Bitcoin in El Salvador: A Missed Opportunity?
El Salvador’s Bitcoin Experiment: A Missed Opportunity?
In 2021, El Salvador made history as the first country in the world to adopt Bitcoin as legal tender. President Nayib Bukele touted the move as a bold step towards financial inclusion, attracting foreign investment, and reducing reliance on traditional financial systems. The initiative included the rollout of a government-backed Bitcoin wallet, Chivo, which came preloaded with $30 worth of Bitcoin for citizens to kickstart adoption. On paper, it was a groundbreaking experiment with the potential to transform the nation’s economy and empower its people. But the reality of the implementation tells a different story.
A Bold Move Met with Reluctance
From the outset, the Salvadoran public was skeptical of the Bitcoin initiative. Concerns about the cryptocurrency’s volatility dominated public discourse, with many fearing that its wild price swings could harm their already precarious economic situations. For example, Bitcoin’s price dropped from $52,000 in September 2021 to around $30,000 by mid-2022, a nearly 42% decrease in less than a year. Surveys at the time showed that a significant majority—around 68% of Salvadorans—were wary of using Bitcoin for transactions. Instead, most chose to convert their $30 government bonus to U.S. dollars immediately, underscoring a deep mistrust of this digital currency experiment.
Small business owners and vendors were particularly hesitant to embrace Bitcoin, citing technical challenges, a lack of knowledge, and concerns over its practical utility. While the government installed over 200 Bitcoin ATMs and launched a $150 million Bitcoin trust to facilitate conversion to U.S. dollars, these efforts were often met with indifference or resistance. The sentiment was clear: Bitcoin might work for tech-savvy investors, but for everyday Salvadorans, the U.S. dollar, which has been the country’s official currency since 2001, was a safer and more familiar option.
A Surging Price, A Potentially Missed Opportunity
Fast forward to 2024, and Bitcoin has experienced a meteoric price surge, climbing to over $90,000 per coin. For a country that bought 2,381 Bitcoin at an estimated average price of $43,000 per coin, the recent rally has significantly boosted the value of El Salvador’s holdings. At current prices, this investment is worth over $214 million—a gain of approximately $112 million.
However, this surge highlights what might be a missed opportunity for Salvadorans themselves. If the population had embraced Bitcoin more enthusiastically during its initial rollout, many could have significantly benefited from its price appreciation. For example, if an individual earning the average monthly income of $365 had chosen to receive just 10% of their salary in Bitcoin since September 2021, they would have accumulated 0.0425 Bitcoin by November 2024. At today’s Bitcoin price of $93,000, this amount would now be worth approximately $3,952—more than 10 times the total amount invested ($1,098). For a country where the average monthly income is $365, this represents a substantial financial boost that could have helped many families.
For those who dismissed the Chivo wallet as a “silly” gimmick and cashed out their free Bitcoin early on, the potential for even greater personal financial windfall was left unrealized. If someone had held onto just 1 Bitcoin from 2021 until now, its value would have risen from $52,000 to $90,000—an increase of $38,000, more than many Salvadorans earn in an entire year.
Why the Reluctance Persisted
The reasons behind Salvadorans’ hesitation to adopt Bitcoin go beyond simple skepticism. Financial literacy played a significant role—many citizens lacked the knowledge needed to understand cryptocurrency, let alone trust it as a reliable medium of exchange or store of value. According to a 2023 survey, 48% of Salvadorans stated they didn’t know how to use the Chivo wallet, and 20% didn’t have access to the internet or a smartphone to even try.
Additionally, the high volatility of Bitcoin clashed with the stability and predictability that most people sought in their day-to-day finances. For example, in a single day in 2022, Bitcoin’s price dropped by nearly 15%, erasing billions in value globally. For citizens living paycheck-to-paycheck, this level of uncertainty was untenable.
Moreover, many Salvadorans operate in a cash-based economy where the U.S. dollar reigns supreme. Bitcoin, with its technological requirements and steep learning curve, felt disconnected from their immediate needs. Without robust education initiatives and widespread access to technology, Bitcoin adoption was unlikely to gain traction among the broader population.
The Road Ahead: Lessons and Reflections
El Salvador’s Bitcoin experiment remains a fascinating case study in cryptocurrency adoption. While the government’s holdings have seen substantial gains, the broader population’s lukewarm reception has resulted in a missed opportunity for many. Surveys from 2024 reveal that 92% of Salvadorans still do not use Bitcoin for transactions, and 66% believe it has brought no financial benefit to their lives.
The skepticism that initially drove citizens to cash out their Bitcoin remains a sobering reminder of the challenges involved in introducing innovative financial tools to populations with limited resources or education. If trust and understanding of Bitcoin had been higher, more citizens might have shared in the financial gains now visible at the national level.
Looking ahead, it’s unclear whether Bitcoin’s ongoing price rally will change the minds of Salvadorans or reignite interest in its use. What is clear, however, is that education, trust, and infrastructure are critical for the success of such ambitious initiatives. Without them, even the most groundbreaking financial policies risk becoming unrealized potential.
In the end, El Salvador’s story is a reminder that innovation can only go as far as the people it is meant to serve. While Bitcoin may have risen in value, the opportunity for personal financial transformation in El Salvador remains an open question—one that may yet have a second chapter.