On June 5, 2021, Nayib Bukele, the young populist president of El Salvador, made a stunning announcement via a pre-recorded video played at the Bitcoin 2021 conference in Miami. “Next week, I will send to congress a bill that will make Bitcoin a legal tender in El Salvador,” he said. Three days later, the Salvadoran Congress passed the law with 62 votes in favor. On September 7, 2021, El Salvador became the first country in history to adopt Bitcoin as legal tender alongside the U.S. dollar.
The decision was controversial. Critics argued that Bitcoin was too volatile to serve as legal tender, that adopting it would expose the country to financial risk, and that Bukele was using the move as a publicity stunt. The International Monetary Fund urged El Salvador to reverse course. Credit rating agencies downgraded the country’s debt. Many Salvadorans expressed skepticism, with polls showing most did not want the change.
But Bukele had a plan. El Salvador launched a government-backed Bitcoin wallet called Chivo, which came preloaded with $30 worth of Bitcoin for every adult citizen who registered. The country installed 200 Bitcoin ATMs and built Lightning Network infrastructure to enable fast, cheap transactions. Bukele began buying Bitcoin with government funds, tweeting each purchase. He announced plans to build a “Bitcoin City” powered by geothermal energy from a volcano, funded by “volcano bonds.”
The early rollout was rocky. The Chivo wallet had technical problems. Many Salvadorans stopped using it after spending their free $30. Merchants reported that customers rarely paid with Bitcoin. The volatility proved to be a real problem — El Salvador’s Bitcoin treasury losses during the 2022 bear market reached hundreds of millions of dollars. Critics called it a disaster. Supporters said it was just early days.
Regardless of implementation challenges, El Salvador’s move was historically significant. It broke a taboo. For the first time, a sovereign nation had elevated a cryptocurrency to legal tender status. Other countries took notice. The Central African Republic briefly followed suit in 2022 (then reversed course). Bitcoin advocacy organizations began pushing other nations to consider similar moves. El Salvador’s experiment would take years to judge fairly, but its impact on the crypto world was immediate: Bitcoin had become a geopolitical asset, not just a technological one.
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