Introduction

On September 7th, 2021, the government of El Salvador, a small country of the Central America, announced that will adopt Bitcoin as a legal tender in the country. Many cryptoentusiasts believed that adopting Bitcoin by a sovereign country would bring a revolution in the use of bitcoin as an electronic peer to peer electronic cash system, making Satoshi Nakamoto's Vision since 2008 a progressive reality. Yet, the question that arises 5 years later, on September 7th, 2026, is how much successful was that revolutionary move ?

Five years ago today, El Salvador made history as the first nation to make Bitcoin legal tender.

Today, the world watches us lead:

🇸🇻 Strategic Bitcoin Reserve
🇸🇻 Bitcoin training for 80,000 civil servants
🇸🇻 Bitcoin education across public schools
🇸🇻 Bitcoin Zones across the… pic.twitter.com/qNhUoRAuqS

— The Bitcoin Office (@bitcoinofficesv) September 7, 2026

Monetary History in El Salvador

El Salvador's first official currency since 1892 was the colón (SVC) but on January 1st, 2001 it was replaced by the US dollar when the Monetary Integration Act authorized the free circulation of another country's currency i.e. the United States Dollar in El Salvador and removing the undervalued colón completely from circulation in an exchange rate of 1 US Dollar to 8.75 colón, decreasing the purchasing power of the population. The purpose of "dollarizing" El Salvador was to achieve financial stability by encouraging foreign investment and decreasing transaction costs of international trade. Yet, the government was unable to control US Doller's monetary policy since the value of the currency was tied to the United States Federal Reserve and not from El Salvador Central Bank.

A similar financial policy took place in Argentina during the 1990s when President Carlos Menem wanted to tie Argentinian Pesos with the value of the US Dollar causing a chaos in the country. Also during early 00s, countries of the European South including Greece and Ireland joined Eurozone replacing their local national currencies to the Euro which was actually a European version of the German Mark pushing them slowly into the hands of IMF during the 2010 European financial crisis.

Nevertheless, El Salvador's main income after the dollarization of the economy was coming mainly from El Salvadorian expats' remittances sent to their families in El Salvador via money operators such as Western Union and MoneyGram and accounted for the 23% of GDP of El Salvador by 2020.  

Bitcoin Adoption as a Legal Tender

Everything started in 2019 when an American Bitcoin advocate named Mike Peterson who lived in the village of El Zonte began facilitating the distribution of an anonymous donation of $100,000 worth of bitcoin to local charities. The donation came with the idea that the village should adopt a circular economy based on Bitcoin because many Salvadorians did not have access to banking services, and accessed bitcoin through their mobile devices and Bitcoin ATMs in commercial areas. The village has since become known as the "Bitcoin Beach", and has been cited as a case study of using Bitcoin for everyday transactions in the country.

And that was how newly elected President of El Salvador Nayib Bukele a cryptoenthusiast centrist politician with progressive modern way of thinking started promoting the idea of Bitcoin as a legal tender in the country to increase his popularity. And on June 5th, 2021, he announced a bill to adopt bitcoin as legal tender in El Salvador, via an English-language video at Bitcoin Conference 2021 in Miami. Bukele claimed that the adoption of bitcoin would make it easier for Salvadorans living abroad to send remittances to their relatives in the country without paying heavy fees to money operators such as WesternUnion and MoneyGram. The use of bitcoin would also make digital transactions more accessible to underbanked people.

Bukele also announced a plan to back the pro Bitcoin as a legal tender in the country with $150 million that were set aside for the project, distributing half of them to the Salvadorians who would signup to an electronic wallet called "Chivo" that included a bonus of $30 worth in Bitcoin. 

He also used the remaining amount of $75 million that were left on El Salvador's budget for the project, to buy more Bitcoin on the market using the Dollar Cost Average strategy and on September 6th, 2021, the government of El Salvador purchased ₿400, worth about $20.9 million at the time. If you do the maths taking into consideration a current price of $85K that would be a rough profit of $85K - $35K = 50K per Bitcoin. Multiply that by ₿400 and El Salvador got a rough profit of $20 million almost the amount of the initial investment and a 100% profit.

Finally, soon after the adoption of Bitcoin as a legal tender, Bukele announced that the country will use geothermal energy from a Salvadorian geothermic factory in a volcano to actually mine bitcoin using natural resources by transferring a container full with miners on site to further backup national monetary reserve with Bitcoin.

First steps...

