El Salvador's Five-Year Bitcoin Experiment Fails

El Salvador, as the first country in the world to recognize Bitcoin as legal tender five years ago, sparked enthusiasm among cryptocurrency supporters with President Nayib Bukele's decision. However, the results of the experiment have been disappointing. The level of foreign direct investment in the sector has not increased, and the issue of lack of access to banking remains unresolved. Studies have shown that mass adoption of digital currency among Salvadorans has not occurred, with usage primarily among young, educated men in urban areas. The government wallet app Chivo offered a $30 bonus for registration, but over 60% of users did not make any transactions after spending those funds. Having used the US dollar for over two decades, El Salvador had no need for currency conversion, which diminished the significance of digital assets. The share of cryptocurrency wallets in remittance services dropped to 1% in 2024. The government in San Salvador signed a $1.4 billion loan agreement with the International Monetary Fund, forcing a change in regulations that made the acceptance of digital payments voluntary. Initiatives such as volcanic bonds and Bitcoin City have been halted. El Salvador's experiment has shifted the discussion about state adoption from theory to practice.

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