Emerging markets are increasingly turning to cryptocurrency as a way to gain financial independence and bypass traditional banking systems. El Salvador was the first to put this idea to the test in 2021 when it made Bitcoin legal tender. At the time, the Buekele administration declared a financial revolution promising increased investment and expanded financial access. Last week, the Salvadoran government agreed to shut down or sell Chivo, the world’s first state-backed cryptocurrency wallet, as part of a deal to secure a $3.5 billion loan. Critics say this amounts to the final nail in the coffin for El Salvador’s crypto experiment.
Yet, El Salvador’s failure doesn’t mark the end of crypto’s role in global finance. Rather, it offers a lesson in how not to implement it. While Bitcoin as a national currency proved unstable, its potential as a tool for financial sovereignty remains. Other countries are watching and adapting. Bhutan, for example, has taken a more measured approach to adopting cryptocurrencies. Over the past six years the Buddhist kingdom has worked quietly, leveraging its vast renewable energy resources to mine Bitcoin and generate state revenue without relying on external lenders. These contrasting cases highlight a bigger question: As more nations explore digital assets, is crypto an inevitable force or will institutions like the IMF ensure that traditional systems remain dominant?
El Salvador’s Bitcoin experiment began with the ambitious passage of Ley Bitcoin in 2021, making it the first country to adopt a cryptocurrency as legal tender. This meant that individuals, businesses and institutions could accept Bitcoin and other cryptocurrencies alongside the U.S. dollar. The legislation was intended to attract foreign investment while making everyday transactions easier for El Salvadorans.
With over 70% of Salvadorans unbanked, it was also pitched as a digital alternative to traditional banking—giving people a way to store and transfer money without relying on financial institutions. But for Bitcoin to take hold, the government needed a system to distribute and facilitate its use.
A major part of the government’s strategy to drive adoption was Chivo, a digital wallet controlled by El Salvador’s national bitcoin office. To encourage usage, the government provided a $30 incentive to every citizen who downloaded the app. Initially, this approach appeared to be successful, with around two-thirds of all El Salvadorans with internet access downloading Chivo in 2021. However, enthusiasm was short-lived with only 20% continuing to use the app after collecting their $30.
In the end, cryptocurrency usage in El Salvador has remained persistently low compared to other countries in the region.
Low cryptocurrency usage can partially be attributed to issues with internet and energy connectivity. In 2021, only slightly over half of the population had access to the internet, which is needed to make transactions through Chivo and other cryptocurrency wallets. In anticipation of this issue, El Salvador invested heavily in physical and digital infrastructure like bitcoin ATMs.
Despite these efforts, the challenges extended beyond simply using Bitcoin for transactions. Even as a broader financial tool, Ley Bitcoin failed to improve El Salvador’s banking situation.
A successful currency must not only function as a medium of exchange but also serve as a stable store of value. Bitcoin’s volatility undermined this role, with unfortunate timing exacerbating problems with adoption. President Bukele released Chivo amid the 2021 cryptocurrency boom, only for the market to crash months later. By November 2021, President Bukele had spent approximately $150 million on Bitcoin—4% of the country’s GDP. By June 2022, Bitcoin’s value had plummeted by 70%. This was a disastrous introduction to digital banking for El Salvador’s chronically underbanked population.
Rather than ushering in a new era of financial inclusion, El Salvador has become a case study in the risks of rapid top-down adoption. Structural issues such as limited internet access, low financial literacy, and Bitcoin’s volatility impeded widespread adoption. External shocks including the Covid-19 pandemic, the cryptocurrency market crash, and pressure from the IMF have further complicated matters. What began as an experiment to break free from traditional financial constraints instead left El Salvador just as dependent on the very institutions it sought to bypass.
El Salvador’s experiment was never given the chance to succeed or fail on its own terms. While the broader economic downturn weakened the country’s standing, it was the IMF that delivered the final blow. As El Salvador’s financial state worsened, loan negotiations came with increasingly explicit messages: to get rid of Chivo. At that point there was only one outcome.
