Three years after becoming the first nation to adopt Bitcoin as legal tender, El Salvador faces a stark reality: Only 11% of its registered crypto firms operate today. With 161 companies non-compliant under strict regulations, skepticism grows over the sustainability of President Nayib Bukele’s high-stakes financial experiment.
Crypto Compliance Crumbles
El Salvador’s 2021 Bitcoin Law mandates rigorous standards for crypto businesses. Firms must enforce anti-money laundering (AML) protocols, maintain transparent financial records, and adopt customised cybersecurity measures. Yet Central Reserve Bank data reveals 89% of 181 registered providers fail these benchmarks.
Only 20 companies, including the government’s Chivo Wallet, meet operational criteria. Analysts blame bureaucratic delays and high compliance costs for the stagnation. “Many firms underestimated the legal workload,” said a local fintech advisor, requesting anonymity. “They’re stuck in paperwork or lack funds to adapt.”
State-Backed Chivo Thrives While Others Struggle
Despite the sector’s turmoil, Chivo Wallet dominates El Salvador’s crypto scene. Launched alongside Bitcoin’s legal tender rollout, the app gained traction through state subsidies and ATM networks. Private firms like Crypto Trading & Investment and Fintech Américas also cleared regulatory checks, but their market share remains limited.
Furthermore, 22 non-operational providers face scrutiny for ignoring financial oversight rules. Critics argue the government prioritises political symbolism over practical support. “Compliance isn’t optional,” said Central Bank official María López. “Firms either meet standards or cease operations.”
IMF Loan Forces Bitcoin Policy Retreat
In March, El Salvador secured a $1.4 billion IMF loan with strings attached. The deal requires scaling back Bitcoin initiatives, including dollar-denominated tax payments and restricted crypto use in public institutions. While the IMF pressed El Salvador to halt state Bitcoin purchases, President Bukele defiantly continued buying, citing a long-term economic vision.
The clash highlights growing tensions between Bukele’s crypto ambitions and global financial pressures. “The IMF deal is a lifeline, but it’s costing our autonomy,” argued economist Carlos Rivera. “Bitcoin’s role is shrinking by necessity.”
Public Bitcoin Buys Defy IMF Demands
Bukele’s administration has purchased 2,381 Bitcoin since 2021, worth roughly $120 million today. Despite IMF warnings, the government added 5 BTC in March. Finance Minister Alejandro Zelaya defended the strategy, calling Bitcoin “a safeguard against inflation.”
Yet public sentiment wavers. Street vendor Marta Reyes, 48, laughed when asked about Bitcoin. “I still use dollars. Chivo works sometimes, but taxes? Not too confusing.” Her skepticism mirrors national surveys: Less than 20% of citizens actively use crypto.
Legal Tender Status Hangs in the Balance
Rumours swirl that El Salvador may revoke Bitcoin’s legal tender status by April 30, a claim fuelled by Bitcoin educator John Dennehy during a recent online discussion. While officials deny plans to repeal the Bitcoin Law, the IMF agreement’s fine print leaves room for reinterpretation.
For now, Bukele’s team walks a tightrope. Scrapping Bitcoin could alienate crypto investors; keeping it risks IMF penalties. “April’s deadline is a litmus test,” Dennehy said. “The world is watching if Bitcoin nations can survive mainstream pressures.”
A Crossroads for Crypto’s Poster Child
El Salvador’s crypto journey, once hailed as revolutionary, now faces existential questions. With most registered firms inactive and global lenders demanding restraint, the nation’s Bitcoin experiment hinges between reinvention and collapse.
While Bukele bets on digital assets to future-proof the economy, critics urge pragmatism. “Innovation needs stability,” warned López. “Without balance, even moonshots fall back to Earth.” As April’s deadline looms, Salvadorans await their next move in this high-risk financial gambit.
