El Salvador became the first country to adopt Bitcoin as legal tender.
The government hoped adoption would support economic development and attract international investors.
Some citizens initially welcomed the move. A Central American University survey showed that 56% of respondents downloaded the government wallet.
The survey also found that 36% used Bitcoin at least once monthly.
Meanwhile, 14% of businesses conducted Bitcoin-related transactions. Bitcoin accounted for 2% of remittance payments. Since then, Bitcoin usage among businesses and citizens has declined sharply.
Why has Bitcoin usage fallen in El Salvador?
Bitcoin usage in El Salvador has nearly disappeared, according to recent reports. Bitcoin Core contributor Jon Attack said major restaurants accepting BTC had gone more than a month without payments.
Attack also said his payment was the only transaction received by Bitcoin Beach during August.
On top of that, Bit Faced reported that Bitcoin usage had fallen more than 99.8% since its legal-tender adoption. The decline reflected a broader shift in how Salvadorans viewed Bitcoin.
Reports attributed the drop to changing sentiment.
Investors increasingly viewed Bitcoin as a long-term holding. Many Salvadorans therefore returned to card payments. Those holding Bitcoin preferred to wait for future gains rather than spend it daily.
That HODL mindset reduced merchant payment activity. Government policy changes added further pressure.
The IMF pushed El Salvador to remove mandatory Bitcoin acceptance for merchants. The change formed part of a $1.4 billion loan agreement.
El Salvador also agreed to reduce its Bitcoin purchases. These changes weakened support among Bitcoin skeptics. Meanwhile, supporters increasingly treated BTC as a holding rather than a payment method.
Is El Salvador still buying Bitcoin?
El Salvador continued accumulating Bitcoin despite declining usage and IMF restrictions. Since passing its Bitcoin law in 2021, the country has purchased 7,754 BTC worth approximately $608 million.
The government continued holding BTC as a long-term treasury asset. That suggested Bitcoin’s role in El Salvador had shifted from everyday payments toward reserve holdings.
The country’s experience also reflected Bitcoin’s broader market evolution.
Bitcoin was increasingly viewed as a long-term store of value rather than merely a payment method.
Final Summary
- El Salvador adopted Bitcoin as legal tender in 2021. Bitcoin usage reportedly declined by more than 99.8%.
- Only 14% of businesses initially conducted Bitcoin-related transactions.
