Bitcoin in El Salvador

On June 9, 2021, El Salvador's Legislative Assembly passed the Bitcoin Law with 62 out of 84 votes, making Bitcoin legal tender alongside the US dollar effective September 7, 2021. President Nayib Bukele championed the law, arguing it would promote financial inclusion for the estimated 70% of Salvadorans without bank accounts, reduce remittance costs (which account for roughly 24% of GDP), and attract foreign investment.

The government launched the Chivo wallet, a state-sponsored Bitcoin wallet that gave each citizen a $30 Bitcoin bonus for signing up. The wallet supported both Bitcoin and US dollar transactions and included a network of 200 Chivo ATMs across the country. However, the rollout faced significant technical problems, including wallet crashes, identity theft concerns, and bugs that allowed some users to claim multiple bonuses.

In January 2025, El Salvador amended the Bitcoin Law as part of a $1.4 billion loan agreement with the International Monetary Fund (IMF). The key changes made Bitcoin acceptance voluntary for businesses rather than mandatory and reduced the government's direct involvement in Bitcoin-related activities. Despite these concessions, El Salvador continues to hold and accumulate Bitcoin, and Bukele has positioned the country as a global hub for Bitcoin innovation.

El Salvador offers one of the world's most favorable tax environments for Bitcoin. The Bitcoin Law specified that Bitcoin gains would not be subject to capital gains tax, making El Salvador a zero-tax jurisdiction for Bitcoin profits. This provision was designed to attract foreign Bitcoin holders and investors to the country.

The tax exemption applies to both individuals and businesses. Foreign income is generally not taxed in El Salvador, and Bitcoin received from abroad is treated no differently. The country has no property tax on Bitcoin holdings, no wealth tax, and no inheritance tax on digital assets. This combination has attracted a growing community of Bitcoin entrepreneurs, developers, and investors who have relocated to El Salvador.

El Salvador has also introduced Bitcoin-denominated government bonds, known as "Volcano Bonds," intended to raise capital for infrastructure projects including a planned Bitcoin City near the Conchagua volcano. The bonds offer investors exposure to Bitcoin price appreciation alongside a fixed coupon. While the project has faced delays, it represents an unprecedented experiment in sovereign Bitcoin finance.

Adoption of Bitcoin for everyday transactions in El Salvador has been mixed. The Chivo wallet was downloaded by roughly 4 million Salvadorans (out of a population of 6.5 million) in its first year, largely driven by the $30 signup bonus. However, surveys by the National Bureau of Economic Research (NBER) found that most users stopped using Bitcoin after spending their bonus, with only about 20% of businesses that downloaded Chivo continuing to accept Bitcoin transactions regularly.

Remittances, which the Bitcoin Law was partly designed to improve, have shown modest adoption. Companies like Strike and other Lightning Network-based services offer lower-cost remittance options compared to traditional providers like Western Union. However, the majority of remittances from Salvadorans abroad still flow through conventional channels, partly due to the volatility concerns of recipients who need stable purchasing power.

Despite the lukewarm everyday adoption, El Salvador has succeeded in attracting a vibrant Bitcoin community. The coastal town of El Zonte (Bitcoin Beach) has become a pilgrimage site for Bitcoin enthusiasts, with local businesses accepting Lightning Network payments. International Bitcoin conferences and events are now regularly held in the country, and a growing number of expatriates have relocated to take advantage of the Bitcoin-friendly environment.

El Salvador has pursued Bitcoin mining using geothermal energy from its volcanic resources. The country sits on the Pacific Ring of Fire and has significant geothermal capacity. President Bukele announced in June 2021 that the state-owned geothermal company LaGeo would provide clean energy for Bitcoin mining operations near the Tecapa volcano.

The geothermal mining operation has been modest in scale, producing a relatively small amount of Bitcoin compared to industrial mining operations in the US or other major mining countries. However, the symbolic value is significant: El Salvador can claim to mine Bitcoin using 100% renewable energy, countering environmental criticisms. The project has generated international media coverage and reinforced El Salvador's branding as a Bitcoin-forward nation.

Infrastructure development includes plans for Bitcoin City, a tax-free zone near the Conchagua volcano that would be powered by geothermal energy and financed partly through Bitcoin bonds. The project envisions a planned city with no income tax, no property tax, and no capital gains tax, funded primarily through a 10% value-added tax. While the timeline has slipped from original projections, the concept represents the most ambitious national Bitcoin infrastructure project ever proposed.