Bitcoin has been declared legal tender in El Salvador. This means that shops and businesses will have to accept Bitcoin payments.

Ignoring the price swings, how will that work in practice? Given the substantial transaction fees, how would Bitcoin transactions be economical for Salvadorans to move anything but (to them) huge amounts of money?

I haven't seen it mentioned in the context, but would the Lightning Network even be sufficiently mature and accessible to help there at all?

  • 1
    – user103136
    Jun 15, 2021 at 6:50
  • @Prayank Spending $8 on a coffee really illustrates the problem of using bitcoin in an impoverished nation. Others thinking it shows otherwise illustrates that some people have never been poor.
    – Dave
    Jun 17, 2021 at 12:38

3 Answers 3


It actually started as Lightning based initiative. Some people started to implement bitcoin as a payment system , using LN in a community in El Salvador: https://bitcoinmagazine.com/culture/on-the-coast-of-el-salvador-bitcoin-is-becoming-the-standard

Considering the success of the "experiment" they plan to expand it to the rest of the country.

But you are right that many articles forget to mention LN. Probably because it's still not well understood by many and bitcoin already mysterious enough like this.

  • The focus is not on shop purchases but on remittances from abroad.
  • The change in law doesn't come into effect until September 2021.
  • Use of Bitcoin is already legal in El Salvador.
  • El Salvador uses the US dollar and does not have its own fiat currency.

According to Reuters

The Central American country last week became the first country to adopt bitcoin as legal tender, with President Nayib Bukele touting the cryptocurrency’s potential as a remittance currency for Salvadorans overseas.

Monthly bitcoin transfers of under $1,000 - a proxy for money sent to the country from Salvadorans working abroad - totalled $1.7 million in May compared to $424,000 year earlier, U.S. crypto researcher Chainalysis found.

Such transfers hit a peak of $2.5 million in March, though a comparison with the previous year was unavailable.

El Salvador is heavily reliant on remittances. In 2019, transfers using traditional money totalled nearly $6 billion - around a fifth of GDP - one of the highest ratios in the world, according to the World Bank.

Other commentators have pointed out problems:

While any cryptocurrency can well facilitate more efficient transfers (without the charges banks impose), the significance of remittances to the Salvadoran economy points to another issue. El Salvador is a poor country, with one of the lowest rates of internet use in the Americas – 33% in 2017, according to World Bank data.

How many vendors, street hawkers or farmers are equipped to handle cryptocurrency transactions? US dollars will more than likely remain the default currency.

So small shops and businesses in El Salvador without the necessary technology are exempt from the new law.

The majority of transactions in El Salvador will continue to be paid in US dollars.

Update 2021-06-25

According to www.presidencia.gob.sv (machine translation into English)

President Nayib Bukele shared more details about how bitcoin will be used in El Salvador, as a legal currency as of September 7, showing certainty and confidence that Salvadorans can use this alternative in their daily economy.

"The government is going to see to it that this works," said President Bukele. For this, the authorities have created the electronic wallet "Chivo" , with which conversions from bitcoin to dollars can be made immediately. There will be a version of the application for individuals and another for companies.

The plan that has been designed by the Executive Branch has multiple guarantees, without affecting the potential to boost the economy. "Are there benefits? A lots of. Are there affectations? None, "said the president.

With the “Chivo” application, the conversion between dollars and bitcoin will be done at the moment: you only need to have a cell phone with internet access. The buyer decides if he uses the cryptocurrency to pay, or if he prefers to do it in dollars. The provider accepts the payment, and with the same electronic wallet, decides if that payment ends up receiving it in dollars or in digital currency.

"The use of bitcoin will be optional: no one will receive bitcoin if they do not want it," insisted the president.


It will simply be 99.9% custodial within Chivo, the official government wallet for Bitcoin and USD.

While any Bitcoin wallet is supposed to be allowed, the official wallet will be the only one with instant and commission free conversion to USD, guaranteed and executed by the government. It will also be the only one where people get the initial airdrop of $30.

The government will simply be the central wallet and payments processor.

Few will transact with actual Bitcoin - mostly tourists and maybe some remitances.

  • So most people will be using a government controlled wallet, isn't that Bitcoin In Name Only? Jun 25, 2021 at 14:44
  • Not even BINO. They will think dollars and see dollars. Jun 25, 2021 at 15:10

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.