El Salvador: The Country That Bet on Bitcoin and Lost

On 15 September 2021, El Salvador's 200th birthday, thousands of people marched through the capital, San Salvador, against President Nayib Bukele. A group broke away, smashed the windows of a kiosk housing one of the government's new bitcoin cash machines, and set it on fire. The machines had been switched on barely a week earlier. According to the Associated Press, most had not worked for much of that week, because the government's bitcoin app kept crashing under the weight of people trying to claim a free $30. Bukele said the vandalism was the work of "infiltrators".

Eight days before, El Salvador had become the first country in the world to make bitcoin legal tender, money that shops and businesses were obliged by law to accept, alongside the US dollar it had used since 2001. Less than three and a half years later, the obligation was gone. In between, the country of about 6.3 million people became the largest real-world test of whether a cryptocurrency could work as everyday money.

A law passed in a week

Bukele, then 39, announced the plan by video at the Bitcoin 2021 conference in Miami on 5 June 2021. Four days later the Legislative Assembly, controlled by his party, passed the Bitcoin Law by 62 votes out of 84. It took effect on 7 September.

The rules were sweeping. Businesses had to accept bitcoin if the customer could pay with it. Taxes could be paid in it. The state guaranteed that any bitcoin could be swapped for dollars at the market price. To get people started, the government launched a free phone wallet called Chivo, which means "cool" in local slang, and preloaded each verified user with $30 of bitcoin. It installed around 200 Chivo cash machines across the country. The International Monetary Fund, which was negotiating a loan with El Salvador, warned against the law from the start.

The government also bought bitcoin with public money. Bukele announced the first 400 coins on 6 September 2021, the day before the law took effect, and posted about "buying the dip" when the price fell. From November 2022 he said the country would buy one bitcoin every day.

The public stayed with the dollar

Bitcoin's price swings made it a poor substitute for the dollar for people paid in dollars. A bitcoin worth $50,000 when the law took effect was worth under $17,000 by the end of 2022. In July 2021 the rating agency Moody's cut El Salvador's credit rating, and in May 2022 it cut it again, to Caa3, one step above where default is expected, citing a lack of a credible plan to pay its debts. The same month it downgraded Bandesal, the state development bank that stood behind the promise to swap bitcoin for dollars.

Most Salvadorans simply did not use the new money. Many downloaded Chivo, spent or cashed out the $30, and stopped. A survey by Universidad Francisco Gavidia in late September 2024 found that 92 percent of people did not use bitcoin for transactions. A separate poll by the public opinion institute of the Jesuit-run Central American University (UCA), taken in December 2024 and published the following month, found that 91.9 percent had not used it to buy anything during 2024, up from 88 percent the year before.

The IMF's price

El Salvador needed money. In December 2024 it reached a deal with the IMF for a loan of about $1.4 billion over 40 months, and the price was the Bitcoin Law. On 29 January 2025, minutes after Bukele sent it the bill, the Legislative Assembly voted 55 to 2 to change it. Businesses no longer have to accept bitcoin. Taxes can no longer be paid in it. The state no longer guarantees to swap it for dollars. Outlets disagree on whether the words "legal tender" survived in the amended law, but the features that made it work as money did not. The IMF board approved the loan on 26 February 2025, and the deal also required the government to wind down its role in Chivo.

The loan also said the public sector should not add to its bitcoin. Bukele said the buying would not stop. On 17 November 2025, with bitcoin down more than a quarter from its October peak, the government's own bitcoin tracker showed a purchase of about 1,090 coins, worth around $100 million, the largest in a single day. That came after two senior finance officials had said publicly that the country had not bought any bitcoin since February 2025.

Where it stands in 2026

The IMF accepted an explanation. In September 2026 it said that all the bitcoin added to the official holdings since June 2025 had come from private donations, with no public money used, although it did not name the donors or say how much each gave. On 1 October 2026 its board completed the loan's second and third reviews, granted a waiver for the missed bitcoin condition and released about $138 million. The IMF said no further buying was expected beyond documented donations, and that the remaining public stake in Chivo should be sold. Majority ownership and control of Chivo had already passed to an unnamed private operator, with the government keeping a minority stake.

The country's official bitcoin holdings stood at about 7,790 coins in early October 2026, worth roughly $640 million at the mid-October price near $82,000. For most Salvadorans, daily life runs on the dollar, as it did before 2021.