from Hacker News

El Salvador abandons Bitcoin as legal tender

by smallerfish on 2/4/25, 12:00 AM with 858 comments

  • by portaouflop on 2/4/25, 2:07 AM

    IMF gave them 1.4 billion to abandon the “experiment”:

    > The IMF made this a condition for a loan of 1.4 billion US dollars (1.35 billion euros). In December of last year, the IMF reached an agreement with President Nayib Bukele’s government on the loan of the stated amount to strengthen the country’s “fiscal sustainability” and mitigate the “risks associated with Bitcoin,” as it was described.

    —-

    I dislike cryptocurrencies as much as the next guy but this was clearly something else than a failure of the currency itself

  • by ptero on 2/4/25, 12:17 AM

    That's heavy editorializing:

    El Salvador keeps buying the Bitcoin for its strategic reserve. Businesses and citizens can keep using it.

    But for getting an IMF loan, IMF (which, to put it mildly, doesn't like Bitcoin) required the end to Bitcoin legal tender status.

    Now the businesses are free to accept it or not instead of being required to accept it. That's all. The government plans to keep buying and using it.

  • by Mengkudulangsat on 2/4/25, 12:11 AM

    > The government, she assured, will continue buying bitcoin and having reserves in this cryptocurrency

    Sounds like the term "Failed Experiment" is the writer's assertion and not the government official position.

  • by starspangled on 2/4/25, 12:51 AM

    It's interesting and nice to see how progressive and creative El Salvador has been. Some failures are perfectly understandable when one is willing to try new things. Their approach to crime is another thing that comes to mind that was lambasted and ridiculed by the "international community" and "experts". Yet in the space of a single decade they went from murder capital of the world to safer than New Zealand (in terms of homicide rate), which is just staggering.

    I love that they are innovating and experimenting and trying their own things, and don't let the stuffy pompous status quo hold them back.

  • by ks2048 on 2/4/25, 12:26 AM

    Do pro-bitcoin people still talk about goals of bitcoin being a currency that people use daily?

    I don't follow it closely, but that idea seems to have faded and now it's just an asset to buy and hold while it magically goes up forever.

  • by wyck on 2/4/25, 12:14 AM

    They have made just over 300 Million off the initial BTC purchase, and as of 15 minutes ago, continue to buy BTC everyday.

    They even have their own tracker, https://bitcoin.gob.sv/

  • by twothreeone on 2/4/25, 12:34 AM

    I don't particularly like BTC (as it senselessly burns huge amounts of energy, thereby actively contributing to the destruction of our biosphere), but this news post is intentionally misleading. As reported by many other outlets (e.g. [1,2]), El Salvador abandons BTC to qualify for an IMF loan - so the IMF is pressuring them towards this move (presumably for political reasons).

    [1] https://finance.yahoo.com/news/el-salvador-changes-bitcoin-r... [2] https://www.msn.com/en-us/money/financial-regulation/el-salv...

  • by mkoubaa on 2/4/25, 12:14 AM

    PSA: If you don't like Bitcoin you might want to read the article before you post your knee-jerk reaction to avoid embarrassment.

  • by dhosek on 2/4/25, 4:25 AM

    Structurally, Bitcoin is a lousy idea for a currency as it is intrinsically deflationary (i.e., even without the speculative inflating of the cost of a Bitcoin, the structure of the coin is such that coins become increasingly scarce and expensive as time goes by). You do not want this in your currency. The ideal is a low-level of inflation which provides an incentive to spend sooner rather than later. With a deflationary currency, the incentive is to put off purchases as long as possible as your currency will buy more tomorrow than it does today. Deflation ends up being economically disastrous, as Japan’s battles with deflation over most of the twenty-first century have shown.

    This is why, aside from speculation, purchase of illicit goods and ransom payments, Bitcoin has had little traction as a currency.

  • by josu on 2/4/25, 12:29 AM

    Here is the retained purchasing power of each of the coins since the law was passed in September 2021:

    Legal tender 1: -15%

    Legal tender 2: +115%

    Guess which one has been deemed a "Failed experiment".

  • by sarcasmatwork on 2/4/25, 12:16 AM

    Misleading.

    Under the new rules, bitcoin is no longer considered "currency," though it remains "legal tender."

    https://reason.com/2025/02/03/el-salvador-walks-back-its-bit...

  • by fode on 2/4/25, 2:06 AM

    I spent three months in El Salvador before the Bitcoin Legal Tender law passed, then another three months after it was enacted.

    From day one, I knew it wasn’t going to work.

    That’s when I flew back to Miami, went back to the drawing board, and stopped being a Bitcoin maxi.

  • by AnotherGoodName on 2/4/25, 12:17 AM

    “Bitcoin success in El Salvador nets country $600million as bitcoin gains value.”

    https://apnews.com/article/bitcoin-elsalvador-bukele-musk-tr...

    It even seems that the above is a very minor change that in no way changes the outcome here. El Salvador did well and looks to continue to do well with its bitcoin policies.

