Nov 19, 2025, Posted by: Ronan Caverly
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El Salvador didn’t just try Bitcoin-it made it legal money. In September 2021, the country became the first in the world to give Bitcoin the same status as the U.S. dollar. The goal was simple: help the 70% of Salvadorans without bank accounts, cut the high fees on remittances, and break free from the U.S. dollar’s tight grip on their economy. At the time, it felt like a revolution. But by January 2025, that revolution was officially over-Bitcoin was no longer legal tender. So what went wrong? And why is El Salvador still buying more Bitcoin than ever?
Why Bitcoin? The Problem That Started It All
For decades, El Salvador’s economy ran on the U.S. dollar. Since 2001, the country gave up its own currency, the colón, to stabilize inflation and attract foreign investment. But that move came with a cost: zero control over monetary policy. When the U.S. Federal Reserve raised interest rates, El Salvador had no choice but to follow. Inflation, unemployment, and poverty stayed stubbornly high. And while the dollar brought stability, it didn’t bring access. Nearly 7 out of 10 Salvadorans had no bank account. Sending money home from the U.S.-a lifeline for many families-cost 10% or more in fees. That’s $10 lost on every $100 sent. President Nayib Bukele saw Bitcoin as the fix. No banks needed. No intermediaries. Just direct peer-to-peer transfers. He didn’t just want people to use Bitcoin-he wanted them to live on it. The government launched the Chivo Wallet, gave every citizen $30 in free Bitcoin, and mandated that all businesses accept it. It was bold. Unheard of. And it worked… at first.How It Worked (On Paper)
The plan had three big parts:- Legal tender status-Bitcoin could be used to pay taxes, buy goods, settle debts-just like dollars.
- Chivo Wallet-a government-built app with no fees, instant transfers, and Bitcoin-to-dollar conversion built in.
- Bitcoin City-a planned city powered by geothermal energy from volcanoes, where no taxes would be paid on Bitcoin gains.
The Reality: Few People Actually Used It
Here’s the contradiction: 82% of businesses accepted Bitcoin, but only 1% of remittances used it. Most Salvadorans didn’t want to hold Bitcoin. They didn’t trust its price swings. One day, your $100 payment is worth $105. The next, it’s $90. Who wants to be paid in something that can lose 15% in a week? People used Chivo Wallet to cash out Bitcoin into dollars immediately-then spent the dollars. The wallet became a bridge, not a home. Even worse, the system was clunky. Many older Salvadorans didn’t own smartphones. Internet access was spotty in rural areas. The Chivo app crashed often. Customer support? Nonexistent. People got frustrated. They’d rather use cash or a bank transfer-even if it cost more. By 2022, more Salvadorans had Lightning wallets (a faster Bitcoin payment layer) than bank accounts. That sounds impressive-until you realize most of those wallets were empty. They were set up for the $30 free Bitcoin giveaway, then never touched again.
The IMF Step In-And What Changed in 2025
The biggest threat to El Salvador’s Bitcoin experiment wasn’t public resistance. It was the International Monetary Fund. The IMF had warned from day one: Bitcoin’s volatility was a risk to national stability. When El Salvador asked for a $1.4 billion loan in 2023 to help rebuild after natural disasters, the IMF said yes-but only if Bitcoin was removed as legal tender. The government resisted. But by late 2024, the economy was under pressure. Inflation was rising. The dollar was strong. And Bitcoin’s price had dropped 60% from its 2021 peak. The IMF’s conditions weren’t optional. In January 2025, El Salvador quietly repealed the Bitcoin legal tender law. The change? Businesses no longer had to accept Bitcoin. Taxes could no longer be paid in BTC. The government stopped requiring banks to offer Bitcoin services. But here’s the twist: they didn’t ban it. Bitcoin became optional again-just like cash or credit cards.Why They’re Still Buying Bitcoin
If Bitcoin was a failure, why did El Salvador buy 8 more Bitcoin in March 2025? And why did they host PLANB Forum 2025-the biggest crypto conference in Central America-just weeks after ditching legal tender status? Because they’re not done with Bitcoin. They’re just changing tactics. The government still believes in blockchain. They still want to be a tech hub. They still want to attract foreign investors who care about crypto. So they kept the Strategic Bitcoin Reserve Fund-and kept buying. Their new goal? Not to make Bitcoin money, but to make El Salvador the Bitcoin warehouse of Latin America. They’re now focusing on:- Building data centers powered by volcanic energy for Bitcoin mining
- Attracting crypto startups with tax incentives
- Using Bitcoin as a reserve asset to hedge against dollar fluctuations
What This Means for the Rest of the World
El Salvador’s experiment was never really about whether people liked Bitcoin. It was about whether a small country could challenge the global financial system. The answer? Not quite. The IMF still runs the rules. Central banks are building their own digital currencies (CBDCs)-not to replace banks, but to control them better. Countries like Nigeria, Brazil, and India are watching El Salvador’s fall closely. They’re not rushing to copy it. They’re learning from it. El Salvador proved one thing: you can’t force adoption. Technology doesn’t change behavior unless it’s simple, stable, and useful. Bitcoin’s volatility killed its use as money. But as a store of value? That’s a different story.What’s Next for El Salvador?
