Nayib Bukele sticks to ‘Bitcoin piggy bank’ strategy, but is it working?

If El Salvador’s President Nayib Bukele stood firm on his country’s Bitcoin gambit during the darkest days of the last crypto winter, it’s hard to imagine him backing off now—with Bitcoin surging past $100,000 and a pro-crypto Trump administration on the White House.

In December 2024, the El Salvador made headlines when it announced a new IMF deal, injecting fresh momentum into its debt-laden economy and providing crucial financing for the future. The agreement also marked what appeared to be a truce with traditional financial markets, which had long viewed El Salvador’s Bitcoin gamble with skepticism.

However, the deal—still awaiting IMF board approval—came at a personal cost for Bukele. El Salvador, the first country to adopt Bitcoin as legal tender in 2021, must now relinquish its mandatory acceptance policy and make Bitcoin usage voluntary for businesses. Additionally, the government must refrain from collecting taxes in Bitcoin, potentially signaling a retreat from Bukele’s ambitious crypto agenda.

Yet Bukele remains undeterred. Shortly after the deal was announced, El Salvador doubled down, buying over two dozen Bitcoin in the first weeks of January. This accumulation strategy has yielded significant profits but also strained ties with the IMF.

Now, with President Trump pushing for cryptocurrency expansion in the US and exploring a national digital asset reserve, Bukele is doubling down—confident that Bitcoin’s best days, and El Salvador’s bet on it, are still ahead.

A Trump boost to Bitcoin

“This year, with Trump’s inauguration and the coming of age of Bitcoin ETFs, will be crucial for both Bitcoin and the broader ecosystem…and we’re reaping the benefits,” Bukele said at a press conference on Jan. 14.

He predicted “a probably exponential” surge in value with the Republican president now leading the world’s largest economy, and with Bukele as one of the few, select guests to his inauguration ceremony—an event he ultimately would not attend.

Indeed, 2024 ended on a high note for Bukele. Once notorious for having one of the highest homicide rates in the world, El Salvador wrapped up the year as one of the safest countries in Latin America. Meanwhile, Bitcoin—boldly incorporated into the country’s national reserves—soared past $100,000 following the US election. To top it off, the IMF deal offered a pathway to ease El Salvador’s debt burden.

While some IMF conditions may constrain Bukele’s ambitions, experts argue the trade-off is worthwhile. Compliance would allow for a $1.4 billion loan, providing much-needed financial relief and marking a return to the international financial fold after years of relative isolation.

“The IMF doesn’t mind the government promoting Bitcoin use voluntarily, but it does take issue with it being declared legal tender,” said Carlos Acevedo, a former Central Bank of El Salvador governor, in an interview with Cointelegraph.

“At this point, it’s clear that the financial risks the IMF warned about have not materialized. This deal, in turn, opens the door to new financing from other multilateral agencies.”

Is El Salvador the new Singapore?

Through a consistent accumulation policy, El Salvador’s Bitcoin holdings have now swelled to over 600 BTC (BTC). At current market rates, these holdings total nearly $600 million, making up almost 15% of the country’s total international reserves. According to Bitbo, this places El Salvador sixth in the world for sovereign Bitcoin holdings.

“You can call it our first Bitcoin piggy bank,” Bukele said last year after transferring the country’s crypto holdings to a cold wallet.

Reelected in 2024 after a landslide victory, Bukele’s presidency has been marked by a controversial but widely supported crackdown on organized crime, which has led to mass detentions and drawn criticism from human rights groups. Despite this, his hardline approach has earned him widespread popularity among Salvadorans.

But Bukele’s vision for the country extends beyond public safety. Leveraging his background as an advertising executive, he is on a mission to rebrand the small, resource-scarce nation as a global cryptocurrency haven to attract international investors and grow its economy.

El Salvador is gradually becoming a hotspot for crypto firms thanks to its crypto-friendly regulations. Recently, Tether, a dominant force in the stablecoin market, announced it would relocate to El Salvador after securing a license as a digital asset service provider. The co-founders of USDT, the world’s biggest stablecoin, have even moved their residences to the country.

“The profit from Bitcoin investment is just a number; it doesn’t mean much compared to the brand value of the whole project,” said Stacy Herbert, head of El Salvador’s National Bitcoin Office, in an interview with Cointelegraph.

“For a tiny country like El Salvador, the Bitcoin initiative was the greatest rebrand in history, with millions of dollars worth of free publicity.”

Herbert added that other crypto companies are also in the process of securing licenses. According to Guilherme Rebane, a partner at digital asset trading firm Nonco, El Salvador’s tailor-made regulations for Bitcoin and the broader crypto sector, combined with strong industry momentum, bode well for the industry in El Salvador.

“We can expect greater interest from companies looking to explore opportunities here, and Tether’s move has certainly drawn increased attention,” he said.

Indeed, having one foot in this Bitcoin-friendly nation is seemingly becoming a powerful marketing tool as well.

“My impression is that Tether is coming to El Salvador as a way to expand its global reputation,” said Eloísa Cardenas, Chief Innovation Officer at Monetae, an El Salvador-based exchange.

“While Tether is the largest player in the stablecoin market, its reign won’t last forever. The company needs to position itself strategically in places where its reputation can continue to grow.”

Related: Failure or 5D chess? El Salvador IMF deal walks back Bitcoin adoption

Bitcoin use and adoption challenges remain

Despite the global attention El Salvador’s Bitcoin strategy has garnered, local adoption has been less encouraging.

A recent poll revealed that just 7.5% of Salvadorans have used Bitcoin so far. During a visit by a Cointelegraph reporter, some locals displayed a lack of understanding about using Bitcoin, and establishments advertising Bitcoin payments were unable to process transactions reportedly due to technical issues.

While Bukele’s security policies have propelled him to a landslide 85% victory in the 2024 presidential elections, not everyone is sold on his Bitcoin pursuit.

“I hardly know anyone who uses Bitcoin for everyday transactions,” said Acevedo, the former central banker. “Even for those who invest in Bitcoin, it requires a certain income level that most of the population does not have—80% earn minimum wage.”

Some residents argue that the nation’s “piggy bank” could be put to better use. “This Bitcoin investment would be better spent on schools, hospitals, and job opportunities,” said Salvadoran citizen Cristian Castillo in an interview with regional media.

Looking ahead

Despite the concerns around El Salvador’s strategy and the adoption hang ups, experts continue to back Bukele’s strategy, which has so far produced significant returns.

“I don’t think the government’s decision to keep accumulating Bitcoin at a steady pace is wrong; it will continue to grow in value,” Acevedo said.

“The issue in El Salvador’s case has been the lack of transparency. When it comes to reserve assets managed by the central bank, there’s complete transparency. But with Bitcoin, unless the president tweets something, we don’t really know much.”

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.