(6/9/2021)

El Salvador’s 2021 Bitcoin Legal Tender Move

bitcoin

Overview

“On June 9, 2021, El Salvador became the first country to adopt Bitcoin as legal tender, following a 62–22 vote in Congress approving President Nayib Bukele’s proposal, as reported by Reuters and detailed in a Harvard Business School case study. The law, effective September 7, 2021, mandated Bitcoin acceptance for goods, services, and taxes, sparking a 6% Bitcoin price surge to $35,200 and a 4% Ethereum rise to around $2,600. Bukele touted benefits for financial inclusion and remittances, but critics warned of macroeconomic risks.

The Announcement: A Global First for Bitcoin

On June 9, 2021, El Salvador’s Congress passed the Bitcoin Law with 62 of 84 votes, making Bitcoin legal tender alongside the U.S. dollar, which the country adopted in 2001. The law, championed by President Nayib Bukele, required businesses to accept Bitcoin for payments, allowed tax payments in Bitcoin, and guaranteed convertibility to dollars via a $150 million trust at BANDESAL, per Reuters. Bukele, inspired by the Bitcoin Beach project in El Zonte, highlighted benefits for El Salvador’s $27 billion economy, including financial inclusion for the 70% unbanked population, cheaper remittances (20% of GDP), and boosted investment and tourism.

Bukele proposed Bitcoin mining using volcanic geothermal energy and offered citizenship for investing three Bitcoins. The law, effective in 90 days, faced skepticism from the IMF, which warned of risks to El Salvador’s $1 billion loan talks, and credit agencies citing potential macroeconomic instability due to Bitcoin’s volatility. Local reactions were mixed, with some residents, like Estela Gavidia, expressing confusion over the unfamiliar currency, per Reuters.

Market Impact: Bitcoin and Ethereum Rally

Bitcoin surged 6% to $35,200 on June 9, its best day in two weeks, per CoinMarketCap, recovering from a May 2021 dip driven by China’s crypto ban and Tesla’s payment suspension. Ethereum rose 4% to around $2,600, reflecting broader market optimism. The total crypto market capitalization, near $1.6 trillion, gained $100 billion, countering recent bearish sentiment from regulatory crackdowns and environmental concerns.

The rally was fueled by El Salvador’s historic move, which legitimized Bitcoin as a national currency and signaled potential for wider adoption in emerging economies. Crypto supporters, including Digital Asset Capital Management’s Richard Galvin, saw it as a “key catalyst” for Bitcoin over two to three years. Retail and institutional investors, encouraged by Bukele’s pro-crypto stance, drove trading volumes higher on platforms like Coinbase, while altcoins like Cardano gained 3–5%.

Why It Mattered: A Bold Experiment in Crypto Adoption

El Salvador’s decision was a landmark for several reasons. First, it validated Bitcoin’s utility as a medium of exchange, challenging its speculative image. By mandating acceptance at places like McDonald’s, the law tested Bitcoin’s scalability for everyday transactions, supported by the Lightning Network and Strike’s digital wallet, as noted in the Harvard study.

Second, it highlighted crypto’s potential for financial inclusion. With 70% of Salvadorans lacking bank access and $6 billion in annual remittances, Bitcoin offered a cheaper, faster alternative to traditional firms, bypassing intermediaries. Bukele’s $150 million trust mitigated volatility risks, fostering trust among users.

Third, it sparked global debate. The IMF and credit agencies raised concerns about debt sustainability and money laundering, while crypto advocates hailed it as a model for dollarized economies like Colombia and India. The move pressured other nations to clarify crypto policies, amplifying regulatory discussions amid China’s 2021 crackdowns.

Long-Term Implications: A Blueprint for Crypto Nations

El Salvador’s adoption had lasting impacts. Bitcoin hit $69,000 and Ethereum $4,800 by November 2021, driven by institutional adoption and ETF approvals, with El Salvador’s move adding momentum. The country’s Chivo wallet, launched in September 2021, onboarded 2 million users by 2022, processing $1 billion in remittances annually. Despite volatility—Bitcoin fell to $16,000 in 2022—El Salvador held its Bitcoin reserves, valued at $400 million by 2024.

The experiment influenced other nations. Tanzania and the Central African Republic explored crypto adoption, while Paraguay eyed Bitcoin mining. Regulatory progress advanced, with the U.S. approving spot Bitcoin ETFs in 2024 and India implementing a 30% crypto tax in 2022. The focus on volcanic mining spurred sustainable crypto initiatives, aligning with Ethereum’s 2022 proof-of-stake shift, which cut energy use by 99.9%.

Challenges persisted, including IMF loan delays and local adoption hurdles due to technical complexity. Yet, El Salvador’s model demonstrated crypto’s potential to reshape economies, fostering innovation in DeFi and NFTs on Ethereum and driving global trading volumes on exchanges like Binance.

Conclusion: El Salvador’s Bitcoin Gamble Sparked a Global Shift

El Salvador’s June 9, 2021, adoption of Bitcoin as legal tender, the first globally, triggered a 6% Bitcoin and 4% Ethereum price surge, cementing crypto’s legitimacy. Bukele’s vision for financial inclusion and remittances faced skepticism but inspired emerging economies and sustainable mining efforts. The move catalyzed regulatory clarity and institutional adoption, proving crypto’s resilience and setting a precedent for its integration into national economies.

Disclaimer: This is not financial advice. Cryptocurrency investments are highly volatile and speculative. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.”

$BTC Price Then

$33380

$BTC Price (30D After)

$33185

% Difference

-0.584182145

Have a hack to report? Contact us. or Share this report

UEEx makes trading easier

Join the official Telegram Channel

©2025, UEEx All Rights Reserved FINTRAC Registered