There were several major difficulties with the roll-out of the digital wallet. The application was not available in several of the leading app stores, and suffered a series of configuration glitches, which ultimately resulted in access to the wallet being disabled until the lack of server capacity could be addressed.

Practical difficulties with the digital wallet

Due to concerns over El Salvador's adoption of bitcoin, many global investment ratings agencies downgraded their ranking of the country. The roll-out was accompanied by a noticeable worsening in governance, and rising tensions with the U.S. and the International Monetary Fund, at a time when the country was negotiating with the IMF on the subject of its debt. 

Opacity and lack of consensus

The official bitcoin price plunged 17% after BANDESAL (Banco de Desarrollo de El Salvador) purchased the equivalent of 21 million dollars (400 units) to set up the fund. BANDESAL then purchased a further 150 units of bitcoin (at a value equivalent to 7 million dollars), after which the market price suffered another drop.

Initial bitcoin price plunge in El Salvador

- Initial bitcoin price plunge
- Practical difficulties with the digital wallet
- Opacity and lack of consensus

University of Minnesota - Twin Cities

On 7 September 2021, El Salvador became the first country to adopt bitcoin as legal tender, through a law passed by the Legislative Assembly.  The Central Bank drew up technical standards to determine how the initiative would function, and the government provided citizens with a digital wallet and launched an educational program to inform the public about its roll-out.

El Salvador's adoption of Bitcoin as legal tender

Gorjon, Sergio. (2021). The Role of Cryptoassets as Legal Tender: The Example of El Salvador. Banco de España. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3944765

The Role of Cryptoassets as Legal Tender: The Example of El Salvador

The transition to accepting bitcoin as legal tender took just under three months, after president Nayib Bukele unveiled the plan at the Bitcoin 2021 conference. The initiative was passed via an expedited procedure, securing a qualified majority in the Legislative Assembly. 

History of El Salvador's Bitcoin adoption

- Slashing the cost of remittances
- Boosting financial inclusion
- Saving public funds

Arguments for El Salvador's Bitcoin adoption

- Brevity
- Role of US Dollar
- State-promoted alternatives
- Delegation of power

Key features of El Salvador's Bitcoin adoption

- Lack of popular support
- Exchange rate instability
- Jeopardization of government revenues
- Declining influence of monetary policy
- Financial market integrity

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