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In May 2021, presenting before an audience of crypto-enthusiasts at the Bitcoin Conference in Miami, Salvadoran President Nayib Bukele announced that Bitcoin would be legal tender in El Salvador. He evoked a techno-utopian vision for the Central American country: “We as humanity can do almost anything we imagine. In El Salvador we are trying to rescue this idea.” A month after the surprise announcement, El Salvador’s Legislative Assembly approved the adoption law in just three hours. Six months after Bukele’s speech in Miami, El Salvador became the first country to adopt Bitcoin as legal tender.
Earlier this year, however, the Legislative Assembly quietly put an end to the experiment. This formed part of the country’s agreement with the International Monetary Fund (IMF), which included a condition to change the status of Bitcoin so that its adoption “by the private sector is voluntary and public sector participation in Bitcoin-related activities [is] ring-fenced.” El Salvadorans can no longer pay taxes in Bitcoin, and the state-owned “e-wallet” Chivo has been decommissioned.
The Bukele government’s urgent need for financing bolstered the position of the IMF, which agreed to a $1.4 billion loan. In 2020, El Salvador’s public debt ballooned to 95.4 percent of GDP. Since then, between 18 and 23 percent of the public budget has gone to principal and interest payments. The IMF concluded that the country’s public debt was on “an unsustainable path.” El Salvador’s adoption of Bitcoin was strongly criticized by the IMF and financial media from the start. Despite Bukele’s triumphant rhetoric, Bitcoin use was never popular among Salvadorans. As Bukele struggled to justify the fledgling Bitcoin policy, the IMF negotiation offered him an elegant escape from this political entanglement.
Cryptocurrency was initially presented as a solution oriented towards financial inclusion and “unbanked” populations. The government created the Chivo digital ecosystem for Bitcoin’s “alternative” financial system. The emphasis later shifted to “modernization” based on digital technologies. More recently, with Donald Trump’s support for cryptocurrency, the Salvadoran government has again justified Bitcoin’s use as a “strategic reserve.”
The Bitcoin strategy was a “soft” adoption from its inception, a trial-and-error process that sought to navigate restricted scope of action in El Salvador’s political economy. These political and economic restraints are the result of El Salvador’s development model over the last decades and reinforced in the most recent IMF agreement. But the experiment, emblematic of a “Bukele model” of economic strategy, cannot change El Salvador’s position in the global economy. While admired by autocrats in the north and the south, Bukele’s disruptive techno-utopian discourse failed to materialize into a transformative shift. Instead, Bukele has relied on an authoritarian security agenda and new alliances to expand the boundaries of financial speculation and extraction.
An engine of remittances
Although El Salvador is still known as a coffee republic, agriculture has played a minor role in the economy for the past two decades, contributing only 5 percent to GDP in 2024. The major sectors in the Salvadoran economy today are maquila manufacturing (14 percent), trade and vehicle repair (13 percent), and finance and insurance (9 percent), whose importance is attributed to the influx of remittances. Limited productive capacity and development sustain high levels of informality and economic precariousness, making remittances even more essential.
In 2024, remittances accounted for 24 percent of El Salvador’s GDP. Remittances reflect Salvadoran’s deep integration in the US labor market, as the US is the source of 98 percent of remittances. Attempting to address the influx of dollars, El Salvador officially adopted the dollar as legal tender in 2001. Dollarized remittances boost and sustain the existing economic model, but they also restrict the scope of monetary policy. The Bitcoin experiment in El Salvador had a strong precedent in the 2001 dollarization, which significantly reduced the cost of incorporating a new currency. Bitcoin could even be interpreted as an alternative to the restrictions imposed by the US dollar.1Boos, T., & Grigera, J. (2025). Two legal tenders, no currency. El Salvador’s bitcoin adoption between world money and international money. (<)em(>)Progress in Economic Geography(<)/em(>), (<)em(>)3(<)/em(>)(2), 100045. (<)a href='https://doi.org/10.1016/j.peg.2025.100045'(>)https://doi.org/10.1016/j.peg.2025.100045. https://doi.org/10.1016/j.peg.2025.100045(<)/a(>)
Since the 1990s, structural adjustment programs in El Salvador have pursued market liberalization, privatization, and financialization. These programs were the result of conditionalities imposed by international financial institutions, but they also received support from local elites. As a result, the Salvadoran economy today is highly dependent on exported labor, foreign debt, and remittances. With low levels of productive development, El Salvador lacks the capacity needed to satisfy the needs of the population. Remittances function as a mechanism of private subsidies from the diaspora to the material concessions necessary to sustain social cohesion—and thus political instability—in the country. Remittances are the main source of income for 30 percent of recipients, and more than 90 percent of remittances support daily sustenance and consumption.
