El Salvador, Bitcoin and Bukele: Audit of a Political Laboratory
In 2021, El Salvador became the first country to adopt Bitcoin as legal tender. The experiment was meant to cut the cost of diaspora remittances, boost financial inclusion, and loosen the country's dependence on the dollar. Five years on, the balance sheet cannot be separated from that of Nayib Bukele, a popular president who restored security at the cost of growing concentration of power.
The country is neither the Bitcoin utopia originally celebrated, nor a regime that can be summarized without accounting for the gang trauma that preceded it. The Cryptoast documentary and the Hardisk documentary both reveal a political laboratory with contradictory results: security transformed daily life, Bitcoin adoption largely missed its target, and management of the national reserve remains opaque.
Before Bukele, a country governed by fear
Understanding Bukele's popularity requires going back to the El Salvador that preceded him. The civil war, which ended in 1992, killed roughly 75,000 people and drove mass emigration, particularly to the United States. Gangs like MS-13 and Barrio 18 formed in Los Angeles before US deportation policies helped implant them in a country still too fragile to absorb them.
These organizations gradually took control of entire neighborhoods. Extortion, forced recruitment, assassinations, and invisible borders defined life for millions of Salvadorans. Before monetary freedom, the first freedom to be reclaimed was simply the ability to move around without risking your life.
The break with that reality is undeniable. The official homicide rate, which peaked at 105 per 100,000 inhabitants in 2015, has dropped sharply. Residents can again cross neighborhoods that were previously off-limits, and the country has changed its image for foreign visitors. That transformation explains much of the support Bukele still commands.
Security restored, and its political cost
This security achievement rests on a state of exception in force since March 2022, and on mass arrests. By May 2026, Human Rights Watch estimated that more than 91,000 people had been detained under that framework. Human rights organizations have documented arbitrary detentions, torture, enforced disappearances, and deaths in custody. Thousands of detainees have also been released, which confirms that not all had established links to gangs.
The debate cannot be reduced to a choice between security and European naivety. The decline in violence is a concrete gain for the population, but it comes alongside a rollback of judicial guarantees and institutional checks.
This concentration of power crossed a new threshold on July 31, 2025. The Legislative Assembly, dominated by Nuevas Ideas, approved indefinite presidential re-election, extended the term from five to six years, and eliminated runoff elections. The question is no longer whether Bukele can remain in power long-term. Legally, he now can. The real question is what happens to institutions if security effectiveness continues to legitimize political exception.
Bitcoin, a good idea imposed from above
The Bitcoin adoption did respond to real problems. El Salvador has used the dollar since 2001, diaspora remittances are a major pillar of its economy, and a significant portion of the population remains unbanked. Bitcoin could offer a payment rail less dependent on intermediaries, and a savings tool accessible without permission.
The government, however, prioritized speed and communication over depth. The Chivo wallet, state-controlled, offered the equivalent of $30 in BTC to every user who registered. Many collected the bonus and immediately converted or withdrew it in dollars. For low-income households, that was a rational choice.
The core failure was not the population's reaction, it was the method. Bitcoin was presented as a government app before it was taught as a monetary system. Part of the bonus budget could have funded education on private keys, Lightning, volatility, and the difference between Bitcoin and Chivo. Adoption would have been slower, but more durable.
⚡ Want to understand how the payment layer works? Read: What Is the Lightning Network? A Complete Guide
Initiatives like Mi Primer Bitcoin, Node Nation, and CUBO+ have since taken on that educational work. They may represent the most lasting lesson of the Salvadoran experiment. A state can create a legal framework and infrastructure, but it cannot decree understanding of a monetary system.
The IMF, the national reserve, and the Tether hypothesis
The sovereignty narrative grew more complicated with the deal struck with the International Monetary Fund. In February 2025, the IMF approved a $1.4 billion, 40-month program. El Salvador committed to making Bitcoin acceptance voluntary, limiting public sector involvement in BTC-related activities, exiting the state from Chivo, and banning Bitcoin for tax payments. The reform effectively stripped out the main features that had made BTC legal tender in the full sense.
During the program's first review, the IMF asked that public Bitcoin holdings remain unchanged. Yet the government continued to communicate about adding roughly one BTC per day to its public address. The contradiction is only apparent if those movements represent transfers from existing reserves rather than new purchases. A transaction visible on the blockchain reveals neither the acquisition date, nor its price, nor the origin of funds.
The Hardisk documentary raises a more sensitive hypothesis. Some movements could be linked to Bitfinex or Tether and represent consideration for their establishment in the country. Tether announced in January 2025 that it was finalizing its relocation to El Salvador following the granting of local licenses.
This hypothesis has not been publicly demonstrated and should not be presented as fact. But it highlights a real weakness: the government does not publish sufficiently detailed accounting to distinguish purchases, internal transfers, or potential agreements with private actors. A public address provides visibility, but not necessarily transparency over the full chain of decisions.
The paradox remains. Bitcoin was supposed to reduce El Salvador's dependence on the dollar and traditional financial institutions. The country now finds itself bound to an IMF program, while Tether, issuer of a dollar-backed stablecoin, occupies a growing place in its ecosystem. This proves neither an abandonment of Bitcoin nor a hidden arrangement. It shows that the initial sovereignty narrative was far simpler than the reality.
Security without institutional guarantees is not enough
Bukele's record does not fit neatly into the binary between miracle and dictatorship. The security turnaround has changed the lives of millions of Salvadorans. At the same time, the state of exception continues, judicial guarantees are eroding, and indefinite re-election makes political alternation increasingly uncertain.
The Bitcoin experiment follows the same logic. It put El Salvador on the map, attracted entrepreneurs, and gave rise to useful educational programs. It also showed the limits of top-down adoption, tied to a state wallet, a one-time bonus, and communication more ambitious than actual usage.
For another case study in Bitcoin as economic survival tool rather than political symbol, see our investigation: The Bitcoin Revolution in Iran.
The challenge now is to preserve security without institutionalizing the exception, and to make Bitcoin something other than a presidential symbol or an argument for foreign capital. Bitcoin can still play a role in El Salvador if it returns to being a tool of individual sovereignty, education, and verification. "Don't trust, verify" should not stop at central banks. The principle applies equally to governments that claim to love Bitcoin.
