Bukele’s blockchain bet

Bitcoin goes national

In this edition of The Last Update, we revisit a story that once looked like technological speculation and now resembles a long, slow accounting exercise: El Salvador’s national bitcoin bet. In June 2021, the country’s young and social-media-fluent president, Nayib Bukele, now 44, announced to a crypto conference in Miami that he would make bitcoin legal tender. While other nations were discussing regulation, El Salvador passed a Bitcoin Law through its Legislative Assembly within months. From early September 2021, it became the first country in the world to adopt the coin, alongside the US dollar (used since 2001), and all businesses had to accept the cryptocurrency for goods and services.

This policy incorporated three ambitions: attracting investment, lowering remittance costs, and changing the country’s long-stigmatized violent image. It was pitched as financial innovation, but it would also become something else: a powerful exercise in national rebranding.

The rollout was swift and theatrical: a state-backed digital wallet – Chivo, slang for cool – was preloaded with $30 in bitcoin for all citizens who signed up; bitcoin ATMs were installed across the country; and presidential tweets marked each dip as a buying opportunity. Bukele cast the move as financial liberation – cheaper remittances, financial inclusion for the unbanked, and a branding exercise that would draw investment into a country better known for gangs than fintech.

Chaos and public skepticism

Those early months were tumultuous. On launch day, the Chivo wallet crashed repeatedly. Yet within months it had reached 4 million users in a country of 6.3 million (including around 10% fake or duplicate accounts). Protests broke out in San Salvador as citizens voiced concern over volatility and opacity. Then the price of bitcoin fell sharply throughout 2022, at one point losing more than half its value from highs (almost $69,000) reached in November 2021. Because Bukele publicized each purchase, often announcing that El Salvador had “bought the dip,” the country’s treasury started to resemble an involuntary crypto hedge fund. Traders have at times watched for sudden price spikes after his crypto tweets, a symbol of how social media had become an unofficial driver of national monetary policy. However, international institutions were skeptical: the International Monetary Fund warned of stability risks and urged reconsideration, especially as El Salvador sought financial support. For a time, the Bitcoin Law seemed less like a masterstroke and more like an unpredictable, costly branding experiment that placed additional risk on top of already strained public finances.

The crypto comeback

Yet the obituary was premature. By late 2023 and into 2024, bitcoin rebounded dramatically, aided by the approval of US spot bitcoin ETFs and renewed institutional interest. This restored El Salvador’s holdings to profit and offered a measure of vindication for Bukele, who was re-elected in 2024 after a divisive constitutional reinterpretation. The government continued to accumulate one bitcoin per day, regardless of market fluctuation, framing the bullish strategy as disciplined and long-term. Tourism also rose in the following years, with “Bitcoin Beach” in El Zonte becoming a symbolic pilgrimage site for enthusiasts. Crypto conferences and industry appeared, though the larger driver of visitor growth was the dramatic fall in homicide rates after Bukele’s security clampdown. Meanwhile the narrative was shifting from recklessness to maintaining a vision.

The value of image

Success, of course, depends heavily on the metric one uses. Bitcoin adoption within El Salvador remains limited; surveys suggest that many Salvadorans immediately converted the $30 incentive into cash and then abandoned the Chivo app. Remittances – accounting for roughly a quarter of GDP and a central justification for the policy – have continued to flow predominantly through traditional channels. Meanwhile, Bukele’s global image as the coolest dictator in the world, and his powerful approval rating, has been shaped at least as much by his sweeping anti-gang crackdown as by his crypto evangelism. His administration’s state of exception, mass arrests (currently over 91,000, 1.43% of their population), and the construction of a highly controversial mega-prison reframed the country’s image. El Salvador went from being seen as one of the world’s most violent nations to one claiming restored order – a transformation applauded and condemned alike. In this context, bitcoin functioned not solely as monetary policy but as reputational catalyst: the country’s association with drugs and violence was traded for audacious plans and new capital.

Volcanic dreams

Nothing illustrated the ambition quite like the proposed Bitcoin City – a venture to be powered by geothermal energy and financed through volcano bonds, a crypto-backed instrument marketed to global investors. State-owned geothermal plants did begin modest bitcoin mining operations, with Bukele posting updates on social media. But ultimately, both the city and the bonds were delayed, amid market turbulence and regulatory questions, and seemingly remain a fantasy. Technically, the energy plan was plausible; conceptually, it was irresistible; practically, it was untenable.

El Salvador isn’t the only nation to trial state-backed bitcoin activity. Bhutan, as the first recognized carbon negative country in the world, uses its investments in hydropower to mine coins. And the Central African Republic formally adopted bitcoin in April 2022, but reverted the decision the next year. Nevertheless, in El Salvador the brand somehow endures: a tax-light, crypto-forward enclave built on a naturally occurring resource – the country already generates geothermal energy, offering a neat rebuttal to criticism that crypto mining is extremely environmentally destructive. The government has also enticed foreign tech entrepreneurs with residency incentives and a streamlined regulatory posture, positioning El Salvador as a jurisdiction willing to test the boundaries of cryptocurrencies.

Political reversal

Eventually, much like the city, the bonds, and the initial hype, the influence of bitcoin waned. Savings for Salvadoran families from cheaper transfers never materialized at scale. And under pressure from the International Monetary Fund, at the end of 2024 the country accepted a $1.4 billion loan program – in stark contrast to Bukele’s previous mockery of the IMF. The government finally backtracked and agreed to remove requirements for businesses to accept bitcoin, to stop public-sector accumulation, and to scale back its legal-tender status, signaling a retrenchment of the initial experiment.

The crypto brand

While few tangible economic effects emerged from Bukele’s bitcoin shift, the broader trend toward future-forward policies and viral marketing has given the country a reputational makeover. And its legal status aside, El Salvador continues to buy and amass bitcoin even as the currency slumps – presently holding over 7,500 coins, worth around 1.5% of their GDP at an unrealized $540 million. The government still publicizes the currency and even offers cryptocurrency education.

So, it appears the initiative has settled into something quieter: a small country holding a volatile asset on its balance sheet, simply waiting (HODL). If bitcoin continues to appreciate over the long term, Bukele may be remembered as a pioneering state-level accumulator. If it falters, the bet could prove a costly detour. Like any bitcoin acquisition, the Salvadoran state took a gamble and, so far, it’s unclear whether they’ve broken even.

Ultimately, this story lingers as a study in political branding as much as financial engineering. Bitcoin, mass incarceration, and aggressive social media messaging formed an intriguing political strategy: that of spectacle governance. It was never purely about remittance fees or wallet downloads; it was about narrative – projecting modernity, flexibility, and technological audacity. The headlines have faded, the protests quieted, and the price charts oscillated. What remains is a government that chose to tie its fiscal identity to an algorithmic asset and challenged the market to disagree. In the end, El Salvador may not have proven that bitcoin works as a national currency. But it did prove something else: that in the age of social media politics, monetary policy can double as global marketing.

Leave a comment

Share