El Salvador‘s Bitcoin experiment has ended. After adopting Bitcoin as legal tender in September 2021, the country reversed the policy in January 2025 to secure a $1.4 billion IMF loan. Despite initial enthusiasm, Bitcoin adoption faced challenges like low public use, technical issues with the Chivo wallet, and Bitcoin’s price volatility. Here’s what happened:
- Limited Adoption: Only 20% of businesses accepted Bitcoin, and 60% of users abandoned the Chivo wallet after claiming the $30 incentive.
- Technical Problems: The Chivo app faced crashes, security issues, and low accessibility.
- Economic Impact: Bitcoin’s volatility caused government losses and credit downgrades.
- IMF Deal: To stabilize the economy, Bitcoin was removed as legal tender, and its use became optional for businesses.
El Salvador still holds 6,068 BTC, focusing on cryptocurrency as an asset rather than a currency. The experiment highlights the importance of digital infrastructure, institutional relationships, and public trust when adopting cryptocurrency at a national level.
IMF urges El Salvador to remove Bitcoin as legal tender
Problems with Bitcoin Implementation
El Salvador’s bold move to adopt Bitcoin as legal tender revealed several challenges, ultimately leading to a shift in policy.
Limited Public Use
Despite government efforts to encourage Bitcoin adoption, its use remained minimal. Only 20% of businesses accepted Bitcoin, even though it was legally required [6]. Data from the Chivo wallet, the government-backed Bitcoin app, highlighted deeper issues:
- Many residents downloaded the app initially to claim the $30 Bitcoin bonus, but over 60% never made another transaction after spending it [6].
- Just 5% of sales were made using Bitcoin through the wallet [6].
- A staggering 88% of businesses converted Bitcoin to dollars immediately instead of holding it [6].
This limited adoption was compounded by a lack of understanding. A September 2021 survey revealed that nine out of ten Salvadorans didn’t fully understand Bitcoin [1].
Wallet and System Issues
The Chivo wallet faced numerous technical and operational problems, making it difficult for users to rely on the system:
- Connectivity barriers: Only about two-thirds of Salvadorans had mobile devices capable of running the app [6].
- Security concerns: Cases of identity theft emerged as stolen data was used to create unauthorized Chivo accounts [3].
- Technical glitches: Users reported frequent app crashes and transaction errors during the rollout [2].
Price Risk and Market Impact
Bitcoin’s price swings created economic challenges for both the government and businesses:
| Impact Area | Details |
|---|---|
| Government Holdings | By January 2022, Bitcoin holdings lost 15% of their value from the November 2021 peak [3]. |
| Business Operations | Merchants struggled to maintain consistent pricing due to Bitcoin’s volatility [3]. |
| Credit Ratings | Rating agencies downgraded El Salvador, citing heightened fiscal risks tied to Bitcoin [4]. |
These combined issues – technical failures, low adoption, and financial risks – ultimately led El Salvador to meet the IMF’s demand to remove Bitcoin as legal tender, a necessary step to secure critical financial aid [5].
IMF Deal and Bitcoin Law Reversal
IMF Loan Terms
El Salvador reversed its Bitcoin law after years of warnings from the IMF about the cryptocurrency’s risks to the country’s economy. This decision coincided with a $1.4 billion loan agreement from the IMF, set to be disbursed over 40 months [5]. The move aligned with earlier IMF concerns about financial stability.
Legal Changes
To comply with the IMF’s conditions, El Salvador introduced several legislative updates in January 2025:
| Policy Area | Revised Law |
|---|---|
| Legal Tender Status | Bitcoin no longer legal tender |
| Business Requirements | Accepting Bitcoin made optional |
| Government Payments | Stopped using Bitcoin for payments |
| Public Sector Involvement | Prohibited from engaging with Bitcoin [5] |
Even with these adjustments, the government kept a selective focus on cryptocurrency. Although Bitcoin’s mandatory use was eliminated, El Salvador retained a portion of its crypto reserves. This reflects a careful balance between experimenting with digital assets and meeting international financial commitments.