The complex network that manages these massive remittance flows comprises the financial system, monetary transfer operators (MTOs), and local remittance agents. This network grounds the financial services industry in El Salvador, which can then use remittances as a base for other services, like private credit. The domestic consumer market thus benefits from the massive influx of remittances.
This underlying logic of the Salvadoran economy has not changed under Bukele, and there is no indication that it will. Bukele has deepened this pattern of dependent development, with an aim to acquire new sources of financing.
Soft adoption
El Salvador’s Bitcoin adoption built on Bukele’s 2020 Digital Agenda, which proposed a nationwide digital transformation to address poverty and exclusion. This vision of technological development would modernize and digitize state administration and increase innovation and competitiveness in the Salvadoran economy. The program sought the creation of technology parks, venture capital funds to support information and communications technologies (ICT), and a new regulatory framework for the financial technology sector (fintech) to strengthen digital financial services. The National Financial Inclusion Policy of March 2021 further prioritized financial service expansion to lower income groups through new products, digitized financial services, financial education, and support for Salvadoran companies. The Digital Agenda provided the strategic framework for Bukele’s Bitcoin experiment, building on an ambition to turn El Salvador into the “Singapore of Latin America.”
By 2021, Bukele’s Nuevas Ideas (New Ideas) Party held an absolute majority in the legislative assembly, allowing the body to rapidly greenlight the Bitcoin experiment. An initial transfer of $150 million inaugurated FIDEBITCOIN, a trust that supports dollar to Bitcoin conversion. Subsidized by public funds and facilitated by foreign private companies, the government launched the Chivo system, which included a digital wallet and Bitcoin-enabled ATMs.2Chivo, in El Salvador, is a colloquial expression that refers to something “great, good, positive”. The Chivo system, launched in 2021 as part of the Bitcoin experiment in El Salvador, was conceived as a key tool to promote financial inclusion through the use of cryptocurrencies. Chivo facilitated access to cryptocurrencies, promising fast and cheap transactions. Salvadorans who downloaded the application received $30 bonus.
Despite rolling out Bitcoin in the name of the unbanked, Bukele soon announced his intention to build a Bitcoin City at the Latin American Bitcoin and Blockchain Conference. Bitcoin City would be a special economic zone dedicated towards innovation in ICT, foreign direct investment, and Bitcoin mining with volcanic energy. At the same conference, Bukele also unveiled a proposal for the Volcano Bond—a Bitcoin-backed government bond which could finance the project attractive interest rates.3Volcano Bonds refer to debt securities issued by the Salvadoran State in digital format backed by (<)em(>)blockchain (<)/em(>)technology. Their name derives from the fact that they would be backed by the geothermal energy generated by the country’s volcanoes, such as the Conchagua volcano, where the construction of the so-called (<)em(>)Bitcoin City (<)/em(>)was planned. In November 2022, Bukele announced on his social networks that the government would buy one Bitcoin a day, creating a massive and volatile state reserve.4The government of El Salvador has not disclosed official data on these purchases. In March 2024, Bukele revealed the (<)a href='https://mempool.space/address/32ixEdVJWo3kmvJGMTZq5jAQVZZeuwnqzo'(>)blockchain address(<)/a(>) where all the country’s Bitcoin is supposedly stored. According to these public BTC accounts, El Salvador would have around 6237 BTC today. This amount differs significantly from the amount tracked based on Bukele’s purchase (<)a href='https://x.com/nayibbukele/status/1767323587071947195'(>)announcements(<)/a(>), where other sources of BTC inflows, such as state mining, are attributed. However, it is difficult to determine how many dollars were spent on Bitcoin purchases, as trackers estimate average market prices for the day or tweets mentioning the price paid.
