On September 7, 2021, El Salvador did something no other country had ever done: it made Bitcoin legal tender alongside the U.S. dollar. The move was bold, flashy, and instantly global news. President Nayib Bukele promised it would fix broken finances, cut remittance fees, and bring the unbanked into the modern economy. But nearly five years later, the reality is far more complicated - and far less successful - than the hype suggested.
Why Bitcoin? The Problem El Salvador Wanted to Solve
El Salvador’s economy has long been stuck. With a GDP of just $27 billion, the country relies heavily on money sent home by Salvadorans living abroad - mostly in the U.S. These remittances make up over 20% of the entire national income. Sending that money through Western Union or banks used to cost 10% or more. For families living paycheck to paycheck, that’s a huge cut. Then there’s the banking problem. More than 70% of adults didn’t have bank accounts. They didn’t trust the system, couldn’t afford minimum balances, or lived too far from branches. The government said Bitcoin could fix both issues at once: cheaper, faster remittances, and financial access for everyone with a smartphone. So they passed the Bitcoin Law. It said businesses had to accept Bitcoin as payment. Taxes could be paid in Bitcoin. Debts could be settled in Bitcoin. And the government would give you free Bitcoin just for downloading their app, Chivo Wallet.The Plan: Free Bitcoin, Discounted Gas, and a Digital Revolution
The rollout was theatrical. The government dropped $150 million into Bitcoin reserves. They gave every Salvadoran who downloaded the Chivo app $30 in Bitcoin. Gas stations offered discounts if you paid with Bitcoin. Restaurants put up signs saying “Bitcoin Accepted Here.” At first, people downloaded the app. Over half the population tried it. But then, something strange happened: they stopped using it. A 2023 study of 1,800 households found that more than 60% of those who got the free Bitcoin never made a single transaction after spending their bonus. One in five still hadn’t touched their original $30. The people who actually used Bitcoin regularly? Young, urban, educated men - the exact opposite of the unbanked population the program was meant to help. Why? Because Bitcoin isn’t easy. It’s not like cash. You need a phone with internet. You need to understand wallets, private keys, and exchange rates. You need to trust that the value won’t drop 20% before you spend it. For many Salvadorans, especially older people in rural areas, that was too much.The Tech Didn’t Work - And Neither Did the Trust
The Chivo app was buggy at launch. Transactions failed. Wallets got locked. People lost money. The government promised instant conversions between Bitcoin and dollars, but the system often lagged or crashed. Small business owners didn’t want to risk holding Bitcoin because its price swung wildly - sometimes by 15% in a single day. And then there was the bigger issue: no one knew who was really managing the Bitcoin reserves. The government claimed they were buying low and holding for long-term gains. But no one could see the transactions. No audits. No transparency. That scared off investors and confused citizens alike. Even the free Bitcoin didn’t work as intended. People didn’t spend it to buy groceries. They cashed it out for dollars as soon as they could. The app became a way to get free cash, not a tool for daily payments.
The IMF Steps In - And the Dream Gets Real
By 2024, the cracks were too big to ignore. El Salvador’s debt was rising. Inflation was creeping up. International investors were nervous. The country needed a $1.4 billion loan from the International Monetary Fund (IMF) to stay afloat. The IMF said yes - but only if El Salvador scaled back its Bitcoin experiment. The deal required the government to stop using Bitcoin as a reserve asset, limit Bitcoin purchases, and improve financial transparency. In short: the world’s first Bitcoin nation had to admit it couldn’t run a currency like a tech startup. This wasn’t a surrender. It was a retreat. El Salvador still says Bitcoin is legal tender. But now, the government barely uses it. The Chivo app still exists, but it’s mostly a relic. No new incentives. No new promotions. The big push is over.What Actually Changed?
Did Bitcoin make remittances cheaper? A little - but not because of Bitcoin. Most remittances now go through apps like Wise or PayPal, which are faster and cheaper than traditional banks - and don’t require you to hold volatile crypto. Did it bring the unbanked into the financial system? Not really. The number of Salvadorans with bank accounts barely moved. The real financial inclusion came from mobile payment apps like TransferWise and Remitly - not Bitcoin wallets. Did it attract foreign investment? Not even close. Companies didn’t flock to El Salvador to build Bitcoin businesses. They stayed away because of the instability, the lack of clear rules, and the political risk. The only thing that really changed? El Salvador now has a $1.4 billion debt to the IMF - and a reputation as a cautionary tale.
What’s Next for El Salvador’s Bitcoin Experiment?
