Bitcoin's dream of saving the country shattered? El Salvador hoarded coins for six years, and the result was unexpected.

Written by: White55, Mars Finance

El Salvador's Bitcoin story is both an ambitious record of a small country challenging the global financial system and a mirror reflecting the complexities of digital currency in the real world.

In September 2021, Salvadoran President Nayib Bukele announced to the world that Bitcoin would become the legal tender of the country, placing this small Central American nation at the eye of the storm of global financial innovation.

Four years from today, this experiment, hailed as the “digital revolution,” dramatically concludes - in early 2025, the Salvadoran parliament quietly passed a bill to revoke Bitcoin's status as legal tender, making its use a voluntary choice.

Nevertheless, the El Salvador Bitcoin Office is still celebrating “Bitcoin Day” in September 2025, emphasizing on social media that the country still holds a strategic reserve of 6,313 bitcoins, valued at over $702 million, highlighting the complex legacy of this experiment.

Aspirations Set Sail: The Financial Breakthrough Dream of a Small Country

El Salvador is a country located in the northern part of Central America, the only country in Central America that does not border the Atlantic Ocean, with a total area of 21,393 square kilometers.

The introduction of the Bitcoin law in El Salvador was not a spur-of-the-moment decision, but rather based on its unique economic background. This country, with a population of just over 6 million, has a weak economic foundation, and remittances from abroad account for more than one-fifth of the national GDP.

President Bukele pointed to the data with great concern: nearly 70% of adults nationwide do not have a bank account, and the fees paid for cross-border remittances reach as high as 400 million dollars every year. In this dollar cash-dominated economy, Bitcoin is packaged as a “financial savior.”

The government launched the Chivo electronic wallet, offering a $30 Bitcoin bonus for registration; installed 200 ATMs with exchange functions nationwide; and even plans to build a “Bitcoin City” using volcanic energy. President Bukele promised that Bitcoin could “make the country rich,” attracting investment and enhancing financial innovation.

Realistic dilemma: the huge gap between ideals and reality

However, the reality is much harsher than imagined. The price of Bitcoin plummeted from $69,000 in 2021 to $16,000 in 2022, and the market value of the Bitcoin held by the Salvadoran government shrank by nearly half, resulting in a direct loss of over $40 million.

The ordinary public quickly discovered the problem: tomatoes that were priced at 3 dollars yesterday might rise to 30 dollars today — the fluctuations in currency value have turned daily transactions into a “gamble.” The Chivo wallet has been frequently targeted by hackers, with issues such as transfer delays and account lockouts occurring often, leading thousands to protest in the capital's streets.

By 2024, 92% of Salvadorans have never used Bitcoin, and only 1.1% of remittances involve cryptocurrency. The government originally believed that using Bitcoin could save $400 million in fees each year, but by 2023, only 1% of remittances used Bitcoin.

Deeper contradictions are gradually exposed. The Bitcoin network can only process 7 transactions per second, which is not even enough to meet the daily transaction demand of El Salvador. The scaling solution of the Lightning Network has also been delayed in implementation.

The International Monetary Fund (IMF) has made “reducing the risks of Bitcoin” a condition for providing a loan of $1.4 billion, directly pressuring El Salvador to abandon its legal tender status. When voting in parliament, 71% of the public clearly opposed this policy, which had been forcibly implemented.

The EU also plans to list El Salvador as a high-risk country under the guise of “anti-money laundering.” Under internal and external pressure, El Salvador was ultimately forced to announce the repeal of Bitcoin's legal tender status in January 2025, bringing this “financial experiment” to an end as the national economy teetered on the brink of collapse.

El Salvador's legislature has repealed the Bitcoin legal tender law and agreed to stop using public funds to purchase additional Bitcoin, as part of a $1.4 billion loan agreement reached with the International Monetary Fund in January.

The letter of intent included in the International Monetary Fund report was signed by Salvadoran financial officials, confirming that the country's Bitcoin balance has not increased. Source: International Monetary Fund

The government also agreed to reduce support for the Chivo Bitcoin wallet, which has limited use among residents of the country.

