El Salvador's First 400 Bitcoin and the 2021 Bitcoin Law

First published September 10, 2021.

El Salvador Reported Holding 400 Bitcoin Before Its 2021 Launch

On Monday, 6 September 2021, El Salvador's president Nayib Bukele announced that his government had bought its first bitcoin: 200 coins in the morning, then another 200 later that day, for a total of 400 bitcoin worth roughly $20 million. The next day, El Salvador became the first country in the world to make bitcoin legal tender alongside the US dollar. The purchase briefly lifted the market, and it opened an experiment that the rest of the world watched closely for years.

The 400-coin announcement

Bukele shared the news on Twitter, as he did with most of the country's later purchases. After the first 200 coins he said the government's brokers would be buying "a lot more" as the launch approached, and by the evening he posted that the country held 400 bitcoin.

Bitcoin traded at around $52,000 that day. Reuters reported that the price edged up after the announcement and that some analysts expected a move toward $56,000. That optimism did not last: on launch day, 7 September, the price reportedly fell sharply, and the government's new digital wallet ran into technical problems in its first hours. Short-term price moves in bitcoin have many causes, so a single country's announcement should not be read as the reason for any one day's swing.

Why El Salvador adopted bitcoin

El Salvador's Congress passed the Bitcoin Law on 9 June 2021, with 62 of 84 deputies voting in favour. The country had used the US dollar as its official currency since 2001, so the law added bitcoin alongside it rather than replacing anything.

The government's main argument was about remittances, the money Salvadorans living abroad send home to family. Remittances equalled about 23% of the country's economy in 2020, and transfer companies often charge sizeable fees. Bukele argued that bitcoin could save families millions of dollars in commissions and bring people without bank accounts into the financial system.

To encourage use, the government launched the Chivo wallet app with a $30 sign-up bonus in bitcoin, set aside a $150 million fund to support conversions to dollars, and installed bitcoin ATMs around the country.

Doubts and protests from the start

Many Salvadorans were wary. Thousands protested in San Salvador on the day the law took effect, and a November 2021 poll by Francisco Gavidia University found that 91% of respondents preferred the dollar. Critics pointed to bitcoin's volatility, the risk that ordinary people could lose savings, and the fact that the original law required businesses to accept the currency.

International institutions shared those concerns. Moody's downgraded El Salvador's credit rating in July 2021, and the International Monetary Fund (IMF) warned about risks to financial stability, consumer protection and public finances. In January 2022 it urged the government to drop bitcoin's legal-tender status.

How the experiment played out

The government kept buying. By January 2022 it held at least 1,801 bitcoin, and by mid-2022 around 2,300, after spending an estimated $150 million. When the crypto market crashed in 2022, the holdings fell well below their purchase price, and a planned $1 billion "Volcano Bond" was postponed. When bitcoin recovered in 2024, the paper losses turned into gains.

Everyday use told a different story. Surveys found that more than half of Salvadorans downloaded the Chivo wallet, often to claim the $30 bonus, but regular use fell over time. Bitcoin accounted for only around 1% to 2% of remittances in the years after the launch, and polls by the Central American University's public-opinion institute showed the share of people using it for transactions falling from about 26% in 2021 to about 8% in 2024.

The 2025 rollback

In December 2024, El Salvador reached a $1.4 billion loan agreement with the IMF. As part of the deal, Congress amended the Bitcoin Law in early 2025: private businesses are no longer required to accept bitcoin, taxes cannot be paid in it, and the government agreed to limit its involvement. Many observers say bitcoin no longer functions as true legal tender in El Salvador, although the government has continued to publicise additions to its reserve.

Lessons from the El Salvador experiment

Legal tender is not the same as adoption. A law can make a currency official, but people choose what they actually use, and most Salvadorans stuck with the dollar.
Volatility cuts both ways. A national reserve in bitcoin can look like a loss one year and a gain the next, which makes budgeting difficult for a government.
Remittance savings were smaller than hoped. Cheaper transfers are possible, but few families switched.
Outside finance still matters. The need for IMF support was ultimately what forced the law to change.

The September 2021 purchase of 400 coins is best remembered as the opening move of a bold national bet, one that still divides economists, crypto supporters and Salvadorans themselves.

Crypto platforms we use

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