Four Years Later: El Salvador’s Bitcoin Experiment Faces Major Setback

El Salvador just pulled the plug on its groundbreaking Bitcoin experiment—and the crypto world is reeling.

The Backtrack

Four years after becoming the first nation to adopt Bitcoin as legal tender, the government quietly scaled back its ambitious crypto agenda. No official numbers disclosed, but insiders confirm the treasury's digital asset holdings took a massive hit during the latest market downturn.

Legacy finance bankers are already smugly nodding—because nothing says 'financial innovation' like watching traditional institutions profit while pioneering nations absorb the volatility.

What's next? Other developing nations eyeing crypto adoption are now hesitating. Meanwhile, Salvadorans who embraced digital payments face uncertainty as infrastructure support dwindles.

Final thought: Revolution often comes with false starts. But in global finance, being first sometimes means being the crash test dummy.

6,313 BTC reserve ($702M)
New BTC banking laws, 80k officials certified
BUT: Jan 2025 IMF deal repealed legal tender law + froze BTC buys
Dollar still dominates daily life

More: https://t.co/q4y1AaxedR pic.twitter.com/JwkkReaegf

— Fintegra News (@fintegra_news) September 8, 2025

From Global First to Policy Retreat

In September 2021, President Nayib Bukele led El Salvador to become the first country in the world to recognize Bitcoin as legal tender. The initiative aimed to boost financial inclusion, reduce remittance fees, and attract foreign investment.

The government launched the official wallet app, Chivo, offering citizens $30 worth of free BTC upon signup. Nearly half the population downloaded the app initially, but usage declined rapidly by early 2022.

In January 2025, El Salvador formally reduced Bitcoin’s legal tender status as part of a $1.4 billion IMF support agreement. Bitcoin was downgraded from a mandatory currency to an optional, private-use payment method. The revised law also made clear that taxes can no longer be paid in Bitcoin.

IMF Pressure and Domestic Reality

The IMF had repeatedly warned that Bitcoin’s volatility could threaten El Salvador’s dollarized economy. Technical challenges, low merchant adoption, and security concerns also hindered its success.

Despite a legal mandate, only around 20% of businesses ever accepted Bitcoin. Of those, 88% immediately converted BTC to U.S. dollars. On Chivo, just 5% of transactions were made in Bitcoin, while most citizens preferred to hold assets in dollars.

Government Still Holding Bitcoin Reserves

El Salvador continues to maintain a strategic reserve of Bitcoin. After additional purchases in March 2025, the country’s holdings reached 6,102 BTC.

The government also remains committed to cryptocurrency innovation. In January 2025, it hosted PLANB Forum 2025, one of Central America’s largest crypto conferences, signaling ongoing interest in building a tech-driven economy despite scaling back legal tender ambitions. In August 2025, El Salvador’s Legislative Assembly has passed a new law enabling licensed investment banks to hold Bitcoin (BTC) on their balance sheets and provide cryptocurrency-related services to professional investors. 

While the legal tender experiment has produced limited results, El Salvador’s pivot shows a balancing act: satisfying international creditors while continuing to position itself as a hub for digital asset innovation.

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