When in 2021 El Salvador announced that would adopt bitcoin as legal tender, the world held its breath. It seemed like the beginning of a new era, the victory of decentralized finance over traditional finance. Four years later, that dream seems more like an expensive mirage.
The numbers speak clearly: only a minority of Salvadorans have used bitcoin, while the state has burned millions in a utopian project. Today, with the agreement reached with the IMF, El Salvador must drastically revise its crypto ambitions.
Bitcoin's Broken Dream
The case of El Salvador has become a clear example of how technological innovation, if poorly managed, could turn into an economic boomerang. When the president Nayib Bukele announced the adoption of Bitcoin, many thought it was a brilliant move. The idea was simple: democratize access to financial services and reduce the cost of remittances, which account for nearly a quarter of the country's GDP.
The real context, however, was very different. Most Salvadorans still prefer cash and payment cards, and digitalization remains an abstract concept for many people.
The experiment showed how cultural and infrastructural barriers are difficult to overcome. Despite millionaire investments, Bitcoin has never become an everyday tool for citizens. Already according to a first survey in 2022, Only 20% of businesses accepted cryptocurrency, and just 5% of taxes were paid in bitcoin. These numbers have further decreased in recent months.
El Salvador, the price of utopia
If there is one lesson to be learned from El Salvador's experience, it is that innovation cannot be separated from social and economic reality. The government spent about $375 million to implement the system Chivo, a state-sponsored digital wallet, as well as installing ATMs and funding free transactions. Costs that far outweighed the benefits of investing in Bitcoin.
If nothing else, however, there is one positive aspect: the admission of mistakes. With the agreement reached with the IMF, El Salvador has finally decided to put aside the crypto utopia. Taxes can no longer be paid in bitcoin, and the use of cryptocurrency in the private sector has become voluntary. A pragmatic choice, dictated by the need to stabilize the economy and guarantee a better future for citizens.
A new beginning?
With the bitcoin chapter now closed, it is time to reflect on El Salvador’s future. The country has shown that it can change course when necessary, but it remains to be seen whether this lesson will serve to guide more careful choices in the future.
Abandoning bitcoin does not mean giving up innovation, but learning to integrate it in a more balanced way. Perhaps this experience will serve as a warning to other governments that look to cryptocurrencies as a magic solution to complex problems.
Ultimately, if the real challenge is not technological, but human, by admitting its mistake El Salvador has shown that it still has much to teach the world.
