September 09, 2021
by Anya Thepot

On September 7, 2021, El Salvador officially adopted bitcoin as a national currency and became “the world’s first crypto-nation”[1], kicking off what CNN business has called “a radical monetary experiment that could pose risks to the fragile economy.”[2]

Bitcoin is now legal tender in El Salvador, alongside the US dollar, which has been El Salvador’s national currency since 2001.[3]  El Salvadoran President Nayib Bukele first announced El Salvador’s plan to start using bitcoin in June during a video recording shown at the Bitcoin 2021 conference in Miami.[4]

The El Salvadoran law designating bitcoin as legal tender states that all “economic agents” shall accept the cryptocurrency as a form of payment and that tax payments can be made in bitcoin.[5]  Salvadorans will be able to download a “government digital wallet” application called “Chivo” (named after Salvadoran slang for “cool”), [6] which will deliver $30 worth of bitcoin to users to promote its use.[7]  The program also features 200 nationwide ATMs[8] that enable customers to buy bitcoin or convert it to cash commission-free.[9]  Moreover, exchanges in bitcoin will not be subject to capital gains tax.[10]

The El Salvadoran government has endorsed the shift to digital currency stating that it will save Salvadorans $400 million each year in fees on remittances (which are received by approximately 70% of the Salvadoran population and make up nearly a quarter of El Salvador’s GDP each year[11]) and that it will “boost financial inclusion” to the approximately 70% of Salvadorans who do not have access to traditional financial services.[12]  In order to promote the shift, the El Salvadoran government purchased 550 bitcoins as part of its national crypto launch, “which is also aimed at mitigating the impact of inflationary pressure on the U.S. dollar after recent U.S. government stimulus packages.”[13]

While President Bukele and some Salvadorans have embraced bitcoin technology, media outlets report Salvadorans’ mixed feelings about their nation’s adoption of cryptocurrency.[14]  Some see El Salvador’s adoption of bitcoin as “a milestone for the crypto, a threshold to financial legitimacy.[15]  However, “widespread skepticism” is attributed to bitcoin’s volatility and risk.[16]  Many citizens may struggle to access the technology necessary to use bitcoin because nearly half of all Salvadorans lack internet access and many more have spotty connectivity.[17]  In addition, “[t]o many observers, the move is emblematic of Mr. Bukele’s tendency toward autocracy.”[18]  On September 7, more than a thousand people protested in San Salvador against the adoption of bitcoin, burning a tire and setting off fireworks in front of the Salvadoran Supreme Court.[19]

Regardless of differing public opinions on El Salvador’s historic adoption of bitcoin, the transition has not been without its “teething problems,” caused by “mistrustful citizens, technological glitches, and a dip in the cryptocurrency.”[20]  For instance, shortly after midnight on September 7, President Bukele complained that the Chivo app was not available on internet platforms such as Huawei and Apple.[21]  President Bukele tweeted for online stores to stock the Chivo app, and Huawei later made it available.[22]  Soon, however, the El Salvadoran government unplugged Chivo to connect it to more servers and increase its capacity for user registrations.[23]  By the afternoon of September 7, Bukele was retweeting videos of El Salvadoran retailers, such as McDonald’s and Starbucks, accepting payments using bitcoin.[24] Starbucks' El Salvador unit said it was accepting bitcoin for purchases at its restaurants, drive-through facilities or to go.[25]

The world will continue to watch El Salvador’s historic adoption of bitcoin over the coming months.  As tweeted by President Bukele, "The process of #Bitcoin in El Salvador has a learning curve. Every step toward the future is like this, and we will not achieve everything in a day, nor in a month.  But we must break the paradigms of the past."[26]


[1] Hannon, Elliott.  “El Salvador Officially Becomes the World’s First Crypto-Nation.”  Slate.com, Sept. 7, 2021.  Available at https://slate.com/news-and-politics/2021/09/el-salvador-bitcoin-cryptocurrency-legal-tender-worlds-first.html.

[2] Delcid, Merlin. “El Salvador buys bitcoin as the digital currency becomes legal tender.”  CNN Business, Sept. 7, 2021.  Available at https://www.cnn.com/2021/09/06/business/bitcoin-price-el-salvador-intl-hnk/index.html.

[3] Id.

[4] McCluskey, Mitchell and Goldman, David.  “El Salvador will adopt bitcoin as legal tender, president says.”  CNN Business, Jun. 8, 2021.  Available at https://www.cnn.com/2021/06/06/investing/bitcoin-el-salvador/index.html.

