El Salvador Cryptocurrency: Breaking Barriers
Crypto Knowledge

El Salvador Cryptocurrency: Breaking Barriers

written by John Murphy | March 30, 2023

In June 2021, El Salvador’s president, Nayib Bukele, announced that the country would become the first in the world to adopt Bitcoin as a legal tender. This decision has sparked a lot of debate, with some hailing it as a bold move towards financial inclusion, while others have expressed concerns about the potential risks and challenges of adopting an El Salvador cryptocurrency as a national currency.

This article will explore the reasons behind El Salvador’s decision, the potential benefits and drawbacks of using Bitcoin as a legal tender, and the implications of this move for the wider cryptocurrency industry.

Key Takeaways:

  • Bitcoin has become a legal trend in El Salvador, stirring global debate.
  • Boosts economic growth, reduces US dollar dependence, and increases financial inclusion.
  • El Salvador Bitcoin reduces transaction costs, increases financial inclusion, and increases foreign investment.
  • Business acceptance of El Salvador Bitcoin and price fluctuations are also drawbacks of the move.
  • Bitcoin’s legal status in El Salvador raises concerns about money laundering. The upcoming legislative measures will address these issues soon.

Why Did El Salvador Adopt Bitcoin?

El Salvador is a small, low-income country in Central America that has struggled with economic instability, poverty, and high levels of inequality for decades. The country’s official currency is the US dollar, which it adopted in 2001 to stabilize its economy and boost foreign investment. However, this move has also made the country vulnerable to fluctuations in the value of the dollar and the decisions of the US Federal Reserve.

According to President Bukele, adopting Bitcoin as a legal tender will help El Salvador to:

Increase Financial Inclusion: 

Nearly 70% of Salvadorans do not have credentials to access traditional financial services, such as bank accounts or credit cards. By adopting Bitcoin, the government hopes to provide a low-cost, secure, and accessible alternative to the traditional banking system.

Boost Economic Growth: 

By embracing new technologies and becoming a hub for cryptocurrency innovation, El Salvador hopes to attract foreign investment, create new jobs, and boost economic growth.

Reduce Dependency On The Us Dollar: 

By diversifying its currency reserves and embracing a decentralized currency, El Salvador hopes to reduce its reliance on the US dollar and protect itself from the risks of inflation and currency fluctuations.

Benefits Of El Salvador Bitcoin

Benefits Of El Salvador Bitcoin

If implemented effectively, the adoption of Bitcoin as a legal tender could bring several benefits to El Salvador, including:

Lower Transaction Costs: 

Bitcoin transactions are typically faster and cheaper than traditional bank transfers, which can be costly and time-consuming, especially for low-value transactions.

Greater Financial Inclusion: 

By embracing Bitcoin, El Salvador could provide access to financial services for millions of individuals who are currently excluded from the traditional banking system.

Increased Foreign Investment: 

El Salvador could create new job opportunities and boost economic growth by becoming a hub for cryptocurrency innovation and attracting startups and investors.

Bitcoin Has No Capital Gains Tax.

Capital gains tax is no longer applicable to Bitcoin because it has been designated legal money. Because of this move, bitcoin owners in El Salvador are also going to profit economically when the price of bitcoin increases.

Not Anymore Influenced By The Dollar’s Dominance

The US dollar is used as El Salvador’s national currency. Altering the ratio of currencies in the financial system, including bitcoin, to the table of accepted legal tenders can contribute to decreasing American dominance.

Drawbacks Of El Salvador Bitcoin

Here are some significant drawbacks of having bitcoin as a legal tender in El Salvador.

Forced Acceptance Of Bitcoin By Businesses

A legal tender article in the recently approved law demands that companies “require” consumers to make payments via Bitcoin. There isn’t much more information provided in the clause than this.

Fluctuations In The Price Of Bitcoin

Those from El Salvador who choose to use bitcoin for everyday transactions may be susceptible to price variations as the worth of the currency changes. Because Bitcoin is so volatile, this presents a short-term risk. Bitcoin price swings are going to become less frequent as years pass and usage around the globe rises.

Is El Salvador The First Nation To Take Such A Step?

El Salvador has made cryptocurrency a legitimate currency for the first time ever. President Nayib Bukele, who took office for the first time in 2019 and has faced criticism and controversy both nationally and internationally for problems including fixed terms, crime, drug usage, and corruption, was a leading proponent of the concept.

Future Of Bitcoin In El Salvador

Future Of Bitcoin In El Salvador

Legalizing Bitcoin in El Salvador has generated concern from various financial institutions and authorities. They fear that it would enable money launderers and other financial fraudsters to reap the benefits of the legal gaps that exist in the world of cryptocurrencies.

For instance, western law enforcement officials have seen drug cartels in Mexico and Central America start using cryptocurrencies to transfer their dirty money. 

Now that they’re in El Salvador, they might be capable of accomplishing it more quickly and effortlessly. El Salvador’s international standing might also be hurt by the legal status of Bitcoin, which could make the nation a focus for tax dodgers.

With these risks in mind, it is predicted that the Salvadoran government will adopt further legislative measures, such as the creation of special Bitcoin-related rules, to meet the new cryptocurrency challenges in El Salvador. Financial firms with activities in El Salvador or trading with organizations located there should adapt their compliance strategies per the new regulatory system.


Is El Salvador welcoming to cryptocurrency?

El Salvador made history by being the first nation to officially legalize cryptocurrency domestically when its 41-year-old leader, Nayib Bukele, approved the Bitcoin Legislation last September.

How many bitcoins is El Salvador now holding?

According to estimates made by Bloomberg using Twitter from President Nayib Bukele, the nation’s 2,381 Bitcoin now are valued at $41.5 million at current rates, less than the nearly $105 million the state paid to buy them.

In El Salvador, is cryptocurrency tax-free?

Moreover, the nation now exempts international investors from paying the tax on their gains or income from bitcoin in order to promote this further. Even better, businesses are obligated to accept Bitcoin as payment because it is acknowledged as a legal currency in the country.


In conclusion, El Salvador legally introduced Bitcoin as its official currency. The first day that Bitcoin was accepted as payment was highly volatile. Chivo, El Salvador cryptocurrency‘s specialized Bitcoin wallet, had to be pulled down by the government as soon as it became life due to technical glitches.