🌋#Bitcoin🇸🇻 pic.twitter.com/duhHvmEnym

— Nayib Bukele (@nayibbukele) September 28, 2021

I’ve just instructed the president of @LaGeoSV (our state-owned geothermal electric company), to put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos 🌋

This is going to evolve fast! 🇸🇻 pic.twitter.com/1316DV4YwT

— Nayib Bukele (@nayibbukele) June 9, 2021

Reaction in Adoption

Interestingly, the adoption of bitcoin as a legal tender in El Salvador drew criticism both internationally, and within the country. On September 7th, 2021, thousands of protestors gathered in San Salvador to protest against the launch of Chivo and the adoption of Bitcoin due lack of transparency regarding the Bitcoin Law voted by the National Assembly and the use of tax government dollars to purchase Bitcoin. Moreover, many international financial experts warned that bitcoin's volatility would introduce unnecessary risk and instability to El Salvador's underdeveloped economy and in July 2021, Moody's Investors Service downgraded the credit rating of El Salvador, citing Bukele's fiscal policies and the adoption of Bitcoin as a factor. That downgrade continued for years and in June 2025 El Salvador requested the financial support of IMF. Also, many critics suggested that Bitcoin's anonymity would make it easier to engage in money laundering and criminal activities by local gangs and mafia syndicates that Bukele was trying hard to fight and bring them to justice. 

Finally, after a relevant survey, it was found that 91% of Salvadorans still preferred to use the US dollar over bitcoin and in fact the switch to bitcoin had made paying remittances more difficult for many Salvadorans, rather than easier as had been promised, because the fees associated with the bitcoin transactions were several times as expensive as traditional remittances. Also, the majority of Salvadorians, saw the promotion of $30 worth of Bitcoin in Chivo Wallet more than an airdrop instead of a motivation to continue using them or a long term investment. Therefore, they would just signup in the app, claim the $30 worth of Bitcoin bonus and then exchange it for US Dollars to cover their everyday needs. 

The only positive support came from Blockstream's CEO the popular Adam Back who commented through Blockstream's X account:

"It was an inevitability, but here already: the first country on track to make #Bitcoin legal tender, said @adam3us. Back said Blockstream plans to contribute technologies like @Liquid_BTC and #BlockstreamSatellite to make 🇸🇻 a model for the 🗺️." https://t.co/1VYHuV7BKx

— Blockstream (@Blockstream) June 5, 2021

El Salvador shifts to Stablecoins

Unfortunately, 5 years after the adoption of Bitcoin as a legal tender, the Salvadorian Revolution of Bitcoin failed completely.

Bitcoin adoption in El Salvador had not shown meaningful progress and IMF reported that only about 1.75% of remittances were actually transferred through crypto wallets, which is stubbornly low since the legal tender law took effect.

IMF supervisory of the economics of the country in 2025, obliged El Salvadorian goverment to transfer majority ownership and operational control of the Chivo wallet to a private operator, while the government retained a minority stake and its custodial responsibilities. Moreover the $1.4 billion IMF financial support program requested from the country to stop any further accumulation of Bitcoin using the DCA strategy and documented donations. In a relevant statement, IMF reported:

“Efforts will continue to reduce the state’s involvement in Bitcoin-related activities, strengthen crypto‑asset regulation and governance, and enhance transparency regarding public-sector crypto‑asset holdings. No further Bitcoin accumulation is envisaged beyond the documented donations.”

5 years later, Bitcoin is still circulated and exchanged freely in the country as a legal tender but Bukele realised his mistake to promote it so passionately. He believed that Salvadorians would appreciate Bitcoin's value and technology but maybe in 2021 it was a bit too early for a mass crypto adoption in an underdeveloped country with low entry in education and a struggling economy where people's first and only priority is to cover their everyday needs. 

5 years later, Bukele is still determined to continue his crypto-supporting policy using a stablecoin instead as a loophole to bypass IMF's request to reduce El Salvador's involvement in Bitcoin-related activities. On September 30th, 2026, El Salvador’s government announced that it has partnered with Modveon, a Palo Alto-based startup backed by Coinbase Ventures, to launch Sivar, a national digital platform designed to connect Salvadorians with verified communities, businesses and public institutions while providing cross-border payment services. The app uses Modveon's technology for verified accounts using national identity cards and USDC transfers on Coinbase's Base network.

Final Thoughts

El Salvador was the first country to make Bitcoin legal tender. Five years on, President Nayib Bukele's crypto experiment failed to turn Bitcoin into a mainstream form of payment in the country. And in my article My earnings on the Lighting Network" I claim that the Lighting Network of Bitcoin is the only viable solution of using Bitcoin as a REAL peer to peer electronic cash system. 

President Nayib Bukele realised his mistake because he was hoping that his fellow Salvadorians will think the same way and that they would have the same cryptoenthusiam that he also has but that unfortunately proved a wrong bias and conclusion. Determined to remain focus on his crypto enthusiasm, Bukele decided to shift El Salvador's crypto adoption to a dollar-backed stablecoin. 

With the current adoption and development of stablecoins from traditional banking institutions all around the world - just because this is what their customers want - there is great hope that Bukele's new "financial experiment" to promote crypto adoption in El Salvador through a stable coin pegged to US Dollar will be more feasible from the Salvadorians to use it for everyday transactions and be successful. 

And I personally hope than by 2031, within 5 years time, I will be writing another country to celebrate El Salvador's pioneering crypto - adoption 10 years ago.

Disclaimer: All information found on this article is for informational purposes only. I do not provide any personal investment advice so please make your own research before proceeding to any investment/trading actions

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