The government still owns about 2,300 Bitcoin, bought mostly during the 2022-2023 price dip. They say they’re holding it long-term. But there’s no plan to spend it. No strategy to use it for public services. It’s just sitting there - like a trophy from a failed bet. The real future of El Salvador’s economy isn’t Bitcoin. It’s better banking. Cheaper remittance services. More reliable electricity and internet. And real financial education - not free crypto giveaways. Bitcoin was supposed to be the revolution. Instead, it became a distraction. A shiny object that pulled attention away from the real problems: corruption, weak institutions, and underinvestment in infrastructure.Lessons from El Salvador’s Bitcoin Mistake
El Salvador didn’t fail because Bitcoin is bad. It failed because it tried to solve deep economic problems with a single, flashy tool. You can’t fix poverty with a wallet. You can’t replace a banking system with a cryptocurrency app. And you can’t run a national economy on a volatile asset that swings 30% in a week. The real lesson? Innovation doesn’t mean forcing a new technology onto a population that doesn’t need it - or understand it. Real progress comes from solving problems step by step, not with one big, risky bet. El Salvador’s Bitcoin experiment didn’t work. But maybe that’s okay. Because now the country has a chance to try again - this time, with clearer goals, better tools, and a focus on real people, not crypto headlines.Is Bitcoin still legal tender in El Salvador?
Yes, Bitcoin is still legally recognized as tender alongside the U.S. dollar. Businesses are required to accept it, and taxes can be paid in Bitcoin. But in practice, almost no one uses it for daily transactions. The government no longer promotes it actively, and the IMF agreement in 2024 effectively ended its role as a core economic tool.
Why did the IMF oppose El Salvador’s Bitcoin plan?
The IMF warned that Bitcoin’s extreme price swings threatened macroeconomic stability. Holding Bitcoin as a reserve asset exposed the country to massive fiscal risk. If Bitcoin’s value dropped sharply, the government could lose billions. The IMF also criticized the lack of transparency in Bitcoin purchases and the absence of proper financial safeguards. Their 2024 loan deal required El Salvador to limit Bitcoin use to protect its economy.
Did Bitcoin reduce remittance costs in El Salvador?
Slightly - but not because of Bitcoin. Most remittances now flow through apps like Wise, PayPal, or Revolut, which charge less than 3% and settle in minutes. These services don’t require users to hold Bitcoin. The Chivo app, which was supposed to cut costs, saw very little usage for remittances. The real savings came from traditional fintech, not crypto.
How many Salvadorans actually use Bitcoin daily?
Very few. A 2023 survey found that only about 2% of Salvadorans used Bitcoin for regular payments. Most who downloaded the Chivo app used it once - to claim their free $30 - then stopped. The active user base is mostly young, tech-savvy men in cities. The unbanked, elderly, and rural populations rarely use it.
What happened to the free Bitcoin the government gave out?
Most people cashed it out for U.S. dollars immediately. The free Bitcoin wasn’t meant to be held - it was a lure to get people to download the app. Once they had it, many used exchange services to convert it to cash. Very few used it to pay for goods or services. The government never tracked how much was actually spent locally.
Is El Salvador still buying Bitcoin?
No. Since the 2024 IMF agreement, the government stopped purchasing Bitcoin. They still hold around 2,300 BTC, bought mostly between 2021 and 2023 when prices were lower. But they’ve made no new purchases since then. Their focus has shifted to stabilizing the dollar-based economy and meeting IMF requirements.
Catherine Hays
This is what happens when you let a dictator with a Twitter addiction run an economy. Bitcoin isn't a currency it's a gamble. And now El Salvador is broke and begging the IMF for handouts. Classic.
Barbara Rousseau-Osborn
I told you all this would fail. Free Bitcoin? Are you kidding me? People aren't dumb. They saw it for what it was: a publicity stunt wrapped in blockchain glitter. The only thing that got 'banked' was Bukele's ego.
Melissa Contreras López
Honestly? The real win here is that people are talking about financial inclusion. Maybe the Bitcoin part flopped, but now we're finally asking: why do so many people still live outside the system? That’s the real conversation we should be having.
Arielle Hernandez
The IMF's involvement was inevitable. Bitcoin's volatility violates every principle of monetary stability. Central banks hold reserves to buffer shocks-not to speculate on meme coins disguised as assets. This was never economics. It was theater.
Mike Stay
Let’s not pretend this was purely about technology. El Salvador’s government used Bitcoin as a distraction from decades of institutional decay. When you have no real plan to fix corruption, weak infrastructure, or education, you slap on a shiny app and call it innovation. It’s the same playbook used by failed startups everywhere.