El Salvador and Bitcoin: What the Experiment Shows About Trust in Money

Why a small country asked a big question about money

Money works as long as everyone believes that others will accept it too. Most of the time nobody notices. El Salvador tested this assumption in an experiment without precedent: an entire country was to use a cryptocurrency as everyday money, with a law, an app, and a sign-up bonus.

This article therefore asks: Can a state create trust in a new money by law, and what follows for businesses deciding on new means of payment? To answer it, we first clarify what money has to do, then trace events since 2021, weigh two explanations for the outcome, and finally derive what an owner can take from it.

What money has to do: three functions

Economics describes money through three functions. This simple model is well suited to structuring the experiment, because a new money must fulfill all three to take hold.

Behind all three functions lies trust: the expectation that the money will still be accepted tomorrow and be worth roughly as much as today. This trust arises from habit, from stable institutions, and from the number of others who use the same money. An analogy makes the last point tangible: a telephone is only useful if the people you want to call have one too. Economists call this a network effect.

El Salvador already had experience with a currency change. Since 2001, the US dollar has been the official currency there, and the national colón disappeared from daily life. Bitcoin therefore did not arrive as a replacement for a weak national currency, but as a second currency alongside a dollar people already trusted.

How the experiment has unfolded since 2021

1. September 2021: bitcoin becomes legal tender

   The Bitcoin Law enters into force on September 7, 2021. Businesses must in principle accept bitcoin, and taxes and debts can be settled in it. The government launches the Chivo Wallet app, which lets people send bitcoin and dollars without fees, and pays every user a sign-up credit.

2. 2022 to 2024: low usage

   Surveys and analyses show that most people barely used the app after the sign-up credit. The state nevertheless keeps buying bitcoin for its own reserves.

3. December 2024 to February 2025: IMF loan

   El Salvador agrees with the International Monetary Fund on a program of about 1.4 billion US dollars over 40 months. The Fund's Executive Board approves it on February 26, 2025. One condition is to scale back the state's role in bitcoin.

4. January 2025: mandatory acceptance ends

   Congress amends the law on January 29, 2025, by 55 votes to 2. Businesses no longer have to accept bitcoin. According to press reports, taxes are collected only in dollars.

5. 2026: withdrawal from the state app

   On October 1, 2026, the IMF Executive Board completes two reviews and releases about 138 million dollars. Majority ownership of the state app has been transferred to a private operator. The Fund grants a waiver for missed targets on bitcoin purchases; no further purchases beyond documented donations are envisaged.

Whether bitcoin formally remains legal tender after the reform is described differently in reports. Without mandatory acceptance, however, it lacks the feature that makes legal tender matter in daily life. In September 2026, Bloomberg reported that the government is building an app with a private partner for dollar-pegged stablecoins, that is, digital dollars, mainly for remittances from abroad.

What the figures show about usage

The most thorough study comes from Alvarez, Argente, and Van Patten (2023), published in the journal Science. They surveyed 1,800 households face to face in a nationally representative sample and also analyzed all identifiable transactions of the state app on the blockchain. Their result: bitcoin was hardly used as a means of payment. Most downloads occurred at launch; afterwards, usage and remittances through the app declined.

As the main barriers, the authors name privacy and transparency concerns, high costs of getting started, and resistance among businesses. Another finding stands out: bitcoin was used mainly by people who were already wealthy and had a bank account. The widespread expectation that cryptocurrencies would mainly help people without bank accounts was not confirmed.

The 2024 survey is based on 1,266 interviews in December 2024 with a margin of error of about 2.75 percentage points. According to IMF figures cited by Bloomberg, only about 1.75 percent of remittances from abroad went through crypto wallets. For a country where such remittances play a major role, that is a clear finding.

Two readings: culture or costs?

Why did bitcoin not catch on? There are two explanations that should be kept apart.

The cultural reading sounds plausible but reaches less far than one would expect. It does not explain why wealthy people with bank accounts in particular were more likely to use bitcoin, and it would also be expected in many other countries with high uncertainty avoidance. The economic reading, by contrast, matches the findings of Alvarez, Argente, and Van Patten (2023): people who already have a stable money switch only if the new one brings a clear advantage. I therefore consider the economic explanation the sounder one. A cultural influence cannot be ruled out from the available figures, but it cannot be demonstrated either.

A law can require that a money be accepted. It cannot require that people trust it.

What the experiment means for payments in your business

For a business in Germany, El Salvador is far away. The mechanics are not. Every new means of payment must pass the same test: do enough others accept it, is its value reliable, and does it bring an advantage that outweighs the effort?

The situation in the euro area is similar. According to the European Central Bank's survey for 2024, 9 percent of respondents own crypto-assets, most of them as an investment rather than for payments. The article Crypto as a means of payment describes how to decide whether crypto payments make sense for your business. Holding bitcoin as a business asset is covered in Bitcoin on the balance sheet.

The money test: three questions for every new means of payment

1. Who already uses it?

   Count how many of your customers and suppliers use it or ask for it. Without other users, every means of payment remains a showpiece.

2. What will it be worth tomorrow?

   Check whether its value is stable or whether you must convert to euros immediately to limit your price risk.

3. Which problem does it solve?

   Name a concrete advantage, such as cheaper international payments. If there is none, introducing it costs effort without benefit.

The turn toward stablecoins is noteworthy. It shows that the technology itself can be useful for transfers when the value is tied to a familiar currency. What the EU rules provide for is covered in Stablecoins and MiCA. The planned digital euro will also have to be measured against the same question: whether people and businesses want to use it, not merely whether they may.

What carries over and what does not

The case can be transferred only to a limited extent. El Salvador is a small country of about six million people that already uses the dollar and depends heavily on remittances from abroad. The surveys capture usage, not each individual's reasons. And the app data show only transactions that can be attributed to it.

Nevertheless, the case supports a general rule that goes beyond crypto-assets. Trust does not arise from announcements but from reliability, habit, and usefulness. That applies to money, to new tools in a business, and to brands. Why trust matters economically too is the subject of the essay Trust as an economic factor.

Conclusion: trust in money cannot be decreed

To the guiding question: El Salvador tried to create a new everyday money with a law, an app, and a sign-up bonus. The result is clear. Bitcoin was hardly used for payments, mandatory acceptance ended in 2025, and the government now relies on digital dollars for payments. A state can permit and mandate a means of payment. But the trust that makes money money arises only when it reliably fulfills its functions and enough others use it.

For your business, this means: decide on new payment methods based on demand and benefit, not headlines.

• Count how often customers asked for a new payment method in the last twelve months.
• Run the money test for every requested payment method and note the result.
• For payments in volatile assets, decide that they are converted into euros immediately.
• Set a date in six months to review the decision with new figures.