The adoption of cryptocurrency was accompanied by the creation of a new institutional framework to manage the new financial tools. This included the National Bitcoin Office (ONBTC) headed by American crypto-enthusiasts Stacy Herbert and Max Keiser); the National Commission for Digital Assets (CNAD), responsible for the regulation and supervision of public offerings of cryptocurrencies; and the Bitcoin Fund Management Agency (AAB), in charge of managing investments in public offerings and their returns, such as Volcano Bonds. These institutions, endowed with their own budgets, function under the supervision of the President, thus forming a parallel administrative and financial structure within the state. The framework has made the Bitcoin project largely opaque—the public has no information on the companies that manage Chivo, data on funds and expenditures, nor the uses of cryptocurrency.
The crypto sector is characterized by vague regulation and tax incentives. The Law for the Promotion of Innovation and Manufacturing of Technologies (2023), for example, promises tax privileges to certified competitive technology industries. As El Salvador was already a dollarized economy, the systemic risk of the Bitcoin experiment was relatively low. Bitcoin was not intended to replace the dollar as legal tender but to become an optional, voluntary currency.5From the beginning, the use of Bitcoin in El Salvador was voluntary-the Bitcoin Law of 2021 clarified that companies with the means could accept it. When the Legislative Assembly revoked Bitcoin’s status as legal tender in 2025, the legal repercussions were limited to not being able to pay taxes through Bitcoin. According to estimates, government spending on the Bitcoin project amounted to $329 million, equivalent to 0.7 percent of GDP. However, the lack of transparency around the role of the private sector and cryptocurrency infrastructure has raised suspicions that the real costs were much higher.
The Bitcoin paradox
The Bitcoin project in El Salvador revealed the limits of cryptocurrency’s anti-establishment narrative: to be effective as a global medium of exchange, Bitcoin needed to be integrated into existing infrastructures, which contradicts its own “comparative advantage.”6Bitcoin understands itself as a decentralized monetary system based on distributed ledger or (<)em(>)blockchain (<)/em(>)technology, in contrast to a monetary system based on the reliability of centralized authorities like a central bank and intermediation by commercial banks. As a decentralized system, transactions are approved through the (<)em(>)proof-of-work(<)/em(>) mechanism. This means that system participants provide computational capacity to solve computational functions and thus confirm transactions and chain them in the (<)em(>)blockchain (<)/em(>)registry. This computational work is rewarded with an amount of Bitcoin that is created in this process, known as “Bitcoin mining.” See Nigel Dodd, “The Social Life of Bitcoin,” (<)em(>)Theory, Culture & Society (<)/em(>)35, no. 3 (2018): 35-56, https://doi.org/10.1177/0263276417746464. When considering the infrastructure that enables large-scale remittance flows, the Bitcoin paradox reveals how its “soft adoption” allowed Bukele to conduct a low-risk experiment.
Private remittances take many different forms, ranging from material goods or payment for telecommunications services, to direct monetary values. In El Salvador, monetary transfers represent the largest proportion of recorded remittances (95 percent), but they take different routes involving correspondent banking, physical transport of cash, or internal transactions of MTOs such as Western Union and Bitcoin. El Salvador has a low level of banking: only 35.9 percent (in 2021) of the population over fifteen years of age had a bank account, and only 27 percent of remittances were channeled through banking channels. By facilitating a large volume of remittances, MTOs have inserted themselves into a lucrative financial services sector in El Salvador as well as in other parts of the world. In Central America, more than 90 percent of remittances are converted into cash.
Through Chivo, the Salvadoran government promoted all types of payments inside the system: sending remittances, commercial payments, and tax payments. But Chivo also needed to be plugged into the existing financial system. Chivo ATMs were installed both in El Salvador and in the United States, but there were only fifty in the US and about 150 in El Salvador. Users also encountered technical problems with the ATMs, which made them underused. Chivo also enabled digital transfers to a bank account, but did not resolve the problem of access for the “unbanked.”
Banks have been reluctant to interoperate with the Chivo system. Bukele stipulated that banks operating in the digital wallet could not earn a commission. The banks also faced difficulties complying with international standards of the Financial Action Task Force, with the lack of clarity in the Chivo system constituting an operational risk. These factors resulted in low use: barely 1 percent of remittances were operated through crypto services in 2024, down from a peak of 1.7 percent in 2020–21.
International regulations around anti-money-laundering, financing for terrorist groups, and know-you-customer frameworks came into conflict with the crypto sector’s vision. The number of institutions involved undermined the fictional autonomy of Bitcoin. Meanwhile, remittance transfer costs were transferred to the state, in the form of digital wallets, Chivo ATMS, and the process of converting and exchanging Bitcoin for dollars.