[5] Delcid, Merlin. “El Salvador buys bitcoin as the digital currency becomes legal tender.”  CNN Business, Sept. 7, 2021. 

[6] Lopez, Oscar and Livni, Ephrat.  “In Global First, El Salvador Adopts Bitcoin as Currency.”  New York Times, Sept. 7, 2021.  Available at https://www.nytimes.com/2021/09/07/world/americas/el-salvador-bitcoin.html.

[7] Delcid, Merlin. “El Salvador buys bitcoin as the digital currency becomes legal tender.”  CNN Business, Sept. 7, 2021.

[8] Turner, Jack.  “El Salvador First Country To Make Bitcoin An Official Currency.”  Tech.com, Sept. 7, 2021.  Available at https://tech.co/news/el-salvador-first-country-bitcoin-official-currency.

[9] Hannon, Elliott.  “El Salvador Officially Becomes the World’s First Crypto-Nation.”  Slate.com, Sept. 7, 2021. 

[10] Kharpal, Arjun and Sigalos, MacKenzie.  “El Salvador bought $21 million of bitcoin as it becomes first country to make it a legal currency.”  CNBC, Sept. 7, 2021.  Available at https://www.cnbc.com/2021/09/07/el-salvador-buys-400-bitcoin-ahead-of-law-making-it-legal-currency.html.   

[11] Hannon, Elliott.  “El Salvador Officially Becomes the World’s First Crypto-Nation.”  Slate.com, Sept. 7, 2021.  Sigalos, MacKenzie.  “El Salvador’s new bitcoin wallets could cost Western Union $400 million a year.” CNBC, Sept. 9,2021.  Available at https://www.cnbc.com/2021/09/09/el-salvador-bitcoin-move-could-cost-western-union-400-million-a-year.html.

[12] Kharpal, Arjun and Sigalos, MacKenzie.  “El Salvador bought $21 million of bitcoin as it becomes first country to make it a legal currency.”  CNBC, Sept. 7, 2021.  See also, Renteria, Nelson and Esposito, Anthony.  “El Salvador's world-first adoption of bitcoin endures bumpy first day.”  Reuters.com, Sept. 8, 2021.  Available at https://www.reuters.com/business/finance/el-salvador-leads-world-into-cryptocurrency-bitcoin-legal-tender-2021-09-07/.

[13] Hannon, Elliott.  “El Salvador Officially Becomes the World’s First Crypto-Nation.”  Slate.com, Sept. 7, 2021.  See also, Delcid, Merlin. “El Salvador buys bitcoin as the digital currency becomes legal tender.”  CNN Business, Sept. 7, 2021. 

[14] See e.g., Delcid, Merlin. “El Salvador buys bitcoin as the digital currency becomes legal tender.”  CNN Business, Sept. 7, 2021. 

[15] See Fonda, Darren.  “Bitcoin Stabilizes. Don’t Expect the Calm to Last.”  Barron’s, Sept. 8, 2021.  Available at https://www.barrons.com/articles/bitcoin-price-stabilize-will-the-calm-last-51631120131?mod=hp_INTERESTS_economy-and-policy&refsec=hp_INTERESTS_economy-and-policy&tesla=y.

[16] Renteria, Nelson.  “Migrant families wary as El Salvador becomes first to adopt bitcoin.”  Reuters.com, Sept. 6, 2021.  Available at https://www.reuters.com/world/americas/migrant-families-wary-el-salvador-becomes-first-adopt-bitcoin-2021-09-06/.

[17] Id.

[18] Lopez, Oscar and Livni, Ephrat.  “In Global First, El Salvador Adopts Bitcoin as Currency.”  New York Times, Sept. 7, 2021.

[19] Renteria, Nelson and Esposito, Anthony.  “El Salvador's world-first adoption of bitcoin endures bumpy first day.”  Reuters.com, Sept. 8, 2021.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Turner, Jack.  “El Salvador First Country To Make Bitcoin An Official Currency.”  Tech.com, Sept. 7, 2021.

About Blockchain Law Center

Blockchain technology utilizes a distributed digital ledger to record and track information, and can be leveraged to gain transparency and certainty in transactions ranging from cryptocurrency to supply chain tracking.  This blog provides information on the legal developments surrounding implementation of blockchain technology, with an initial focus on the financial services sector.