Today, El Salvador is in a strange middle ground. - Bitcoin is not legal tender. But it’s not illegal. - The Chivo Wallet still exists. But it’s barely used. - The government still holds over 6,100 Bitcoin. And they’re still buying. - Businesses can accept Bitcoin-but most don’t bother. - Crypto startups are moving in, drawn by low taxes and a government that still talks about blockchain like it’s the future. The dream of a Bitcoin-powered economy is dead. But the dream of a crypto-friendly nation? Still alive. El Salvador’s real legacy won’t be its failed legal tender law. It’ll be proving that a small country can shake the financial world-even if it had to back down to survive. And in the end, that’s more powerful than any law ever was.Write a comment
Comments
Mike Stadelmayer
Man, I remember when this all started. Everyone was hyped like it was the second coming. Turns out forcing people to use tech they don’t trust? Bad idea. But honestly? I’m not surprised. Bitcoin’s too wild for daily use. Still, I respect they kept buying. Smart move if you think it’ll bounce back.
Kinda like trying to make everyone switch to electric cars overnight-without charging stations. People just want something that works.
November 20, 2025 AT 06:26
Norm Waldon
THIS IS A TRAP. A FINANCIAL COUP D’ÉTAT BY THE IMF AND THE FED. THEY DON’T WANT SMALL NATIONS TO BREAK FREE-SO THEY THREATENED LOANS, THEN FORCED A BACKDOWN. EL SALVADOR DIDN’T LOSE TO THE PEOPLE-THEY LOST TO GLOBAL ELITES WHO FEAR DECENTRALIZATION. THEY’RE STILL BUYING BITCOIN BECAUSE THEY KNOW THE TRUTH: THE DOLLAR IS A PAPER CROWN. THE REAL REVOLUTION IS STILL COMING-AND THEY’RE HIDING THE GOLD IN PLAIN SIGHT.
November 20, 2025 AT 19:59
neil stevenson
LOL at the Chivo Wallet crashing every time someone tried to pay for tacos 😂
My abuela still uses cash. And she’s happy. Bitcoin’s cool and all, but if your app doesn’t work on a $50 phone with spotty Wi-Fi, it’s not a solution-it’s a party trick.
Also, 30 bucks in BTC? That’s like giving someone a lottery ticket instead of rent money.
November 21, 2025 AT 00:20
Samantha bambi
I think the real lesson here is about empathy, not technology. The government assumed that because Bitcoin was innovative, people would automatically embrace it. But adoption isn’t about what’s cool-it’s about what’s safe, simple, and reliable. Most Salvadorans weren’t rejecting Bitcoin-they were rejecting risk with their livelihoods.
It’s not a failure of crypto. It’s a reminder that progress must serve people, not the other way around.
November 22, 2025 AT 22:17
Anthony Demarco
Everyone’s acting like this was some grand experiment but let’s be real-this was just Bukele flexing. He wanted to be the crypto king. He didn’t care about the people who couldn’t use the app. The Chivo Wallet was a PR stunt wrapped in blockchain hype. The fact that only 1% of remittances used it proves it was never about helping the poor-it was about making headlines.
And now they’re still buying Bitcoin? Classic. They’re not investing-they’re doubling down on ego.
November 23, 2025 AT 08:12
Lynn S
This entire endeavor was a textbook case of technological hubris disguised as economic reform. The government ignored fundamental behavioral economics, disregarded infrastructure limitations, and assumed that legal mandate could override human psychology. The result was predictable: superficial compliance without meaningful adoption. The IMF’s intervention was not an act of oppression-it was a necessary corrective. El Salvador did not challenge the global financial system; it exposed its own fragility.
Author
Ronan Caverly
I'm a blockchain analyst and market strategist bridging crypto and equities. I research protocols, decode tokenomics, and track exchange flows to spot risk and opportunity. I invest privately and advise fintech teams on go-to-market and compliance-aware growth. I also publish weekly insights to help retail and funds navigate digital asset cycles.