Financial inclusion is a human right; yet, in many countries around the world, a significant number of adults are excluded from basic financial services due to social, geographical, and economic barriers.
This exclusion makes it hard for them to access resources such as savings accounts, credit, insurance, and payment systems, which are often taken for granted. Not only does this hinder personal wealth accumulation, but it also limits opportunities for broader economic development.
However, cryptocurrencies have emerged as a revolutionary solution that aims to address this problem faced by billions of people globally, providing an alternative payment option and empowering individuals to take control of their financial futures.
Cryptocurrencies have come a long way since the inception of Bitcoin, the pioneering digital asset, and today, it still draws attention from people who are watching popular trading pairs like BTCUSDT to make the most of the opportunities that this vibrant market offers.
When it comes to the adoption of crypto – more specifically, Bitcoin- as a tool for financial inclusion, El Salvador comes to mind as the first country in the world that embraced the asset as a legal tender, with President Nayib Bukele arguing at that time that the goal was to increase efficiency of remittances, increase private investment, and promote financial inclusion.
While not everything has worked as expected, El Salvador plays a crucial role in this mission to serve the unbanked, revealing trade-offs and potential risks, and offering policy lessons that could be beneficial for any country considering the use of crypto for inclusion purposes.
How El Salvador became the first Bitcoin country
The story of Bitcoin’s adoption as legal tender in El Salvador begins with President Nayib Bukele’s ambitious vision to transform the nation’s financial landscape. In June 2021, at the Bitcoin Conference in Miami, Bukele announced his intention to adopt Bitcoin as legal tender through an English-language video presentation, taking the crypto world by surprise.
Shortly after, the Legislative Assembly passed the “Bitcoin Law,” which required businesses to accept Bitcoin for services and goods, and stated that taxes could also be paid in BTC, while accounting could be done in dollars to help alleviate concerns surrounding volatility.
This experiment garnered international attention rapidly, and supporters of cryptocurrency celebrated it as a revolution in financial inclusion; yet, critics warned of risks, including volatility and fiscal exposure, among others.
While many Salvadorans showed enthusiasm for the adoption of Bitcoin, not everyone continued to use it actively, and El Salvador had a change of heart regarding Bitcoin’s status as a legal tender a few months ago, following pressure from the International Monetary Fund. The new law established clear boundaries to enclose Bitcoin transactions, meaning that, for example, it won’t be possible to pay taxes using the crypto asset.
Lessons from El Salvador’s Bitcoin experiment and the road ahead
Despite the abolishment of Bitcoin’s status as legal tender in El Salvador, the experiment isn’t over, as the country has ambitions to become a logistic and tech hub by raising awareness of new technologies and cryptocurrencies and promoting their adoption.
In March 2025, the government purchased more Bitcoin to achieve a total Strategic Bitcoin Reserve Fund of approximately $500 million. However, the loss of legal tender status will change the scope of the experiment. Nevertheless, looking ahead, all efforts could still pay off, provided that the right lessons are learned.
From the start, the adoption of Bitcoin in El Salvador faced practical challenges, as people hesitated to support the efforts of the government to promote it. Furthermore, the lack of trust in Bitcoin decreased its use in business considerably, and as such, the U.S. dollar remained the go-to currency.
When the IMF made public the first agreement for an Extended Fund Facility with the Bukele administration in December, one major condition was to roll back the use of Bitcoin.
As a result, El Salvador had to decide whether to keep Bitcoin as its legal tender or accept IMF support instead. Considering the limited success of the asset’s adoption policy, it was only logical to relinquish its legal tender status.
One of the main lessons from El Salvador’s experiment is the need to implement bold policies that fuel innovation, which would help Latin America to foster economic growth, especially in its administrative institutions.
Notably, innovation requires a trial-and-error approach, and while the adoption of Bitcoin as a legal tender didn’t have the expected outcome, the government is clearly better positioned currently to develop clear and robust regulatory frameworks, with the aim of facilitating the safe use of Bitcoin, as well as that of other cryptocurrencies.
By easing people’s concerns about the legal tender status, El Salvador can make efforts to develop robust regulations and foster citizen trust, ultimately using Bitcoin as a means to enhance financial inclusion.
The next important lesson is that state and private sector capacity are both essential for sustainable innovation. Progress utilizing new technologies such as blockchain and artificial intelligence requires access to information and communication technologies, and it’s worth noting that in El Salvador, a digital divide due to inequality limits access to the development of new technologies, which creates barriers to the adoption of Bitcoin.
The solution to closing the gap is regulatory innovation, and the good news is that El Salvador is making notable efforts by using temporary suspensions of regulations to enable experimentation and implement policies that boost regulation.
Notably, this financial inclusion is necessary to reduce inequality and highlights the third important lesson: crypto assets and regulation complement each other rather than being rivals, as is often considered.
If it doesn’t benefit from sound financial regulation, Bitcoin is considered volatile, which decreases its use. Innovation in crypto can simultaneously fuel regulatory innovation, therefore building state capacity.
Takeaway
El Salvador’s bold step to adopt Bitcoin as legal tender marked a turning point in the global conversation about financial inclusion and cryptocurrencies. While the experiment faced major challenges, the country’s willingness to innovate has undoubtedly left behind valuable lessons.
The rollback of Bitcoin’s status as a legal tender doesn’t signal the end of the journey, but rather a shift toward a more sustainable approach focused on building regulatory frameworks and fostering digital literacy.
Suppose the government, alongside its multilateral partners, can effectively tackle the potential risks, especially those related to financial intelligence; the Bitcoin experiment in El Salvador could ultimately have a favorable outcome.