The Bitcoin Experiment
El Salvador made history in 2021 by becoming the first country to adopt Bitcoin as legal tender, requiring businesses to accept it for transactions. To support this initiative, the government introduced the Chivo wallet, a state-backed app that facilitated Bitcoin transactions and even offered a $30 incentive for users. However, the U.S. dollar remained in circulation as the primary currency, giving citizens the choice to use either.
Adoption faced barriers beyond the legal requirement. A nationally representative study by Fernando Alvarez, David Argente and Diana Van Patten found that cash preferences, trust and privacy concerns, and access to suitable technology limited the use of Chivo and Bitcoin.
The Outcomes of Bitcoin Adoption
Over nearly four years, the Bitcoin law had mixed results:
Tourism Growth: Tourism expanded, but that increase alone does not establish how much was caused by Bitcoin adoption.
Limited Everyday Use: In Iudop’s survey about 2024, 91.9% of respondents said they had not used Bitcoin to buy or pay for something that year. This measures payment use, not whether people gained access to bank accounts.
Remittances: The Alvarez, Argente and Van Patten study found limited use of Chivo for remittances in early 2022. This should not be read as a measurement of all Bitcoin remittances in 2023.
Business Reluctance: The same 2022 study found that about 20% of firms accepted Bitcoin, and 88% of those reporting Bitcoin sales converted the receipts into dollars.
Trust Issues: The researchers identified privacy and transparency concerns as important barriers to adoption. Bitcoin’s price volatility also makes it different from holding U.S. dollars.
The Shift to Voluntary Acceptance
Decree No. 199 was adopted on January 29, 2025 and published on January 30, with entry into force set for 90 days after publication. It retained the term “curso legal” in the law while replacing compulsory acceptance with voluntary acceptance by private parties. The reforms followed a December 2024 IMF staff-level agreement for about $1.4 billion, still subject to Executive Board approval at the time. The changes provided for:
Voluntary Bitcoin acceptance by private businesses and individuals.
Taxes to be paid only in U.S. dollars.
Limits on public-sector Bitcoin activity and a gradual withdrawal of government participation in Chivo.
The reform changes the rules for acceptance and the state’s role; it does not prohibit voluntary private Bitcoin transactions. Describing it simply as a ban or an unqualified removal of legal-tender status misses the wording and practical effect of the amended law.
The Government’s Ongoing Crypto Investments
Despite scaling back its Bitcoin policy, El Salvador’s government continues to invest in cryptocurrency. On February 4, 2025, it purchased 12 more Bitcoin, bringing its total holdings to 6,068 BTC, valued at over $585 million at the time of this February 2025 report. These reported holdings describe the government’s treasury position in early February 2025; they do not change the distinction between holding Bitcoin and requiring businesses to accept it.
The reform shifted private Bitcoin acceptance from a compulsory requirement to a voluntary choice. It changed the state’s approach without ending private Bitcoin use.
Sources: IMF agreement; Adoption study; Iudop survey
