El Salvador, the first country to adopt Bitcoin as legal in 2021, recently reversed its decision after the pressure of the IMF. What led to this change and what were the results of his crypto experience of almost four years?
The curious case of El Salvador
The law of 2021 in Salvador formed Bitcoin (BTC), which means that it has become not only legal but compulsory for transactions. Merchants had to accept Bitcoin, and the government began to perceive payments such as bitcoin taxes and costs.
To facilitate this, the country has launched the Wallet Chivo, a mobile application supported by the government designed to help salvadorans to transform with Bitcoin. The application allowed users to send, receive and store Bitcoin, and even offered an incentive of $ 30 in Bitcoin for those who downloaded it.
However, the law did not affect the status of the US dollar, which had been the official currency of El Salvador from 2001 to 2021. Surveys of 2021 watch That only 15% of the population trusted Bitcoin and 70% of respondents opposed its adoption.
Despite the media campaign of President Nayib Bukele and public relations efforts, the law did not convince many salvadoran of its value.
While the international Crypto community greeted the law on El Salvadoran, the residents of the country protest The law in the streets, and many in the financial world have criticized the defects of the legislation.
A key problem was that many traders across the country were not equipped to accept bitcoin, and that the law did not commit this gap.
In addition, a large part of the population lacked bank accounts, and many companies still accepted only cash payments. Many traders were also reluctant to accept Bitcoin because of its volatility, fearing that its fluctuating value would cause losses.
What are the results of El Salvador’s Bitcoin experience?
The period of almost four years during which Bitcoin was legal in Salvador gave mainly negative results, although there are some positive points to note.
On the positive side, the adoption of Bitcoin 2021 helped expose more people to cryptocurrencies. A measurable result was the boom in tourism. The announcement of the adoption of Bitcoin has bitten international interest, which resulted in a 20% increase in tourist arrivals in 2024 compared to 2023, growth also observed in previous years.
However, the broader impact has been largely negative. Bitcoin failed to hide against inflation in Salvador. Problems such as its extreme volatility and its technical difficulties with the Chivo portfolio are often mentioned as reasons for the reluctance of the public to use Bitcoin.
In addition, multiple hacking incidents Implying the Chivo portfolio eroded confidence in cryptocurrency, which leads to its limited use.
The Bitcoin law has also failed to considerably improve financial inclusion. In 2021, around 70% of the Salvadoran were not banished and an even higher percentage had never used Bitcoin.
In fact, most people in the country have largely ignored digital currency. By 2024, a report of the Central America group said that 92% of salvadoran did not use Bitcoin for transactions.
While Bitcoin was intended to facilitate cross -border payments, it had little impact in this regard. In 2023, only 1.3% of funds do Use of bitcoin. A survey in 2022 also revealed These 86% of local companies did not have Bitcoin transactions and 91.7% of respondents said that the adoption of Bitcoin had not affected them. Only 3.6% said sales improvement.
One of the main defects in the Bitcoin adoption strategy was the time. The law was promulgated in 2021, a year after a major crypto rally fed by the reduction of half of Bitcoin.
Historically, the bull markets are followed by slowdowns, and the law was adopted just before the start of another winter of cryptography. The Bitcoin Net accident in 2022 only served to discourage the Salvadoran from using the currency.
How to end the Bitcoin experience of El Salvador?
Since 2022, the International Monetary Fund has urged El Salvador to modify its Bitcoin law. On January 30, 2025, the Salvadoran congress took action, agreed to revise the law in exchange for a loan of $ 1.4 billion to the IMF.
A key condition to guarantee the loan was the abolition of the status of tender tenders in the country. The loan agreement Stipulates that “the commitment of the public sector in economic activities, transactions and purchases related to Bitcoin will be limited.”
Although the reports suggest that Bitcoin will remain legal for trade between Salvadoran, it will no longer be accepted for taxes or other government payments, and companies will have the right to refuse Bitcoin payments.
The requirement for all companies to accept Bitcoin has been faced with criticisms struck due to the volatility of the BTC and the limited understanding of the public of digital currencies. The new legislative reform also responds to these concerns by giving companies the possibility of choosing to accept or not Bitcoin
However, the complete extent of these restrictions has not yet been fully determined, and other details are expected soon.
The IMF loan will be spent over a period of 40 months, which means that these restrictions will be applied over a three -year period, potentially resulting in a long -term drop in the role of bitcoin in the country.
Despite the change of policy to guarantee the IMF loan, the government of El Salvador seems to maintain its pro-Crypto position. On February 4, the Bitcoin office of El Salvador said it had bought a total of 12 BTC thanks to two separate transactions.
The first acquisition included 11 BTC, bought for around 1.1 million dollars, at an average price of $ 101,816 per Bitcoin. The second purchase added 1 BTC at a price of $ 99,114, a few hours later.
These recent acquisitions bear the total Bitcoin reserves in the country to 6,068 BTC, valued at more than $ 592 million at the time of writing this document. El Salvador continued to regularly accumulate Bitcoin, after adding 60 BTC in last month.
