El Salvador's Bitcoin Experiment: 3 Years Later, What's the Verdict?

The World's Boldest Bitcoin Experiment

On September 7, 2021, El Salvador became the first country in history to adopt Bitcoin as legal tender. President Nayib Bukele pushed through the Bitcoin Law with a simple premise: give the 70% of Salvadorans without bank accounts access to a modern financial system, reduce remittance costs, and attract foreign investment.

Three years later, the verdict is in — and it's more nuanced than either Bitcoin maximalists or critics would have you believe. As someone from a developing country (Sri Lanka) with similar challenges, I've followed this experiment obsessively.

What El Salvador Did

The Bitcoin Law mandated that:

• Every business must accept Bitcoin as payment (alongside the US dollar)
• The government launched Chivo Wallet — a state-run Bitcoin and USD wallet — with a $30 BTC sign-up bonus
• The government began purchasing Bitcoin for its national treasury
• Bitcoin ATMs were installed nationwide
• Tax exemptions were created for foreign Bitcoin investors and businesses

The Scorecard

Category	Grade	Assessment
Financial Inclusion	B-	Chivo wallet reached millions but daily usage dropped
Remittances	C+	Some adoption but traditional methods still dominate
Treasury Performance	A	Government BTC holdings now significantly profitable
Foreign Investment	B+	Attracted crypto companies, conferences, and digital nomads
International Relations	B-	IMF friction but eventually reached a deal
Domestic Adoption	C	Most Salvadorans still prefer dollars for daily transactions

What Worked

Treasury Profits

Bukele started buying Bitcoin when it was between $30,000-$60,000. After Bitcoin surpassed $100,000, El Salvador's treasury holdings — now exceeding 5,000 BTC — are worth over $500 million and are deeply in profit. Bukele hasn't been shy about sharing this fact, regularly posting updates on social media.

Foreign Investment and Tourism

El Salvador has attracted significant attention from the global Bitcoin community:

• Annual Bitcoin conferences in San Salvador and El Zonte (Bitcoin Beach)
• Crypto companies establishing operations in the country
• Digital nomads relocating for the Bitcoin-friendly environment
• A new "Freedom Visa" program offering residency to crypto investors

Volcano Mining

El Salvador began mining Bitcoin using geothermal energy from volcanoes — an innovative approach that leverages the country's abundant volcanic activity. While the mining operation is modest, it demonstrates creative thinking about energy utilization and provides Bitcoin at below-market costs.

What Didn't Work

Daily Adoption

The honest truth: most Salvadorans don't use Bitcoin for daily transactions. After the initial excitement (and $30 sign-up bonus), Chivo wallet usage dropped significantly. Studies show that less than 20% of Salvadorans regularly use Bitcoin for payments. Most still prefer dollars.

The reasons are understandable: Bitcoin's volatility makes it uncomfortable for daily spending, merchants prefer stable prices, and the user experience for Lightning Network payments still has friction.

Chivo Wallet Problems

The government's Chivo wallet was plagued by technical issues, identity theft concerns, and glitches. Many users had negative experiences that colored their perception of Bitcoin. In hindsight, the government should have partnered with existing wallet providers rather than building its own.

IMF Tensions

The International Monetary Fund was openly critical of El Salvador's Bitcoin adoption, warning about financial stability risks. This complicated El Salvador's negotiations for a much-needed $1.4 billion IMF loan. Eventually, a deal was reached in early 2025, but it required El Salvador to make Bitcoin acceptance voluntary for private businesses rather than mandatory.

Lessons for Other Countries

As someone who would love to see Sri Lanka engage constructively with Bitcoin, here are the key lessons I draw from El Salvador:

1. Don't force adoption: Making Bitcoin mandatory was unnecessary and created backlash. Let it grow organically.
2. Don't build the wallet yourself: Governments aren't good at building apps. Partner with the private sector.
3. Treasury allocation can work: Buying Bitcoin as a national reserve asset has proven profitable and visionary.
4. Focus on education first: Many Salvadorans didn't understand what they were being given. Education should precede adoption.
5. Bitcoin is better as savings than spending: For developing countries, Bitcoin's primary value is as a savings technology and remittance rail, not as a point-of-sale payment method.

Bhutan: The Quiet Bitcoin Nation

Interestingly, Bhutan has taken a quieter but potentially more effective approach. The Druk Holding and Investments (Bhutan's sovereign wealth fund) has been mining Bitcoin using the country's abundant hydroelectric power since at least 2022. By 2024, Bhutan held an estimated 12,000+ BTC — making it one of the largest government Bitcoin holders per capita in the world. And they did it without the controversy, simply by mining with cheap, clean energy.

Sri Lanka, with its own developing hydroelectric capacity, could learn from both models. Read more analysis on our blog and explore Bitcoin fundamentals at our learning center.