El Salvador’s Bitcoin Adoption Struggles With IMF Pressure and Low Public Engagement, NGO Reports

Introduction: A Rocky Road for Bitcoin in El Salvador

El Salvador made history in September 2021 by becoming the first country to adopt Bitcoin as legal tender. However, nearly three years later, the nation’s bold experiment faces significant challenges. A recent report from a non-governmental organization (NGO) highlights two major obstacles: persistent pressure from the International Monetary Fund (IMF) and lukewarm public engagement with Bitcoin.

While President Nayib Bukele remains a staunch advocate for Bitcoin, the IMF has repeatedly urged El Salvador to reconsider its crypto-friendly policies due to financial stability concerns. Meanwhile, despite government efforts to promote adoption, many Salvadorans remain hesitant to use Bitcoin in daily transactions. This article examines these struggles in depth, analyzing the economic, political, and social factors shaping El Salvador’s Bitcoin journey.

IMF Pressure: A Persistent Challenge for El Salvador’s Bitcoin Policy

IMF’s Stance on Bitcoin as Legal Tender

Since El Salvador’s Bitcoin Law took effect, the IMF has consistently warned against its risks. The institution argues that adopting a volatile cryptocurrency as legal tender could undermine financial stability, increase fiscal vulnerabilities, and complicate monetary policy. In January 2022, the IMF’s executive board explicitly recommended that El Salvador reverse its decision, citing concerns over consumer protection and financial integrity.

Impact on Financial Relations

The IMF’s skepticism has had tangible consequences. Negotiations for a $1.3 billion loan—critical for El Salvador’s debt management—have stalled due to disagreements over Bitcoin regulation. The government has sought alternative financing methods, including Bitcoin-backed bonds (dubbed "Volcano Bonds"), but these have faced delays and regulatory hurdles.

Historically, the IMF has influenced economic policies in developing nations through loan conditions. El Salvador’s defiance of IMF recommendations places it in a precarious position—balancing sovereign monetary innovation against international financial pressures.

Low Public Engagement: Why Aren’t Salvadorans Using Bitcoin?

Government Efforts vs. Public Reception

President Bukele’s administration has aggressively promoted Bitcoin adoption through initiatives like:

• The Chivo Wallet (a state-backed digital wallet with $30 sign-up bonuses).
• Bitcoin ATMs across the country.
• Tax incentives for businesses accepting BTC.

However, reports suggest that public enthusiasm remains tepid. A 2023 survey by Central American University (UCA) found that only 20% of Salvadorans continued using Chivo Wallet after spending their bonus, with many reverting to cash or traditional banking.

Barriers to Adoption

Several factors contribute to low engagement:

1. Volatility Concerns: Many citizens fear losing value due to Bitcoin’s price swings.
2. Technical Barriers: Rural populations face internet access challenges, limiting wallet usage.
3. Trust Issues: Some distrust government-backed financial tools due to past corruption scandals.

Compared to early projections of mass adoption, real-world usage has fallen short—highlighting the gap between policy ambition and grassroots implementation.

Comparing Past and Present: Has Bitcoin Benefited El Salvador?

Early Optimism vs. Current Realities

When Bitcoin was first adopted, proponents argued it would:

• Boost financial inclusion for the unbanked (70% of Salvadorans lacked bank accounts pre-2021).
• Reduce remittance costs (remittances make up ~24% of GDP).
• Attract foreign investment and tech entrepreneurs.

While some progress has been made—such as increased crypto tourism and developer interest—the broader economic impact remains debated. Remittance savings have been marginal, with many migrants still preferring traditional services like Western Union due to familiarity.

Bitcoin Reserves: Profit or Gamble?

El Salvador’s Treasury holds 2,381 BTC (worth ~$150 million as of mid-2024), purchased at an average price of ~$44,300 per coin. While the government claims long-term conviction, critics argue this strategy exposes public funds to unnecessary risk—especially after BTC’s 2022 crash below $20,000.

Broader Implications for Crypto Adoption Worldwide

El Salvador’s experiment is being closely watched by other nations considering similar moves:

• Pro-Bitcoin Countries: Paraguay and Panama have explored crypto-friendly laws but remain cautious after seeing El Salvador’s struggles.
• Anti-Crypto Regulators: The IMF’s stance reinforces skepticism among central banks wary of decentralized currencies undermining monetary control.

The key takeaway? National crypto adoption requires more than legislation—it demands infrastructure, education, and trust-building among citizens.

Conclusion: What Comes Next for El Salvador and Bitcoin?

El Salvador remains committed to its Bitcoin experiment despite mounting challenges. However, success hinges on addressing:

1. IMF Relations: Finding a compromise that satisfies global financial institutions without abandoning crypto innovation.
2. Public Adoption: Enhancing education and accessibility to drive real-world usage beyond speculative holding.
3. Economic Stability: Ensuring BTC reserves or bonds don’t jeopardize fiscal health during market downturns.

For crypto enthusiasts, El Salvador serves as a critical case study—a test of whether a nation can thrive with Bitcoin at its core or if regulatory pushback and public reluctance will force a retreat. Moving forward, observers should monitor:

• The rollout of delayed Volcano Bonds.
• Shifts in IMF negotiations under Bukele’s second term (beginning June 2024).
• On-chain data tracking BTC usage in Salvadoran transactions.

One thing is certain: The world is watching whether Bitcoin can succeed as national legal tender—or if El Salvador’s gamble will become a cautionary tale instead of a revolution.