El Salvador’s Bold Bitcoin Experiment

In 2021, El Salvador became the first country in the world to make Bitcoin legal tender. President Nayib Bukele said the decision would help the country break free from relying on the US dollar and lower the high costs of sending and receiving money.

The government launched the Chivo Wallet, set up Bitcoin ATMs, promised a tax-free “Bitcoin City,” and planned to raise $1 billion through “Volcano Bonds” to advance its digital agenda. Notably, Bukele pledged to buy one Bitcoin every day starting November 2022, claiming his administration followed through for more than two years.

Updates on new purchases were frequently posted on social media to highlight its Bitcoin commitment, with platforms like Nayib Tracker showcasing the growing reserves and aiming to convince others of El Salvador’s steadfastness.

While Bitcoin advocates praised the country for challenging traditional finance models, El Salvador faced significant financial struggles, including rising debt pressures and the need for international support. In secret, it negotiated a $1.4 billion loan deal with the International Monetary Fund (IMF), agreeing to strict conditions for the funds.

By July 2025, an IMF review revealed that no new Bitcoin purchases had occurred since February, prompting skepticism about the government’s true commitment to Bitcoin.

Misleading Communication to the IMF and Public

By late 2024, soaring debt led to economic strains, and despite the bold Bitcoin initiative not generating expected relief, rising tourism and sporadic interest from Bitcoin influencers appeared. However, systemic issues persisted, leading to IMF engagement for vital funding.

In December 2024, El Salvador finalized a 40-month loan deal with the IMF to stabilize its economy. Compliance meant ceasing Bitcoin purchases, making usage optional, limiting government control of the Chivo Wallet, and enhancing transparency.

While the government informed the IMF about halting Bitcoin purchases, the public narrative maintained claims of ongoing support for Bitcoin and daily acquisitions.

The IMF’s July 2025 report disclosed no new public Bitcoin purchases and clarified that increases in reserves were mere transfers between wallets, not new acquisitions.

Distorted Bitcoin Narrative for Financing

The primary question remains whether the government intentionally misled the public or employed a strategy to secure funding while managing its crypto image. Bukele’s administration knew the loan necessitated significant changes to digital asset policies but promoted a contrary public narrative.

The mixed messaging illustrates a strategy to cater to both public support and global lenders, leading to additional funds from the World Bank and IDB.

El Salvador’s commitment to Bitcoin framed the nation as a forward-thinking entity, attracting media attention and crypto support. However, acknowledging its compliance would undermine this image and demonstrate vulnerability.

Thus, maintaining the narrative of Bitcoin purchases, despite IMF compliance, preserved political and economic interests while delaying fallout from the inevitable changes.

Cautionary Lessons for Other Nations

Although El Salvador never explicitly stated it stopped using Bitcoin, it allowed critical aspects to fade while maintaining a public facade of support. The dual tactics allowed for IMF reforms while perpetuating crypto credibility, but the July 2025 report exposed the fragile foundation of the Bitcoin experiment amid financial pressure.

El Salvador’s journey serves as a cautionary tale for other nations in Africa, Southeast Asia, and Latin America contemplating similar moves. The experiment revealed the consequences of neglecting transparency and sustainable infrastructure when adopting Bitcoin as a national policy.

The ultimate query is whether Bitcoin can serve as a legitimate national policy or if it poses too many risks. El Salvador’s experience demonstrates that despite initial accolades for Bitcoin’s adoption bolstering leadership’s popularity, the underlying challenges of debt dependency and murky communications must be addressed for lasting success.