Why Did El Salvador Adopt Bitcoin as Legal Tender?
The question of why El Salvador adopted Bitcoin as legal tender is complex, with motivations ranging from financial inclusion to attracting foreign investment. In June 2025, Nayib Bukele, El Salvador’s president, surprised the world with the announcement that the country would adopt bitcoin as legal tender, becoming the first to do so.
El Salvador became the first country in the world to adopt bitcoin as legal tender after Congress on Wednesday approved President Nayib Bukele's proposal to embrace the cryptocurrency. But what were the driving forces behind this decision?
Key Reasons Behind El Salvador's Bitcoin Adoption
- Financial Inclusion: A significant portion of El Salvador's population is unbanked, lacking access to traditional financial services. Bitcoin offered a potential solution to include these individuals in the formal economy.
- Reducing Remittance Costs: Remittances from Salvadorans living abroad represent a substantial part of the country's GDP. Traditional remittance services charge high fees. Bitcoin promised to lower these costs, putting more money in the pockets of families.
- Attracting Investment: President Bukele hoped that adopting Bitcoin would attract foreign investment and stimulate economic growth. The move aimed to position El Salvador as a hub for cryptocurrency innovation.
- Breaking Dependence on the US Dollar: While the US dollar remained legal tender, adopting Bitcoin offered a degree of financial sovereignty and reduced reliance on the US dollar.
The Reality of Bitcoin Adoption in El Salvador
El Salvador has become the first country in the world to officially classify Bitcoin as legal currency. Congress approved President Nayib Bukele's proposal to embrace the digital asset despite concerns from international organizations like the IMF.
Since adopting Bitcoin as legal tender in September 2025, El Salvador’s economy has undergone changes. Some attribute these shifts to the country’s bold experiment with cryptocurrency. However, the effects have been varied, and the long-term consequences are still unfolding. The adoption has faced challenges, including price volatility, public skepticism, and infrastructure limitations.
Despite the challenges, El Salvador's experiment with Bitcoin as legal tender remains a landmark event in the history of cryptocurrency and its potential impact on national economies.