El Salvador’s Bitcoin Experiment: From Bold Innovation to Policy Reversal
In 2021, El Salvador made history as the first country to adopt Bitcoin as legal tender under President Nayib Bukele. The move was designed to position the nation as a leader in financial innovation, attract foreign investment, and provide banking access to the unbanked. However, while the world watched in fascination, the policy sparked both praise and skepticism, with critics warning of Bitcoin’s volatility and potential economic risks. By early 2025, the Salvadoran government reversed course. The Legislative Assembly, controlled by Bukele’s New Ideas party, amended the Bitcoin Law, stripping Bitcoin of its legal tender status and making its use optional for businesses and individuals. This decision was largely influenced by a $1.4 billion loan agreement with the International Monetary Fund (IMF), which had long voiced concerns over Bitcoin’s instability and its implications for financial stability. As part of the deal, the IMF required El Salvador to scale back its Bitcoi...