  • by josu on 2/4/25, 12:20 AM

    While it is true that adoption remained relatively low, the reason why they abandoned it is that the IMF made it a condition for the Salvadorian government to be able to receive a 1.4B loan.

  • by epolanski on 2/4/25, 12:15 AM

    Nobody wants to spend it anyway, just hoard or sell it to the next sucker willing to shell more $.

    Among all the crypto shills I know I'm probably the only one who has used it for trade (0.25ish Bitcoins for a computer on caseking.de in late 2017 and few goodies on local bitcoin in the same year).

  • by modeless on 2/4/25, 12:17 AM

    Hmm, sounds more like an IMF requirement than something the government wanted to do. It's not news that the IMF is opposed to the use of Bitcoin as legal tender.

  • by riknos314 on 2/4/25, 6:30 AM

    An overview of a subset of the myriad issues that contribute to bitcoin being a very bad currency:

    https://github.com/theborakompanioni/bitcoin-spring-boot-sta...

  • by donohoe on 2/4/25, 3:35 AM

    The writing was on the wall way back in 2022. The launch was a dud. People were more likely to use the national wallets for stable-dollar coins then Bitcoin.

    https://restofworld.org/2022/el-salvador-chivo-bitcoin-walle...

  • by lacker on 2/4/25, 12:50 AM

    By branding itself as "crypto-friendly", El Salvador managed to get Tether to relocate there. That seems like a pretty big deal for a country that otherwise would never attract any sort of tech company.

    So I wouldn't call it a "failed experiment" per se - more like a publicity stunt that has achieved publicity.

  • by FreeTrade on 2/4/25, 2:57 AM

    Bitcoin (BTC) was hijacked and oriented away from use as cash. It was quite obvious BTC was no longer capable of functioning this way and that the LN wouldn't help.

    There were maybe a half a dozen other networks that might have made a more plausible and interesting experiment in testing crypto as a day to day currency.

  • by Jimmc414 on 2/4/25, 2:33 AM

    El Salvador invested approximately $269.74 million to acquire 5,900 bitcoins ($595 million) and secure $1.4 billion in IMF loans.

    I hope they can recover from this failed experiment.

  • by ChrisArchitect on 2/4/25, 2:32 AM

    Is there a new development here or same news as the IMF deal requirements 2 months ago:

    El Salvador to scale back Bitcoin dreams to seal $1.3B IMF deal

    https://news.ycombinator.com/item?id=42372064

  • by twodave on 2/4/25, 2:57 AM

    Didn’t we learn back in the 1500s that asset-backed currencies are unsustainable? Bitcoin will never, ever be able to take the place of a fiat currency because it carries with it many of the same problems as Spanish silver the conquistadors were traveling all the way to SOUTH AMERICA to mine half a millennium ago. It was essentially a very difficult proof of work. The only real advantage bitcoin has is that it’s easy to carry.

    Even when the entire world started selling off their gold to the US in the 30s and 40s it became obvious by the 70s that there wasn’t enough gold mining capacity on earth to sustain a global asset-backed currency.

  • by adamtaylor_13 on 2/4/25, 3:14 AM

    This was never going to work.

    To me, Bitcoin seems way more like an asset class, rather than a currency. (Despite the name which is a HUGE misnomer for the average layperson.)

    Nobody invested in Bitcoin believes you should be ordering pizzas or using it as an actual currency. Bitcoin is a long-term play.

    You can't make a currency out of something that's fluctuating by more than 10,000 USD in a 24-hour period.

  • by tim333 on 2/4/25, 8:51 AM

    Bitcoin as legal tender, as in something you are legally required to accept as a debt payment, is kind of a terrible idea. What if the person owed money has no idea how to muck around with private keys, not getting hacked and so on? Does your average small law firm who has to deal with legal stuff have any idea how to do that?

  • by zidad on 2/4/25, 7:36 AM

    Does anyone know how/if using BTC as daily currency works in practice? Can El Salvadorians just add it to their Google Wallet?

    I don't know much about cryptocurrencies but there seems to be a scaling issue, last thing I read it can only handle 7 transactions/s, is that still valid?

    If so, then how would this scale to a country-wide payment system?

  • by ffjffsfr on 2/4/25, 7:19 AM

    IMF forced them to drop, but if they want to use crypto as legal tender, why use BTC which has high transaction fees? Why not something with low or zero fees and efficient chain? There is million of crypto out there and most open source, so govt could even launch their own coin on top of existing chains.

  • by ArtTimeInvestor on 2/4/25, 7:05 AM

    This could be the IMF fighting fire with gasoline.

    The IMF is afraid of Bitcoin because it threatens the Dollar.

    The IMF bribes El Salvador to reduce their support for Bitcoin.

    El Salvador uses the bribe to buy more Bitcoin.

    If Bitcoin catches on around the world and the IMF is fighting it by throwing money at it, that could lead to an accelerated adoption curve.

  • by natmaka on 2/4/25, 3:59 AM

    Bitcoin's value: from mid-2022 to the end of 2023 it hovered between 20k and 30k USD, then 57k to 70k from February 2024 to October 2024, then from 90k to 110k since.

