El Salvador and Bitcoin: the basis

As may you can know or not in September 2021, El Salvador, under President Nayib Bukele, became the first country to adopt Bitcoin (BTC) as legal tender alongside the US dollar. Starting with this the El Salvador's Bitcoin Experiment aiming to boost financial inclusion, reduce remittance costs, and attract investment in a dollarized economy plagued by low growth and high emigration.

Mandated BTC acceptance by businesses was stablished, and ambitious projects like Bitcoin City—a tax-free crypto hub powered by geothermal energy—and Bitcoin Bonds were announced to fund infrastructure. By January 2026, the "experiment" has evolved: BTC acceptance is now voluntary for the private sector following IMF pressure, but the government continues aggressive accumulation, holding around 7,500 BTC valued at over $650-700 million. About this shift I will be talking here because from it we can extract value lessons.

Key Outcomes

The experiment's core goal of widespread adoption as a daily payment method has largely fallen short. Only about 7.5% of Salvadorans use BTC for purchases, and just 1% of remittances—the lifeblood of the economy—are processed via crypto. At first merchants faced resistance due to transaction fees, price swings, and technical barriers in a country where financial literacy is limited.

After three years the government relaxed mandates, making acceptance optional for private businesses while the public sector still must accept it.

This low uptake reflects the challenges of integrating a volatile asset into everyday transactions in any economy. BTC's price fluctuations— -70% in 2022 before recovering—eroded trust as a reliable medium of exchange.

Economic Impacts

However, despite early skepticism, El Salvador's economy is booming, with the IMF projecting 4% GDP growth in 2025 and a positive outlook for 2026. Although this is not directly related to Bitcoin, because it is driven by record remittances, improved security (reducing gang violence), and surging foreign direct investment (FDI), Bitcoin has played an indirect role.

The legal tender adoption of BTC works as a marketing image washing for the country. The pioneer status attracted crypto tourists, investors, and digital nomads, boosting visitor numbers and branding El Salvador as an innovation hub.

Unlike the Inability to work as day to day payment medium, the BTC long term holdings of El Salvador have prove the capacity of Bitcoin to work as store of value and monetary reserve. The acquisitions of that country have generated grow from an initial investments of ~$270 million to over $600-700 million.

But what other issues bring Bitcoin to El Salvador? Stay tuned for Part II of this analysis.

Image made with Grok.