Getting your Trinity Audio player ready...
|
Almost half a decade since El Salvador became the first country to make BTC a legal tender, the country faces backlash from industry advocates for not living up to its grand promises of a crypto paradise.
In a recent interview with Reuters, Quentin Ehrenmann, general manager at My First Bitcoin, a non-governmental organization (NGO) focused on Bitcoin adoption, expressed disappointment that El Salvador’s Bitcoin reserve has had limited impact on the population, and that the country’s loan agreement with the International Monetary Fund (IMF) may further hamper its ambitious BTC aims.
“Since the government entered into this contract with the IMF, Bitcoin is no longer legal tender, and we haven’t seen any other effort to educate people,” said Ehrenmann. “The government, apparently, continues to accumulate Bitcoin, which is beneficial for the government — it’s not directly good for the people.”
Last December, El Salvador was effectively forced to roll back on its Bitcoin laws by the IMF, as part of the international organization’s demands if it agreed to a US$1.4 billion loan for the country, which it eventually did in February 2025.
El Salvador also agreed not to purchase any new BTC, a commitment on which recent reports appeared to suggest it was reneging—continuing to buy BTC in contravention of the agreement. El Salvador’s crypto bro President, Nayib Bukele, has certainly done his part in propagating these rumors, to keep the dream of a crypto utopia alive.
However, a July IMF report showed that—despite Bukele’s proclamations to the contrary—El Salvador has in fact fallen in line with IMF demands and ceased buying more BTC.
In a post on X, Ehrenmann described El Salvador’s situation as: “No legal tender; no adoption (except in a few key places); stifled independent bitcoin education projects; gov in bed with the IMF; lack of transparency in comms; no gov accumulation; deception and shenanigans.”
He posed the question, “Is El Salvador still Bitcoin Country?”
El Salvador’s doomed Bitcoin romance
Long-term crypto advocate and self-styled “world’s coolest dictator” President Bukele made BTC legal tender in 2021 and started purchasing BTC with public money.
Amid the 2022 FTX crisis and the resulting downturn in the digital asset market, Bukele doubled down, announcing in November of that year that his government would buy one BTC a day, indefinitely. As of February 2025, its holdings had reached 6,250 BTC, valued at approximately US$740 million.
In January 2023, El Salvador’s parliament also passed landmark legislation that provided the framework for a BTC-backed bond, “The Volcano Bond,” which the government hoped would enable it to raise capital to pay down its extensive sovereign debt.
Unfortunately for the burgeoning crypto-state, despite the value of BTC rising substantially in the past few years—reaching an all-time high of US$122,838 on July 14, 2025—the BTC economy didn’t have the desired effect, and between 1991 and 2024 the national debt rose by approximately US$28.67 billion. By 2024, it amounted to about US$30.95 billion, with some predicting it to rise by around US$5.68 billion from 2024 to 2030, reflecting a clear upward trend.
While El Salvador’s BTC gambit did produce the promised fruit, it also had the negative side effect of hampering the country’s negotiations with the IMF for a much-needed loan. The legacy financial institution was reluctant to lend money to a country willing to spend it on “risky” ventures. As such, the IMF urged the government “to narrow the scope of the Bitcoin law.”
IMF saga
The IMF has never been comfortable with El Salvador’s BTC adventure, urging it to discontinue BTC’s legal tender status in 2021, citing “large risks” to its economic stability.
Thus, in December last year, to get its loan from the IMF, El Salvador agreed to the international money lender’s terms that it would halt further purchases of BTC with national funds. A deal that was eventually signed in February of this year.El Salvador also walked back on a mandate that merchants must accept Bitcoin as legal tender; Bukele’s government agreed to reduce its deficit by 3.5% of GDP by increasing taxes and cutting spending; and various anti-corruption measures, to enhance transparency and foster good governance, were also agreed.
Despite the IMF deal, Bukele remained unrepentant and bullish on Bitcoin, saying in a March post on X that further purchases were “not stopping. If it didn’t stop when the world ostracized us and most “Bitcoiners” abandoned us, it won’t stop now, and it won’t stop in the future.”
Shortly after agreeing to the deal, it appeared briefly as though he was following through on this promise—or threat—to ignore the IMF’s demands, and was continuing to buy more BTC. However, in July, the IMF published its first review of the US$1.4 billion financing agreement in a report that revealed there had been no new public BTC purchases for months.
The report concluded that El Salvadorian authorities “continue to comply with commitments not to voluntarily accumulate Bitcoin, nor issue Bitcoin-indexed/denominated debt or tokenized instruments that could create government liabilities.”
A letter attached to the review stated that “the stock of Bitcoins held by the public sector remains unchanged.”
Meanwhile, a footnote in the review also addressed the seemingly misleading reports of increases in El Salvador’s BTC holdings since the IMF deal, saying that “increases in Bitcoin holdings in the Strategic Bitcoin Reserve Fund reflect the consolidation of Bitcoin across various government-owned wallets.”
In other words, it appears that Bukele—a man who knows the importance of image and publicity—has been trying to have his cake and eat it: maintaining the illusion of a commitment to investing in the Bitcoin economy by shuffling around tokens they already own, while in reality cashing the IMF’s cheque and falling in line with its demands for more traditional and less risky monetary policies.
Unfortunately for Bukele, this had not gone unnoticed by the Bitcoin industry.
On July 17, Bitcoin advocate and journalist pseudonymously known as Joe Nakamoto posted on X, with a link to the IMF report, that “as many suspected, the IMF report suggests El Salvador has not been buying Bitcoin—just reshuffling it internally.”
Also commenting on this post, Ehrenmann of My First Bitcoin stated that it “seems like the government of El Salvador is trying to get the Bitcoin community to believe it is still accumulating Bitcoin when in fact it is just moving it around.”
Thus, ironically, despite being one of the pioneers of crypto adoption, El Salvador now finds itself beholden to an international money lender that is forcing the country to rein in its Bitcoin investments, just as strategic Bitcoin reserves are becoming increasingly in vogue, in the Trump 2.0 era.
Watch: Breaking down solutions to blockchain regulation hurdles