Bitcoin costs El Salvador $425 million with uncertain results
El Salvador’s adoption of Bitcoin (CRYPTO:BTC) as legal tender in 2021 was presented as a move to boost economic growth, attract foreign investment, and provide financial inclusion for the unbanked population.
The government invested an estimated $425 million in the rollout, including the purchase of Bitcoin and the creation of the Chivo electronic wallet system, which aimed to remove transaction fees and make remittances more efficient for Salvadorans.
President Nayib Bukele promoted the initiative as a way to lessen dependence on the US dollar, increase remittance efficiency, and open access to financial services for disadvantaged citizens.
However, according to multiple sources, the results have been mixed and often controversial.
Reports indicate that the adoption of Bitcoin has not delivered the expected benefits for the country’s poor, and the usage of the Chivo wallet dropped significantly after its initial launch.
By the first half of 2022, Chivo wallet downloads had plummeted, and the value of El Salvador’s Bitcoin holdings had fallen by 50 percent, raising concerns about the impact on the national treasury and public finances.
“Contrary to the expectation that the cryptocurrency would bring financial inclusion, Bitcoin adoption has depleted El Salvador’s Treasury, ballooned its foreign debt, and failed to tackle mass migration to the U.S.,” according to analysis from Univision.
The government’s approach has also drawn criticism for its lack of transparency and for benefiting a narrow group of business interests closely tied to the administration.
A study published in 2024 noted that the implementation of the Bitcoin law “undermined accountability and transparency in the use of public funds,” and suggested that the policy has empowered a small number of well-connected individuals both domestically and internationally.
While some international observers and expatriates have lauded El Salvador as a haven for crypto innovation, many local citizens remain sceptical, questioning whether the policy truly serves the broader population or primarily benefits outsiders and elites.
The World Bank has projected economic difficulties for the country, and foreign direct investment remains low despite the high-profile Bitcoin experiment.
At the time of reporting, the Bitcoin (BTC) price was $87,284.94.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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