Whether or not El Salvador’s crypto experiment could have been salvaged remains an open question. What’s clear is that the IMF made sure we’ll never find out.
The IMF’s opposition to cryptocurrencies isn’t just about El Salvador, it has to do with maintaining control over a global financial order. At its core, the IMF sees widespread Bitcoin use as a direct threat to financial stability. To them, Bitcoin is too volatile for use in the public domain. Bitcoin’s price swings can wreak havoc on fiscal stability and unlike with traditional currencies, monetary policy is essentially outsourced to the markets. That level of distributed decision making threatens an institution that has long shaped global economies by exerting influence over central banks.
On paper, this influence ensures loans will be repaid—and they are. But some are questioning: at what cost? The IMF’s conditionality has been increasingly criticized as predatory, with some arguing it resembles a form of neocolonialism. Argentina serves as a prime example. Today, after decades of IMF loans and structural adjustments, it remains one of the IMF’s most prolific debtors. Each bailout comes with conditions, austerity measures and increased market liberalization that, rather than stabilizing the country, have kept it locked in a cycle of debt and dependence.
El Salvador’s experience might be different in scale but the pattern is the same. Once again, an emerging market has sacrificed monetary sovereignty at the IMF’s altar of stability. Bitcoin might not have been a perfect solution but it was an attempt to break free from a system that has kept countries like Argentina trapped in a cycle of debt. Their experiment didn’t just fail, it was shut down.
El Salvador’s experiment might have collapsed but that hasn’t stopped other nations from exploring crypto on their own terms. Some are proving it can work.While El Salvador rushed to make Bitcoin a legal tender, others have treated crypto as a strategic asset rather than a monetary overhaul. Bhutan stands out as a shining example.
Rather than forcing bitcoin onto an unprepared and disinterested constituency, Bhutan has leveraged its surplus renewable energy to power cryptocurrency mining operations. By selling excess energy and investing in digital currencies the country has created a controlled, state backed revenue stream that has diversified its economy while minimizing reliance on institutions like the IMF.
This approach was more cautious, aligning with the nation’s unique development philosophy that prioritizes sustainable and relatively conservative economic projects. While most other nations including those under the IMF’s influence gauge success through Gross Domestic Product(GDP), Bhutan prioritized a different measure called Gross National Happiness(GNH), a metric that considers environmental sustainability, good governance, and overall well-being. This framework ensured that crypto adoption resembled a traditional financial move rather than an El Salvadoran experiment.
So far, this approach appears to have paid off, Bhutan’s strategy has achieved tangible economic gains. Since harnessing its hydroelectric energy to sell to mining operations in 2021, the nation’s income has increased dramatically. Two years later, the country was able to afford increasing its civil servants’ salaries by 50%. As Bhutan’s GNH continues to rise, it presents a compelling alternative to the IMF’s narrative that crypto is inherently reckless – maybe it’s only as effective as the systems built around it.
El Salvador’s capitulation to the IMF underscores a harsh reality: challenging the global financial system comes with consequences. But if the goal was to stifle Bitcoin’s role in emerging markets, it may have the opposite effect. Bhutan’s success shows that top-down adoption can sidestep crypto’s volatility while still offering economic benefits. Regardless, bottom-up adoption has grown exponentially over the past decade. From remittances to informal economies, people aren’t turning to cryptocurrencies because governments tell them to but because it offers something traditional finance never could—autonomy, financial inclusion, and a hedge against unstable currencies.
Meanwhile, the narrative continues to shift with President Trump doubling down on his campaign promise to make the United States the “Crypto Capital of the World.” The launch of his own digital coin comes amid a sweeping new executive order establishing a Strategic Bitcoin Reserve. The reserve will be funded using Bitcoin seized in criminal and civil forfeiture cases. At the same time, the European Union has intensified its regulations, signaling that the very institutions that struggled against bitcoin adoption could end up legitimizing it. The question is no longer whether cryptocurrencies will survive but rather who will control their adoption and expand its use on a global scale.
