On September 7, 2021, El Salvador became the first country in the world to adopt Bitcoin as legal tender, alongside the US dollar. President Nayib Bukele — the self-styled “world’s coolest dictator” — pushed the Bitcoin Law through congress in June 2021, requiring all businesses to accept Bitcoin for payment and creating the government-backed Chivo wallet for citizens.
The initial rollout was chaotic. The Chivo wallet crashed repeatedly. Citizens, most of whom had never used crypto, were confused. The World Bank and IMF vocally opposed the move, citing financial stability risks. Protests erupted in San Salvador. Bitcoin’s price dropped 50% from its November 2021 peak, making El Salvador’s growing Bitcoin holdings (Bukele publicly announced purchases at various prices) look like a bad bet.
Bukele doubled down. El Salvador continued buying Bitcoin through the bear market (“buying the dip,” as Bukele tweeted). The government launched a Bitcoin mining operation using geothermal energy from the Conchagua volcano. Plans for “Bitcoin City” — a planned urban development funded by “volcano bonds” (Bitcoin-backed government bonds) — were announced, though implementation was delayed repeatedly.
By 2024, the narrative had shifted. Bitcoin’s recovery above $60,000 put El Salvador’s holdings significantly in profit. Tourism increased, partly driven by crypto enthusiasts visiting the “Bitcoin country.” Bukele’s domestic popularity remained enormous (he won re-election with over 80% of the vote), though international human rights organizations criticized his authoritarian governance style. The Bitcoin experiment became a Rorschach test: supporters saw a visionary leader banking the unbanked and diversifying the economy; critics saw a populist authoritarian using Bitcoin as a distraction from democratic erosion. The actual on-the-ground adoption was modest — most Salvadorans still preferred dollars — but El Salvador proved that a sovereign nation could adopt Bitcoin without its financial system collapsing, setting a precedent that other countries (Central African Republic briefly, Bhutan through mining) attempted to follow.
Leave a Reply