forward. But three years later, the story is far more complicated.

Why Bitcoin? The Economic Problems El Salvador Wanted to Fix

El Salvador’s economy has been stuck for decades. Over 70% of adults didn’t have a bank account. Sending money home from the U.S. cost up to 20% in fees. The country relied on remittances-money sent by Salvadorans living abroad-for more than 20% of its entire GDP. That’s more than $7 billion a year. Every dollar lost to fees was a dollar that never reached a family’s dinner table.

President Nayib Bukele promised Bitcoin would fix this. No middlemen. No banks. No fees. Just direct transfers. The government claimed it would bring financial freedom to the unbanked, cut remittance costs, and attract foreign investors looking for crypto-friendly markets. They set aside $150 million to buy Bitcoin and back the system. They built the Chivo wallet. They offered gas discounts and cash bonuses. It sounded like a revolution.

The Chivo Wallet: A Promising Start, Then a Slow Collapse

When the law launched, half the country downloaded the Chivo app. That’s over 3 million people. But downloads aren’t adoption. By early 2022, most people stopped using it. A study of 1,800 Salvadoran households found that over 60% of early users never made a single transaction after spending their free Bitcoin. One in five still hadn’t touched their bonus.

Why? Because using Bitcoin isn’t like using a debit card. You need to understand wallets, private keys, transaction fees, and price swings. Many users didn’t know how to check their balance. Others lost access because they forgot their password. Rural communities with no reliable internet couldn’t use it at all. The app crashed often. Support centers were few. The government promised financial inclusion, but the tool only worked for the young, tech-savvy, and urban.

Bitcoin as Legal Tender: What It Actually Means

Legally, Bitcoin can be used to pay debts, taxes, and prices. Businesses must accept it. But here’s the catch: most businesses don’t want to hold Bitcoin. So the Chivo wallet automatically converts Bitcoin to U.S. dollars the second it’s received. That’s not freedom-it’s a bridge. The dollar is still the real money. Bitcoin is just a middle step.

The government says this protects users from price swings. But it also means Bitcoin isn’t really functioning as money. It’s not a store of value. It’s not a unit of account. It’s a payment pipe. And that pipe is leaky. When Bitcoin’s price dropped 40% in late 2022, the government lost millions on the $150 million it bought. They had to sell Bitcoin at a loss just to cover public payroll.

Volcanic Bitcoin mining rig crumbling amid falling dollar bills and IMF symbols.

The IMF Step In: When the World Said ‘Stop’

The International Monetary Fund (IMF) didn’t hold back. They called El Salvador’s move a “significant risk” to financial stability. In 2024, after the country struggled to secure loans, the IMF agreed to lend $1.4 billion-but only if El Salvador scaled back its Bitcoin plan. The deal required the government to stop using Bitcoin for public spending, improve transparency around Bitcoin purchases, and strengthen financial oversight.

This wasn’t just a loan condition. It was a public admission: Bitcoin as national currency wasn’t working. The IMF didn’t say Bitcoin is bad. They said using it as legal tender is too risky for a small, dollarized economy. El Salvador had to choose between innovation and survival. They chose survival.

Who Really Benefits? The Real Winners and Losers

The winners? A handful of crypto investors and foreign speculators who bought Bitcoin when the price was low and sold when it spiked. A few tech startups that got government contracts to build wallet infrastructure. And President Bukele, who turned the Bitcoin move into a global branding win.

The losers? Ordinary Salvadorans. Those who were supposed to benefit-the unbanked, the rural poor, the elderly-got a confusing app, a volatile asset, and no real improvement in their daily lives. Many now distrust digital money. Some say the whole thing was a distraction from deeper problems: corruption, weak institutions, and underfunded schools.

Even the promised remittance savings didn’t materialize. Most people still use Western Union or MoneyGram. Why? Because they know how they work. Bitcoin’s speed advantage means nothing if you can’t use it.

Split portrait of urban tech user and rural elder, connected by a label showing low Bitcoin adoption.

The Aftermath: Bitcoin Still Legal, But Mostly Ignored

Bitcoin is still legal tender. You can still pay taxes with it. But very few do. The government still holds Bitcoin in its reserves, but it’s no longer buying aggressively. The Chivo app still exists, but daily active users are under 10% of downloads. The free Bitcoin bonuses are long gone. The gas discounts? Mostly forgotten.

The country hasn’t abandoned Bitcoin entirely. It still mines some using volcanic geothermal energy. A few small businesses accept it. But the dream of a Bitcoin-powered economy? That’s over.

What This Means for Other Countries

El Salvador’s experiment was never just about money. It was a test. Could a poor country leapfrog traditional finance using crypto? The answer is no-not like this.

The lesson isn’t that Bitcoin is useless. It’s that you can’t force adoption. You can’t replace a financial system with a flashy app and free cash. Real change needs education, infrastructure, trust, and time. El Salvador tried to skip all of that.

Other countries are watching. Panama, Nigeria, and Ukraine have all looked at crypto. But none are copying El Salvador’s model. Instead, they’re building central bank digital currencies (CBDCs)-digital money issued by the state, not by the market. That’s safer. That’s predictable. That’s what most experts now say the future looks like.

Final Reality: A Symbol, Not a Solution

El Salvador didn’t revolutionize its economy with Bitcoin. It turned Bitcoin into a political symbol. A way to say, ‘We’re different. We’re bold.’

But symbols don’t pay bills. They don’t feed families. They don’t build roads or hospitals. The U.S. dollar still runs the economy. The people still rely on remittances. The banks still hold the money.

Bitcoin didn’t fix El Salvador’s problems. It just made them noisier.

What’s left? A country that tried something radical, failed to deliver on its promises, and is now quietly walking back its most ambitious idea-without ever saying it was wrong.