El Salvador's Bitcoin Experiment Hits Snags as Usage Plummets
In 2019, an anonymous donor provided $100,000 in Bitcoin to the village of Agua Fria. This capital was used by Mike Peterson and local community leaders like Jorge Valenzuela to start a Bitcoin economy. The group targeted the unbanked population, bypassing high fees associated with traditional remittance services. Villagers earned Bitcoin for tasks such as cleaning rivers, repairing roads, or working as lifeguards.
During the 2020 pandemic, the project provided $30 of Bitcoin per month to households to help with living costs. This also helped local businesses since residents had a way to spend money when tourism slowed. The residents used Bitcoin to pay for water and electricity bills.
The residents also used Bitcoin to pay for water and electricity bills. Mike Peterson moved to El Zonte in 2013 and saw the potential for Bitcoin to provide local business capital. The team worked with local business owners to teach them how to accept Bitcoin. They also distributed Bitcoin to families with children attending the local school to encourage education.
The government of El Salvador became the first country to adopt Bitcoin as legal tender in September 2021. President Nayib Bukele announced the plan at the Bitcoin 2021 conference in Miami. The government launched the Chivo Wallet and installed 200 Bitcoin ATMs. To encourage adoption, the government gave users a $30 Bitcoin bonus.
However, the Chivo Wallet faced technical issues and user confusion. A study by the Central American University found that only 8.1% of Salvadorans used Bitcoin for purchases in 2024. This was a drop from 25.7% in 2021, 21% in 2022, and 12% in 2023.
The government amended its Bitcoin Law in 2025 to secure a $1.4 billion financing program for 40 months. This amendment made Bitcoin acceptance voluntary for private businesses. All taxes must be paid in U.S. dollars. The government began winding down the Chivo Wallet. As of August 25, wallets linked to El Salvador held 7,756 BTC, worth roughly $615 million.
El Salvador's economy is dollarized, and recipients convert Bitcoin directly to U.S. dollars through MoonPay or EvoMone without an exchange step. This eliminates the currency risk found in other corridors. Users now utilize private Lightning wallets like Blink or Strike instead of Chivo. These networks provide a non-custodial account built on the Spark protocol where users hold their own keys with a 12-word recovery phrase.