A failed experiment
Despite its techno-solutionist promises—among them “generating employment opportunities, promoting true financial inclusion and generating economic dynamism”—Bitcoin failed on several counts. Still, the financial inclusion mantra has retained its appeal as an anti-poverty measure. El Salvador’s national policies fit within this global paradigm, which has been promoted by development agencies since the 2008 financial crisis. Today, only about one third of El Salvador’s population has a bank account, a figure that drops to 23 percent among the poorest 40 percent of the population.
Bitcoin did not improve banking levels. The limited data available shows that the use of Chivo and other crypto wallets is minimal, and those who use it tend to be already banked, young, education, and male. After the initial spike in usage during the months following Chivo’s launch, less than 10 percent continued to use the app after withdrawing the $30 bonus. At the business level, the adoption of Bitcoin as a means of payment has been concentrated primarily among large international companies, which account for 20 percent of all businesses, excluding the informal sector.
In El Salvador, the promise of financial inclusion is closely linked to the hope of reducing the costs associated with sending private remittances. Compared to the region, the costs of facilitating remittances to El Salvador are low in part due to dollarization, but they still represent up to 9 percent of the transaction. Although transferring remittances in the Chivo system should be subsidized by the state and therefore free, crypto-wallets remain a tiny share (1 percent) of total remittances.7Although within the Chivo system remittances should in theory be free, as the state subsidizes the transfer, the available data do not show a relevant volume of remittances that would have gone through digital wallets between 2021 and 2025. When analyzing the amounts sent by clearing agents, it is evident that sending funds through crypto wallets does not contribute significantly to this gradual increase. Most of these funds (about 56 percent of the total volume in 2024) are settled by remitting agents (such as Western Union), followed by the banking sector (about 37 percent of the total volume in 2024). There is also no evidence that the Bitcoin project has led to an increase in foreign direct investment.8The sectors that have received the largest increases in investments are trade, financial and insurance activities. Investments come mainly from the Central and North American regions (Costa Rica, Panama, Guatemala, Mexico and the United States), as well as Spain. The existing data do not allow definitive conclusions to be drawn about the specific effects of the measure and must be interpreted in the context of the retraction and return of investments due to the Covid19 pandemic. If Bitcoin was meant to explore alternatives to traditional financing options in the monetary order, it is clear that the position of the El Salvador remains unchanged.
The IMF opposed the conversion of Bitcoin into legal tender from its inception. Markets similarly rejected the measure, which further complicated access to international credit, as they downgraded the country’s credit rating. While a 2021 debt swapwith China gave the government a temporary respite, the situation worsened so much so that Bukele finally relented at the end of 2024 to unlock negotiations with the IMF and enable the disbursement of $1.4 billion. The subsequent 2023 report confirms that Bitcoin policy was a source of friction between the government at the IMF.
The agreement between the IMF and El Salvador has forty-month term and includes disbursements of $3.5 billion by international agencies such as the World Bank and the Inter-American Development Bank. Among the conditions of the agreement is the withdrawal of state participation in cryptocurrencies—the end of the Chivo system— as well as a transparency requirement for the sector.9The National Bitcoin Office is (<)a href='https://x.com/bitcoinofficesv/status/1933574580867854782'(>)publishing(<)/a(>) that El Salvador is still continuing to buy Bitcoin through the state account. Due to the lack of transparency, the compliance status cannot be assessed. The agreement gave the government access to international markets and provided a simple exit from the failed Bitcoin experiment.
Rather than establishing autonomous and independent systems created from scratch, the Bitcoin project showed how digital finance systems are necessarily embedded in the existing global monetary hierarchy.10Beaumier, Guillaume/Kalomeni, Kevin (2022): Ruling through technology: politicizing (<)em(>)blockchain (<)/em(>)services. In: (<)em(>)Review of International Political Economy(<)/em(>), Routledge, 29 (6), 2135-2158;(<)/p(>) (<)p(>)Bernards, Nick/Campbell-Verduyn, Malcolm (2019): Understanding technological change in global finance through infrastructures. In: (<)em(>)Review of International Political Economy(<)/em(>), Routledge, 26 (5), 773-789; Westermeier, Carola/Campbell-Verduyn, Malcolm/Brandl, Barbara (Hrsg.) (2025): The Cambridge Global Handbook of Financial Infrastructure. Cambridge: Cambridge University Press. This hierarchy manifests itself in the dollarized nature of the Salvadoran economy, marked by a high level of indebtedness and dependence on the United States and private remittances. The failure of the Bitcoin experiment as legal tender speaks to these hard constraints.
