The Collapse of El Salvador’s Bitcoin Policies

A few years ago, the small, Central American country of El Salvador made worldwide headlines when they announced that Bitcoin would become one of the official currencies of the country. All vendors, no matter how or when they operated, were required to take payment in Bitcoin overnight.

Unfortunately, despite varying trials, the adoption of Bitcoin in El Salvador has officially been declared a failure in 2025. Keep reading to learn more.

Why Bitcoin Adoption Failed in El Salvador

There is no single reason that the adoption of Bitcoin as legal tender failed in El Salvador. Rather, it was a cumulation of issues that finally all escalated at once in 2025. We will discuss each issue separately below.

1. Bitcoin is Very Volatile

The issue we believe affected Bitcoin adoption the most in El Salvador was the fact that Bitcoin is simply too volatile to be a national currency.

When El Salvador adopted Bitcoin, they had done so for the purpose of providing a form of financial services to the unbanked, hoping to accumulate Bitcoin in national reserves, and eventually, to pull their people out of poverty. While all of this is possible with Bitcoin, the cryptocurrency is simply too volatile at this point for a country this poor to rely on it.

Yes, El Salvador increased their national reserves with Bitcoin, but the increase was not enough to sustain the country long term—plus any increases were liable to be snatched away with any sudden dip.

2. Only 8% of El Salvadorians Use Bitcoin

The second largest issue is one that no one could have predicted. Before adopting Bitcoin as legal tender, 60% of El Salvadorians didn’t have access to banking services. The president hoped that Bitcoin implementation would change this.

Unfortunately, several years after implementation, it was discovered that 92% of El Salvadorians didn’t transact in Bitcoin at all. This means that even though a unique banking solution was available to them, they chose not to use it. As such, businesses began to resent the laws that forced them to accept the cryptocurrency, which further delayed adaptation.

3. The Other Legal Currency is the US Dollar

Bitcoin makes sense as a second currency in countries where the local currency is heavily inflated, unreliable, or crashing. The other legal tender in El Salvador is the US Dollar.

The US dollar already makes transacting both in and out of El Salvador easy for residents and tourists alike, therefore when Bitcoin was adopted, there was no real reason to use it.

Look at it this way; Nigeria is another country where Bitcoin is heavily used by locals. But many confess to using it to send money abroad and to receive money abroad—and because the local currency is unpredictable and highly inflated, many Nigerians don’t mind holding their savings in Bitcoin.

El Salvador, on the other hand, doesn’t have this issue. They can send US dollars abroad with ease as needed (using basic wire services), and their currency, though it is a bit inflated, is more stable than many currencies around the globe. Thus, though Bitcoin is available, it isn’t the shining light in the dark that it is for some countries.

4. The IMF Never Approved

When the El Salvadorian President announced Bitcoin adoption, the IMF shook their heads and sighed. They had never supported the adoption and they were convinced it would go wrong.

Unfortunately for El Salvador, it did go wrong, and now they need a loan from the IMF. If the IMF had approved originally, this loan might have been able to be used for Bitcoin adoption, but because they didn’t, they are forcing the country to roll back their policies in order to receive the loan.

This has only added to the pile of the argument against Bitcoin adoption.

5. The Average El Salvadorian is Too Poor to Benefit from Adoption

The last thing on our list is the hardest to discuss. We truly believe that Bitcoin can be banking for the unbanked, and that it can help alleviate poverty. But unfortunately, it’s a long game, and the game is just too long for those desperate for relief in El Salvador.

When Bitcoin was first adopted, all El Salvadorians were issued the equivalent of $25 USD in Bitcoin—and most of them were in such dire financial situations that they cashed out as soon as they received it—instead of using it at businesses as the President had hoped.

If they had been able to wait, that same $25 would be worth thousands of dollars today.

But, as we mentioned, many of the people couldn’t wait. They needed that money to survive and thus it made no sense to them to wait and see. Therefore, they were unable to see the benefits of Bitcoin themselves over the past few years, and have thus not used cryptocurrency at all beyond the initial cash out, which contributed to the low usage among El Salvadorians overall.

What Happens in El Salvador Next?

Sadly, the IMF is forcing the president to roll back on his Bitcoin positive policies. While all businesses in El Salvador are currently set up to accept Bitcoin as payment, they won’t be going forward, and we expect many to cancel these options for customers. As such, the usage of Bitcoin as legal tender in El Salvador will decline even further.

Although this is sad news overall, we don’t think that Bitcoin adoption was really helping El Salvador anyway. Well, it was in theory, but it didn’t spike tourism or the availability for El Salvadorians to use financial services as we had once hoped.

Overall, while we hope another country will give Bitcoin a shot at being legal tender in the future, we understand why it didn’t work in El Salvador. We just hope that other countries won’t be spooked by the story of El Salvador and will give cryptocurrency a chance in their country. Of course, like always, we aren’t holding our breath though!