El Salvador Adopts Bitcoin (2021): What the Law Did and What Followed
In 2021 El Salvador became the first country to make Bitcoin legal tender. A neutral look at the law, the Chivo wallet, the IMF's concerns and the 2025 changes.
In June 2021, El Salvador's legislature voted to make Bitcoin legal tender, the first country to take that step. The decision drew strong reactions: some saw it as an experiment in financial inclusion, others as a risky departure from sound policy. This article sets out what was done and what is known about the results, without taking a side.
Background
El Salvador has used the US dollar as its official currency since 2001, so it does not issue its own money. A large share of the population receives money from relatives abroad, and remittances make up a significant part of the national economy. Many Salvadorans also did not have bank accounts. Those factors were cited by the government as reasons for the policy.
The Bitcoin Law
President Nayib Bukele announced the plan on 5 June 2021 in a video message to a Bitcoin conference in Miami. The Legislative Assembly passed the Bitcoin Law on 9 June, and it took effect on 7 September 2021. Its main provisions were:
- Bitcoin would be legal tender alongside the US dollar.
- Businesses had to accept Bitcoin as payment if they were technologically able to do so.
- Prices could be shown in bitcoin, and the dollar remained the reference currency for accounting.
- Exchange between bitcoin and dollars would be handled by the state, and capital gains from bitcoin would not be taxed in the way other property would be.
The Chivo wallet
The government launched a digital wallet called Chivo and offered every citizen who signed up a bonus of 30 US dollars in bitcoin. It also installed a network of Chivo-branded ATMs. The launch had technical problems: there were reports of sign-up difficulties and outages during the first days, which the government worked through in the following weeks. Chivo supported Lightning Network payments for small transactions.
How it was received
| Group | Position |
|---|---|
| Government | Said it would lower remittance costs and encourage investment and tourism |
| International Monetary Fund | Warned about risks to financial stability, consumer protection and integrity |
| Rating agencies | Cited concerns about public finances and the bitcoin policy |
| Public opinion | Surveys in 2021 and 2022 showed a majority of respondents disapproving of the law |
Researchers studying adoption found limited use. A 2022 working paper from the National Bureau of Economic Research reported that many people downloaded the wallet to claim the bonus, but that use for ordinary payments was low afterwards. Supporters replied that the policy should be judged over the longer term and that bitcoin purchases by the state, which it began in September 2021, were part of a wider strategy. Those purchases were reported by the government and are not independently audited here.
The IMF and the 2025 changes
In January 2022, the IMF urged El Salvador to remove Bitcoin's status as legal tender. The country later negotiated a lending programme with the Fund, announced in December 2024. As part of that arrangement, the Legislative Assembly amended the law in January 2025 so that businesses are no longer obliged to accept bitcoin and its use is voluntary. The government has said it will keep its bitcoin holdings, while the IMF programme includes commitments to limit further public-sector accumulation and to wind down the state's role in Chivo. How closely those commitments have been followed has been reported differently by the government and outside observers.
How payments were meant to work
The government's aim was that a shopkeeper could receive bitcoin and have it converted to dollars immediately, so the shop would not hold price risk. The Chivo wallet was integrated with the Lightning Network, and the US payments company Strike worked with the government on this technical side. Merchants could also use private payment apps. In practice, how many shops switched on bitcoin payments, and how often customers used them, is a point on which official statements and independent surveys have not matched. The honest summary is that the policy was an experiment whose results are still being assessed. For general questions about hosting and services, our knowledge base is a good place to begin.
What can be said with confidence
- El Salvador was the first country to give Bitcoin legal tender status, and the first to retreat from making it mandatory for businesses.
- Take-up for everyday payments appears to have stayed modest, based on academic studies and surveys.
- The wider effects on investment, tourism and the national budget are debated, and measurements differ between the government and outside analysts.
This article does not predict the future of the policy or the price of bitcoin.
What it means for businesses
For merchants anywhere, the case is a reminder that accepting crypto is a choice with trade-offs, covered in our guide on the pros and cons for businesses. In El Salvador, many businesses used a payment processor so they could receive dollars without handling the volatility themselves.
A practical lesson for site owners
Laws change, and they can change quickly. If you accept crypto payments, rely on a processor that stays current with the rules in the countries where you trade. Zebra Hosting accepts more than 80 cryptocurrencies via Cryptomus; the details are on the hosting page.