The International Monetary Fund released a report in July revealing that El Salvador has not purchased any new Bitcoin since signing a $1.4 billion loan agreement in December 2024, which has caused a stir in the crypto community.

Strategic Shift: From Fiat Currency to Strategic Reserves

Despite canceling Bitcoin's status as legal tender, El Salvador has not completely abandoned its Bitcoin strategy. The country continues to accumulate Bitcoin reserves, currently holding 6,313 coins worth over $702 million.

The government has also passed a new banking law that allows BTC investment banks to provide services to accredited investors. By 2025, 80,000 civil servants have received Bitcoin certification, and El Salvador has hosted several public Bitcoin and artificial intelligence education programs.

In August 2025, El Salvador even conducted a “quantum migration,” transferring the country's Bitcoin reserves of $680 million from a single address to 14 decentralized, new blockchain addresses to enhance the security and long-term custody of the national strategic Bitcoin reserves.

Economy and Livelihood: The Real Cost Behind the Experiment

El Salvador's Bitcoin experiment has placed a heavy burden on this economically weak country. According to World Bank data, in 2023, the central government's debt in El Salvador accounted for 101.7% of GDP, and the volatility of Bitcoin prices has directly exacerbated the debt crisis.

Moody's has downgraded its sovereign credit rating to Caa3, nearing default. This money could have been used to repair roads and build schools, but now it has all been wasted on these nonsensical things.

The lives of ordinary people have not improved; merchants immediately convert Bitcoin into US dollars, or else they risk losing money if prices drop. In February 2025, El Salvador was forced to announce the abolition of Bitcoin's legal tender status, and this “financial experiment” ended with the national economy on the brink of collapse.

Geopolitical Game: The Dilemma of Small Countries in the Games of Great Powers

Behind El Salvador's Bitcoin experiment lies deeper geopolitical factors. The United States sees China's financial system becoming stronger, the internationalization of the Renminbi is evident, and their trade and cross-border payment capabilities are also increasing, which of course makes them uncomfortable.

The U.S. is trying to regulate stablecoins through legislation, creating a closed loop of “Dollar - Stablecoin - U.S. Treasury Bonds,” aiming to incorporate Bitcoin into its own system. The “Genius Act” passed by the U.S. House of Representatives in 2025 requires stablecoin issuers to hold 100% of their reserves in U.S. dollars or Treasury bonds.

El Salvador initially jumped in, probably thinking it could bypass the control of the US dollar with Bitcoin, but instead became a test subject for American capital. In 2023, El Salvador's external debt accounted for over 80% of GDP, and much of that debt was borrowed against collateralized Bitcoin. When the price drops, additional collateral must be provided, leaving the national finances gasping for breath.

Future Outlook: Reflections on Digital Currency and National Sovereignty

El Salvador's experiments are not all failures. There are still over 100 merchants in Berlin accepting Bitcoin, Turkish companies have invested $1.6 billion in the ports surrounding “Bitcoin City”, and El Salvador has even become the first country to issue tokenized U.S. Treasury bonds.

Buckle candidly stated in an interview: “It didn't meet expectations, but it brought us branding and investment.” Nowadays, although Bitcoin is no longer fiat currency, it continues to exist in a more market-oriented way - businesses can choose whether to accept it, while the government shifts its focus to improving the regulatory framework.

The reflection that this experiment leaves for the world is far from over. Can digital currency truly make finance accessible to all? How can national sovereign currencies coexist with decentralized assets? In the current global absence of cryptocurrency regulation, are the adventures of small countries innovations or gambles?

The Bitcoin office of El Salvador announced on “Bitcoin Day” in September 2025 that they have acquired an additional 21 bitcoins. President Bukele emphasized on social media that the country's Bitcoin reserves have reached 6313.18 bitcoins, with a market value of approximately 701 million USD.

This number seems to tell the story of a small country’s stubborn insistence on financial autonomy. On the streets of El Salvador, Bitcoin ATMs still stand there, but few people show interest.

The four-year Bitcoin experiment brought international reputation and profound lessons to this country, and President Booker highlighted the key point with a statement: “It didn’t meet expectations, but it brought us branding and investment.”