New frontiers
In July 2024, Bukele presented a grand economic plan for his second term. While he promised to break from the country’s historic economic trajectory, the details of his vision remain vague. Some clues can be found in the 2025 budget. With the IMF agreement stipulating a fiscal adjustment of 3.5 percent over the next three years, the budget saw a 10 percent reduction in expenditures, cutting resources in fourteen of sixteen ministries (the only two that were spared are Armed Forces and the communications and press offices of the President). Contrary to Bukele’s announcement of an economic transformation, the budget does not entail large investments in digital or physical infrastructure for technology parks and logistics. Despite some investment from Google and Rumble, the digital sector currently plays no significant role in the economy. The techno-utopia remains a fiction.
El Salvador’s existing model of dependence has been deployed in new arenas. While Bitcoin City and Volcano bonds never saw the light of day, large-scale development utopias have driven land speculation. In El Zonte Beach, also known as “Bitcoin Beach,” prices per square meter since the announcement of the Bitcoin project rose more than 130 percent as a result of luxury real estate projects. Between La Union and Conchagua, hundreds were displaced to make way for the construction of the new Pacific airport and facilitate access to the Bitcoin City crypto hub. Land prices increased by up to 3,000 percent, a trend that has already been evident in the region over the past twenty years. The eviction of the local population has served a highly insular ruling class allied with transnational crypto capitals.
The crypto-friendly regulatory ecosystem and tax exemptions for financial inclusion initiatives have allowed to fintech sector to advance a model based on accumulation and financial speculation. The Chivo system has long lacked transparency, obscuring the profits of the private companies that operated within it.11Lack of data limits accurate estimates in this area, but it is clear that through the Chivo system large sums of public money go into private hands. Estimates of the costs of installing the Chivo system amount to about $330 million, or 0.7 percent of GDP, without the ongoing costs of transactions over the Bitcoin or Lightning network, or the costs of maintaining the infrastructure. Of the companies operating the Chivo system, only a few have confirmed collaboration with the Salvadoran State: Alphapoint Corporations (Chivo app), River Financial (Lightning), Athena Bitcoin (ATMs), NETKI (KYC/AML, record validation), Genesis Coin (ATM-Lightning connection). According to the National Bitcoin Office, on 11/07/2025 the Bitcoin reserve reached (<)a href='https://www.criptonoticias.com/comunidad/adopcion/elsalvador-bitcoin-700-millones-dolares/'(>)6234 coins(<)/a(>) which on this day is equivalent to more than 700 million dollars. In addition to these digital inclusion initiatives, the Bukele government has also expressed interest in expanding the exploitation of natural resources, particularly in the north of the country, which contains approximately $3 billion worth of metals and minerals. The passage of the new Metallic Mining Law late last year, which repealed a landmark 2017 ban on mining, forewarns a significant shift.
These policies allow us to understand who benefits from the “Bukele model.” Since the 1990s, Salvadoran elites have been transnational in character and drew wealth from trade and service sectors. While the “Bukele model” shares core features with earlier economic policies, there has been more pronounced corruption in the current administration. Those with personal ties to the Bukele family have gained political influence and managed to expand their financial holdings. Since 2019, Bukele’s personal entourage has increased their land holdings by a factor of twelve. The crypto alliance has also inaugurated a new elite. The Board of Directors of Chivo and the leaders of the ONBTC and Bitcoin Beach all consist of figures close to Bukele himself.
The recent deals with Trump are an extension of the “Bukele model,” which ultimately sustains its political legitimacy through the promise of security. The powerful security regime has harmed democracy and human rights, as demonstrated by the expanded use of the Terrorism Confinement Center (CECOT) to detain those illegally expelled from the US. These acts of authoritarian diplomacy undergird a model based on speculation, corruption, and security, enforced by both the Armed Forces and the President’s close circle. The Bitcoin project confirms the essence of this rule. Despite reiterating a commitment to transparency, the project displayed the presidential management of funds without public control, for the benefit of the private sector and a new domestic elite.
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