Those who criticise bitcoin as "fake money" are generally ignorant to the fact that Bitcoin has been legal tender in El Salvador since 2021.
The decision to adopt Bitcoin as legal tender in September 2021 was a bold experiment that both captivated and polarized the world. Under the leadership of President Nayib Bukele, El Salvador sought to revolutionize its economy by leveraging Bitcoin’s unique properties, including its fixed supply, which makes it resistant to debasement.
Despite initial criticism from institutions like the International Monetary Fund and doubts about the viability of the move, Bitcoin’s price is now nearing $100,000, and Bukele is being hailed as a leader ahead of his time. His strategy of embracing a currency immune to inflation has not only strengthened El Salvador’s economy but also positioned the nation as a global innovator. With Donald Trump’s recent U.S. election victory partially attributed to his promise to create an American Bitcoin reserve, Bukele’s foresight is now recognized as surpassing even the strategies of the world’s most powerful nation. The substantial gains from El Salvador’s sovereign Bitcoin reserves have begun to silence critics and validate the country’s daring embrace of digital currency.
In September 2021, El Salvador made history as the first nation to declare Bitcoin legal tender, alongside the U.S. dollar. This monumental step was enshrined in the “Bitcoin Law,” passed by the Legislative Assembly with a strong majority. The law required all businesses to accept Bitcoin for goods and services unless they lacked the means to do so. To ease the transition, the government introduced the Chivo Wallet, offering every citizen $30 worth of Bitcoin as an incentive to participate in the new digital economy. It also installed more than 200 Bitcoin ATMs nationwide and established a $150 million fund to stabilize conversions between Bitcoin and dollars. President Bukele further envisioned bold projects like Bitcoin City, a tax-free, crypto-driven municipality powered by volcanic energy, signaling El Salvador’s ambition to become a global leader in financial innovation.
While the initiative captured the imagination of the global cryptocurrency community, it was not without controversy. Skeptics pointed to Bitcoin’s notorious volatility as a significant risk, particularly for a country like El Salvador, already grappling with economic challenges. Critics, including the International Monetary Fund (IMF), warned that the move could undermine financial stability, complicate debt negotiations, and alienate traditional investors. Within El Salvador, public adoption of Bitcoin was slow, despite government incentives, as many citizens preferred the familiarity of the U.S. dollar. Concerns about technological barriers, limited understanding of cryptocurrency, and uneven infrastructure further hindered widespread acceptance. For many, the Bitcoin experiment seemed like an uncertain gamble rather than a guaranteed path to prosperity.
Despite the initial skepticism, El Salvador steadily pursued its Bitcoin strategy, demonstrating unwavering commitment to the cryptocurrency. The government began purchasing Bitcoin strategically, starting with 400 BTC in September 2021 at an average price of $46,811 per coin. Over time, the country adopted a disciplined dollar-cost averaging approach, including the “1 Bitcoin per Day” program initiated in late 2022. By 22 November 2024, El Salvador’s Bitcoin holdings had grown to approximately 5,942 BTC, acquired at an average cost of $45,223 per coin. These purchases coincided with innovative initiatives, such as mining Bitcoin using volcanic energy, further strengthening the country’s position as a crypto pioneer. As Bitcoin’s price surged toward $100,000, El Salvador’s reserve value soared to over $585 million, with unrealized profits exceeding $300 million—marking a vindication of President Bukele’s bold strategy.
As Bitcoin’s price approached historic highs, the economic implications of El Salvador’s strategy began to materialize. The government’s unrealized profits from its Bitcoin holdings provided a powerful counterpoint to critics who had questioned the initiative's viability. With a 75% return on investment, the reserves positioned El Salvador to strengthen its fiscal outlook, potentially aiding in debt repayment and boosting international confidence in its economy. Beyond the financial gains, the country also experienced an uptick in Bitcoin-related tourism, attracting crypto enthusiasts from around the globe. This inflow of visitors and investment helped to elevate El Salvador’s profile as a hub for innovation, tourism, and financial inclusion. The promise of lower remittance costs and expanded access to financial services further underscored the practical benefits of the Bitcoin adoption strategy.
El Salvador’s Bitcoin experiment has also sparked a broader global dialogue about the role of cryptocurrency in modern economies. While other countries like Bhutan have amassed Bitcoin reserves through mining, and nations like the United States and China hold Bitcoin largely from seizures, El Salvador stands out for its deliberate, government-led strategy of integrating Bitcoin into its economy. By establishing Bitcoin as legal tender and embracing it as a cornerstone of national policy, the country has charted a unique path that other nations are closely watching. The success of El Salvador’s Bitcoin holdings—now valued at over $500 million, representing 1.5% of its GDP—has fueled speculation that its approach could serve as a model for others seeking innovative solutions to economic challenges. President Bukele’s bold gamble has proven that a small nation can lead the way in redefining the financial landscape, even in the face of intense criticism and uncertainty.
El Salvador’s journey with Bitcoin, from its controversial adoption to its current vindication, underscores the transformative potential of Bitcoin when paired with visionary leadership. The adoption of Bitcoin at the nation-state level, long predicted by game theorists, marks a turning point in global economics. As more countries embrace Bitcoin for its superior properties—trustlessness, inflation resistance, and verifiable digital scarcity—El Salvador’s fate is tied to Bitcoin’s inevitable rise. In a world where the U.S. dollar’s role as the reserve currency weakens under a spiraling debt crisis, Bitcoin offers an unparalleled solution for international trade. Unlike gold, which is difficult to verify and transport and relies on trust in promissory notes, Bitcoin enables instant, verifiable transfers of large volumes without centralized control. Its decentralized design ensures no single nation can dominate its network or manipulate currency issuance, providing a neutral, reliable foundation for global commerce. As Bitcoin’s adoption spreads, El Salvador’s bold move cements its place as a pioneer in the financial revolution, demonstrating how visionary leadership can leverage disruptive technology to drive national progress and inspire a new era of economic sovereignty.
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