The lesson of El Salvador’s failed Bitcoin experiment

Opinion by: Kadan Stadelmann, chief technology officer of Komodo Platform

The International Monetary Fund wants to keep you down. Just look toward El Salvador for proof, where President Nayib Bukele abandoned his Bitcoin legal tender revolution in favor of international development loans. The new status quo has been made clear: while nation-states can stack and hold Bitcoin, the people cannot use it as legal tender. Instead, they must remain chained to fiat currency.

The International Monetary Fund (IMF), a financial arm of the United Nations, has long played a significant role in the economic colonization of emerging countries on behalf of a cabal of corporations, banks and the US government. 

The IMF’s modus operandi has been to give developing countries development loans for construction and engineering projects. To receive these loans, countries often agree to balance their deficits, squeeze public spending, open their markets and privatize sectors of the economy. And, in the case of El Salvador, kill the Bitcoin Revolution and squash the opposition — Bitcoiners. This is known as “conditionality.” 

The IMF says no Bitcoin for you

El Salvador became the world’s first country to make Bitcoin legal tender in 2021. President Bukele gave lip service to the idea that he introduced Bitcoin as a legal tender to free the Salvadoran people from the chains of central banking.

He has said, however, that the adoption of Bitcoin as tender by El Salvador’s Main Street has been slow. Bukele noted that it was the most unpopular measure his government had undertaken. According to a survey conducted by San Salvador University Francisco Gavidia, approximately 92% of Salvadorans did not use Bitcoin in 2023.

It appears the revolution is dead. El Salvador has been forced to scale back its Bitcoin agenda to attract development funds from the IMF, and take a quick step back on its pro-Bitcoin legal framework. To receive a $1.4 billion credit line, Bukele chose to do what the IMF required: revoke his plan for Bitcoin as a national currency. The IMF called it mitigating Bitcoin-related risks.

The development agency forced El Salvador’s government to reduce its Bitcoin purchases and no longer accept tax payments in Bitcoin. Bukele dropped the law requiring businesses to accept Bitcoin. Meanwhile, the IMF said the public sector’s Bitcoin-related activities will be restricted. 

Central American countries will also gradually scale back their partnership with Chivo, the Bitcoin e-wallet El Salvador launched in 2021. The plan is to either privatize or shutter Chivo. How many people use the digital wallet is not public. 

In 2021, the El Salvador government forked out $200 million to build out Bitcoin infrastructure, including Chivo and Bitcoin ATMs. It also offered $30 of free Bitcoin for those who signed up for the wallet. Most people used the Bitcoin to buy goods or exchanged it for dollars. 

Despite the changes to its Bitcoin strategy, El Salvador’s government says it remains dedicated to Bitcoin. It can still stack Bitcoin — look no further than its recent 12 Bitcoin purchase. Stacy Herbert, director of El Salvador’s National Bitcoin Office, said the country would still buy Bitcoin to continue building its strategy Bitcoin reserve. El Salvador will no longer make putting Bitcoin into the hands of the people a priority. 

The IMF vs. Bitcoin

The Salvadoran government made Bitcoin legal tender so that everyday citizens could enjoy the cryptocurrency’s benefits. They could experience holding a sound asset in their hands. They could start to understand the ills that central banks cast upon society. 

The IMF disagrees. It has intended to diminish the chances that people discover how sound assets can change the lives of people with low incomes and the disenfranchised.

Recent: El Salvador buys another 12 Bitcoin for country’s reserve despite IMF deal

“For the public sector, engagement in bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined,” the IMF stated. “Transparency, regulation, and supervision of digital assets will be enhanced to safeguard financial stability, consumer and investor protection, and financial integrity.”

When El Salvador made Bitcoin a legal tender in September 2021, the IMF warned of financial and legal risks, which it recently said never materialized. 

Bukele’s deal with the devil 

It’s nothing new for the IMF to keep the tools of financial liberation out of the hands of the people. Its dominion over under-resourced countries is a through-line of the post-World War II world. 

In 2024, the IMF’s colonial practices were met with mass protests in Kenya, which shed light on the predatory nature of the IMF. 

The protest called on President William Ruto to strike down an IMF-led bill for austerity and regressive taxes in the nations. 

It’s merely another case of the long arm of US colonial power prioritized at the expense of people experiencing poverty in underdeveloped countries. In Kenya and many other nations, the IMF continues pushing austerity measures, often freezing public sector bills. 

“This global financial architecture was not established by us, it was not established for us, so it cannot be the financial architecture that will help us today. […] That is neo-colonial wealth extraction,” Tunisian-American economist Fadhel Kaboub said in an interview outside the IMF counter-summit in Marrakech. 

While people in Africa this year stood up to IMF colonization and power over debt, Bukele submitted.

The IMF, functioning as an arm of the UN to homogenize economic policies worldwide, intends to maintain fiat currency dominance. Nation-states can stack, but the IMF’s development help must be contingent on nation-states abandoning any notions of Bitcoin as legal tender. That is the lesson of El Salvador.

Opinion by: Kadan Stadelmann, chief technology officer of Komodo Platform

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.