Lessons from the failure of El Salvador's Bitcoin experiment

Source: Cointelegraph Original text: "Lessons from the Failure of El Salvador's Bitcoin Experiment"

The view comes from: Kadan Stadelmann, Chief Technology Officer of the Komodo platform.

The International Monetary Fund (IMF) wants to suppress you. Just look at El Salvador; President Nayib Bukele abandoned the Bitcoin (BTC) legal tender revolution in favor of international development loans. The new status quo is clear: while the country can accumulate and hold Bitcoin, the people cannot use it as legal tender. Instead, they must continue to rely on fiat currency.

The International Monetary Fund, as a financial institution of the United Nations, has long played an important role in economically colonizing emerging countries on behalf of multinational corporations, banks, and the interests of the United States government.

The IMF operates by providing development loans for construction and engineering projects in developing countries. To obtain these loans, nations typically agree to balance their budget deficits, reduce public spending, open up markets, and privatize economic sectors. For El Salvador, this also includes stifling the Bitcoin revolution and suppressing opposition—Bitcoin supporters. This is referred to as "conditionality."

The IMF stated: Ban the use of Bitcoin.

El Salvador became the first country in the world to adopt Bitcoin as legal tender in 2021. President Bukele has stated that he introduced Bitcoin as legal tender to free the people of El Salvador from the constraints of the central bank.

However, he also stated that the acceptance of Bitcoin on the main street of El Salvador is relatively slow. Bukele pointed out that this is the least popular measure taken by his government. According to a survey by the Universidad Francisco Gavidia in San Salvador, about 92% of Salvadorans did not use Bitcoin in 2023.

The revolution seems to be dead. El Salvador is forced to scale back its Bitcoin agenda in order to attract development funds from the IMF and quickly retract its legal framework supporting Bitcoin. To secure a $1.4 billion credit line, Bukele chose to do what the IMF demanded: to withdraw the plan to make Bitcoin a national currency. The IMF stated that this was to mitigate the risks associated with Bitcoin.

The development institution has forced the Salvadoran government to reduce Bitcoin purchases and no longer accept Bitcoin as a means of tax payment. Bukele has also repealed the law requiring businesses to accept Bitcoin. Meanwhile, the IMF stated that activities related to Bitcoin in the public sector will be restricted.

Central American countries will also gradually reduce their cooperation with Chivo, which is the Bitcoin electronic wallet launched by El Salvador in 2021. The plan is to privatize or shut down Chivo. As for how many people use this digital wallet, it is unclear to the outside world.

In 2021, the Salvadoran government spent $200 million on building Bitcoin infrastructure, including Chivo and Bitcoin ATMs. It also provided $30 in free Bitcoin to those who registered to use the wallet. Most people used Bitcoin to purchase goods or exchanged it for USD.

Despite the change in El Salvador's Bitcoin strategy, the government says it remains committed to Bitcoin. It can still accumulate bitcoins – look at the 12 bitcoins recently bought. Stacy Herbert, director of El Salvador's National Bitcoin Office, said that El Salvador will still buy bitcoin to continue building its bitcoin reserve strategy. El Salvador will no longer prioritize putting Bitcoin in the hands of the people. El Salvador continues to build up Bitcoin reserves, but the experiment as a fiat currency seems to be over.

IMF and Bitcoin

The Salvadoran government adopted Bitcoin as legal tender to allow ordinary citizens to enjoy the benefits of cryptocurrency. They can experience the feeling of holding a solid asset. People can also begin to understand the various drawbacks that central banks bring to society.

The IMF disagrees with this. It has been trying to reduce the opportunities for people to discover how robust assets can change the lives of low-income and disenfranchised individuals.

The IMF stated: "For the public sector, economic activities related to Bitcoin and the purchase and trading of Bitcoin will be restricted. Transparency, regulation, and oversight of digital assets will be strengthened to ensure financial stability, consumer and investor protection, and financial integrity."

When El Salvador adopted Bitcoin as legal tender in September 2021, the IMF warned of financial and legal risks, but the IMF recently stated that these risks have not materialized.

Bukele's deal with the "devil"

The IMF taking away the tools of financial liberation from the hands of the people is nothing new. Its dominance over resource-scarce countries has been a main theme of the post-World War II world.

In 2024, the IMF's colonial practices faced massive protests in Kenya, revealing the predatory nature of the IMF.

Protests call on Kenyan President William Ruto to withdraw the IMF-led austerity and tax bill.

This is merely another example of American colonial power sacrificing the interests of people in poorer countries to prioritize American interests. In Kenya and many other countries, the IMF continues to push for austerity measures, often freezing public sector bills.

"This global financial system was not built by us, nor was it built for us, so it cannot be the financial architecture that helps us today. This is the new colonialist wealth plunder," said Tunisian-American economist Fadhel Kaboub in an interview outside the IMF counter-summit in Marrakech, Morocco.

Despite the fact that the people of Africa have stood up against the IMF's colonial actions and debt control this year, Bukele has yielded.

The IMF, as a department of the United Nations, aims to unify economic policies globally and maintain the dominance of fiat currencies. Countries can accumulate Bitcoin, but IMF development assistance must be predicated on the country's abandonment of any idea of adopting Bitcoin as legal tender. This is the lesson from El Salvador.

The viewpoint comes from: Kadan Stadelmann, Chief Technology Officer of the Komodo platform.

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This article is for general informational purposes only and is not intended and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily reflect or represent the views and positions of Cointelegraph.