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El Salvador After Bitcoin Law
The decision to reverse the Bitcoin law brought noticeable changes to El Salvador’s markets and government strategies.
Effects on Local Economy
After Bitcoin was removed as legal tender, its presence in the local economy shrank significantly. Business acceptance dropped to just 5% [5][6], and crypto remittances fell below 2% of total transfers [5], returning to levels seen before the law was enacted.
State Bitcoin Holdings
Even with reduced public adoption, the government stuck with its Bitcoin investment strategy. El Salvador still holds 6,068 BTC, valued at $592 million [5]. The government has continued buying Bitcoin, signaling that it sees the cryptocurrency more as a speculative asset than a tool for everyday transactions.
Key Findings for Other Countries
El Salvador’s experience highlights three important takeaways for nations considering cryptocurrency adoption:
- Digital Infrastructure: A strong digital framework is essential. For example, the Chivo wallet saw a 60% abandonment rate [6].
- Institutional Relationships: Collaborating with institutions can shape policy outcomes, as seen with the $1.4 billion loan’s conditions [5].
- Public Preference: Many Salvadorans leaned toward traditional financial systems over new, unfamiliar ones.
While the IMF agreement helped stabilize the country’s economy, this experiment revealed the challenges of balancing crypto ambitions with the demands of established financial systems.
DEX Trading Options
After Bitcoin lost its status as legal tender in El Salvador, decentralized exchanges (DEXs) became the go-to option for Salvadorans looking to trade crypto. These platforms have stepped in to replace the discontinued Chivo system, offering access to global liquidity and allowing users to maintain control over their assets.
Why DEX Platforms Are Gaining Ground
For Salvadoran traders, DEX platforms offer more control and flexibility when handling Bitcoin transactions. Given the country’s preference for dollar-based transactions, these platforms extend that ease of use to decentralized trading. Some of the standout benefits include:
- Lower fees compared to traditional exchanges
- 24/7 access to trading markets
- Tools for managing risks in volatile markets
Features of Defx Perps DEX
The Defx Perps platform is tailored to meet the needs of Salvadoran traders navigating the post-Bitcoin legal tender landscape. Here’s a quick look at its key features:
| Feature | What It Offers |
|---|---|
| Leverage Trading | Trade Bitcoin with up to 100x leverage [7] |
| Margin Options | Choose between isolated or cross-margin trading |
| Order Types | Use stop-loss and take-profit orders for better control |
| Security | Self-custody with built-in automated safeguards |
Defx Perps enables swift trade execution and provides contracts that mirror Bitcoin’s price. These tools help traders navigate market volatility while keeping full control of their assets.
Conclusion: Bitcoin Law Results
El Salvador’s Bitcoin experiment, which ended in January 2025, offers important insights into the challenges of adopting cryptocurrency at a national level. The government revoked Bitcoin’s legal tender status to secure a $1.4 billion loan from the IMF [5], highlighting the gap between ambitious crypto policies and their practical execution.
Although half of all households initially downloaded the Chivo wallet, long-term adoption fell short. The program struggled to connect with its intended audience – the unbanked population. Instead, active users were mostly young, educated males who already had access to traditional banking services [6].
The government’s substantial Bitcoin holdings signal its ongoing interest in cryptocurrency. However, this approach has strained relationships with traditional financial institutions and exposed the country’s finances to unpredictable market swings.
For other nations exploring cryptocurrency adoption, three key takeaways stand out. Success depends on strong technological infrastructure, thoughtful management of institutional relationships, and alignment with public needs. While centralized systems faced challenges, decentralized platforms gained traction among Salvadoran traders.
Reversing Bitcoin’s legal tender status helped ease tensions with financial institutions. Still, El Salvador’s journey underscores the delicate balance between embracing crypto advancements and maintaining stability within traditional economic systems.