What’s going on now after El Salvador canceled Bitcoin's legal tender status?

In January 2025, the Salvadoran Congress passed a new bill abolishing Bitcoin’s mandatory status as legal tender, bringing this globally sensational financial experiment to an end. As of September 2025, the country still holds approximately 6,313 Bitcoins valued at $701 million, but they no longer have the enforceable status of legal currency. Meanwhile, the country purchased $50 million worth of gold for the first time since 1990, as a hedge against cryptocurrency volatility.

Economic Aspects: IMF Loan in Exchange for Policy Compromise

(Source: Arkham)

Previously, Bitcoin’s high volatility did not bring the expected economic prosperity to El Salvador; instead, it created fiscal uncertainties and drew skepticism from international financial institutions. To secure a $1.4 billion IMF loan to ease debt pressures, the country ultimately compromised and amended the Bitcoin Law. This loan was crucial for El Salvador, which faced enormous external debt, and international financial bodies had long been cautious about the experiment of Bitcoin as legal tender.

After the loan was disbursed, El Salvador’s fiscal tension eased somewhat, and the country began adjusting its asset reserve strategy. In 2025, for the first time since 1990, it purchased nearly $50 million worth of gold to hedge against cryptocurrency fluctuations, stabilize its balance sheet, and reassure international partners. This move has symbolic significance, indicating that El Salvador is returning to a prudent asset allocation strategy within traditional financial systems.

However, its external debt issues remain unresolved, and Bitcoin-related assets account for less than 2% of GDP, limiting their impact on improving fiscal deficits. This data reveals a harsh fact: although the Bitcoin experiment has garnered global attention, its substantive impact on El Salvador’s overall economy is far below expectations. The country still faces structural challenges, including high unemployment, poverty, and heavy reliance on remittance income.

Key Data on El Salvador’s Economic Adjustment

IMF Loan: $1.4 billion to ease debt pressures

Gold Purchase: $50 million, first in 35 years

Bitcoin Holdings: 6,313 coins (worth $701 million)

GDP Share: Bitcoin-related assets less than 2%

Bitcoin Strategy Shift: From fiat to voluntary payment tool

The country has not completely abandoned Bitcoin; as of September 2025, the government still holds about 6,313 Bitcoins worth approximately $701 million, and President Bukele has repeatedly stated his intention to continue purchasing Bitcoin. This indicates that despite the legal status change, the Salvadoran government remains optimistic about Bitcoin’s long-term value. President Bukele has frequently showcased the government’s Bitcoin holdings on social media, demonstrating his personal conviction in cryptocurrency.

At the grassroots level, over a hundred businesses in Berlin accept Bitcoin payments, and areas like Bitcoin Beach remain centers for cryptocurrency use. Educational organizations have promoted Bitcoin-related materials to over 40 countries worldwide. These regions form a unique crypto ecosystem, attracting some enthusiasts and digital nomads to experience the environment. Bitcoin Beach has become one of the pilgrimage sites for the global crypto community, demonstrating a spontaneously formed crypto economy model.

However, Bitcoin no longer has the enforceable power of legal tender. Merchants can choose whether to accept it, and it cannot be used to pay taxes or settle public debts. It exists only as a voluntary payment tool similar to credit cards and regular digital wallets. This shift in positioning means Bitcoin in El Salvador has moved from an enforced financial revolution back to a market-driven payment option. Businesses are no longer legally required to accept Bitcoin but can decide based on commercial considerations.

This policy adjustment reflects a broader lesson: top-down implementation of radical monetary policies without sufficient infrastructure, financial literacy, or social consensus often encounters resistance. El Salvador’s experience serves as a valuable reference for other countries considering cryptocurrency adoption.

Livelihood and Society: Citizens Return to the US Dollar for Security

When Bitcoin was first made legal tender, 71% of the population opposed it. Its promotion was hindered by issues like usage barriers and price volatility, making it hard to integrate into daily life. This high level of opposition highlights a significant gap between policy and public opinion. Many citizens lack smartphones or internet access, making digital wallets difficult to use effectively, and Bitcoin’s dramatic price swings have caused insecurity among those relying on fixed incomes.

Following policy adjustments, most people returned to the more familiar US dollar transaction system, no longer worried about Bitcoin price fluctuations affecting their transactions and assets. For most Salvadorans, the dollar has been the primary currency since dollarization in 2001, and its stability and predictability far surpass Bitcoin. Returning to dollar transactions restored certainty to daily economic activities.

Additionally, visitors mention that public safety has improved in El Salvador, with citizens gradually regaining a sense of relaxation and security. This change has made casual discussions and daily social scenes more normal. It should be noted that the safety improvements are mainly due to President Bukele’s strict law enforcement policies, not Bitcoin policy. However, for ordinary citizens, the digital currencies distributed by the government during the Bitcoin promotion were mostly exchanged for cash, and the financial experiment did not substantially improve most people’s income.

This fact reveals the fundamental problem of the Bitcoin experiment: it was more a top-down political decision than a financial innovation driven by actual public needs. For ordinary people with limited daily income and a need for stable purchasing power, Bitcoin’s speculative properties far outweigh its practical value.

Industry and Planning: Diversification and Bitcoin-themed Projects

El Salvador is actively reducing reliance on a single approach, simultaneously optimizing its asset structure through gold purchases and pursuing diversified industrial development. The government plans to buy chips to build local AI capabilities and is transforming 500 classrooms for Bitcoin and financial education. This diversification strategy indicates the government’s effort to find growth points beyond the Bitcoin experiment.

At the same time, efforts are being made to enhance local beef production in agriculture, attracting companies like Steak 'n Shake as their first entry into Latin America. These traditional investments could create more employment opportunities and economic value for ordinary citizens than Bitcoin speculation. Additionally, the country continues to attract investment through Bitcoin-related themed projects, such as promoting Bitcoin city plans, issuing volcano bonds, and attracting crypto investors through Bitcoin passport policies.

The Bitcoin City plan aims to establish a fully Bitcoin-driven economic zone, utilizing geothermal energy for Bitcoin mining and issuing volcano bonds for infrastructure financing. Although progress is slow, these plans show that El Salvador is trying to explore the residual value of Bitcoin within a compliant framework, shifting from mandatory currency policies to specialized investment attraction tools.