    Therefore during 2024 people having or obtaining it tend to keep it instead of spending it. Is it surprising?

  • by kkfx on 2/4/25, 11:24 PM

    The reason why BTCs are not much an usable currency for a whole economy is that they are a deflationary currency like gold, meaning the more time passes the less new BTC are created till the end with no creation at all. This means they will always more interesting to be stockpiled then spent. Also they can't decrease nor increase "as needed" the BTC base, meaning that if you are short of natural resources you can't reduce their usage tightening the number of circulating money.

    The idea behind BTC is very valid, but they can be more like the old ECU or CFA/CFP not money you normally use for day to day stuff.

  • by seltzered_ on 2/4/25, 7:49 AM

    Related: https://news.ycombinator.com/item?id=42014013 (discussion of 'A Week of Failing to Pay with Bitcoin in El Salvador')

  • by sporkydistance on 2/4/25, 12:40 AM

    Nothing says stability like a "currency" that swings +/-1000% in value.

  • by bzmrgonz on 2/4/25, 3:48 AM

    Maybe they put the cart before the horse. I understand some countries in Africa are having wonderful success with e-wallets. Perhaps El Salvador should have started with e-wallets before crypto to acclimatize the population.

  • by abdullahkhalids on 2/4/25, 12:18 AM

    In the 15 years since Bitcoin went viral, has someone proposed a reasonable social, legal and financial protocol for how a society can adopt a novel cryptocurrency without getting stuck in the phase where the cryptocurrency becomes a speculative asset rather than a common medium of exchange? By novel, I mean not using an existing cryptocurrency that is already stuck in the speculative asset phase.

    Surely, if a government wants the people in the country to use a novel cryptocurrency, it has a lot of levers of control which some distributed libertarian minded community simply doesn't.

  • by ddtaylor on 2/4/25, 12:39 AM

    As a cryptocurreny enthusiast I think the execution here and it's goals weren't aligned to begin with. It was nothing more than a custodial wallet and it was not implemented or deployed in any meaningful way. You can't write any useful smart contract to "do" anything and without any of that it doesn't compete for shit against centralized digital payment systems in terms of efficiency or simplicity.

  • by ipaddr on 2/4/25, 6:04 AM

    I heard they will be accepting American prisoners in exchange for money from the US. They will also hold US deportees from any country.

  • by ggm on 2/4/25, 5:22 AM

    For anyone else who enjoyed this tree, I enjoyed reading this book by Galbraith many years ago. I don't say you have to agree with him politically or economically, but as a basic introduction to the idea of money, and national economies, it's a great read.

    Money: Whence It Came, Where It Went. John Kenneth Galbraith. (1975)

    He had a very interesting life.

  • by 127 on 2/4/25, 7:29 AM

    I once bought video games from Steam with Bitcoin. Those were some expensive video games. Bitcoin is a completely new economic tool. It just doesn't seem to work that great as a traditional currency for day to day purchases.

  • by 65 on 2/4/25, 12:34 AM

    BTC doesn't work as legal tender since it's deflationary, has high fees, and is slow. Bukele got lucky gambling on BTC, perhaps now would be a good time to cash out.

  • by m3kw9 on 2/4/25, 1:27 AM

    How a currency increase or decrease in price so fast will affect how people spends it. It’s a bull market, yeah let’s wait for it to go up before buying that.

  • by kernal on 2/4/25, 5:17 AM

    Bitcoin as a currency was always going to fail. It’s a speculation instrument that wildly fluctuates. Satoshi sealed its fate by limiting it to 21000 coins.

  • by sub7 on 2/4/25, 6:48 AM

    They can buy 100 Lummis-es and 100 El Salvadors and bitcoin still won't have a use case outside of fraud and more suckers = number go up

  • by whimsicalism on 2/4/25, 1:59 AM

    because the imf demanded it of them. not much has changed from the structural adjustment era of IMF fiat, despite all the controversy

  • by strangescript on 2/4/25, 2:24 AM

    Shouldn't they be loaded right now with all the BTC they bought when it was low?

  • by EGreg on 2/4/25, 2:29 AM

  • by ggm on 2/4/25, 12:12 AM

    Speculative asset class fails as non-speculative legal tender class.

    If king for the day with a sovereign wealth fund I wouldn't forbid investment choices like this on risk grounds, I mean you need risk assets as well as boring ones, right? But I have problems with the moral quality: it's like state investing in the casino business. Monaco? works fine. Anywhere else? It's got problems.

    Like a lot of people, I probably fall into severe errors which would be bread and butter for "bad economics" reddit groups but truly, I can't see how this wasn't forseen and expected. It was about WHEN, not IF.

  • by ein0p on 2/4/25, 8:10 AM

    Bukele says on Twitter they're still buying Bitcoin.

  • by seinecle on 2/4/25, 6:09 AM

    Read the story as if from the Onion and it actually fits

  • by jongjong on 2/4/25, 6:16 AM

    Bitcoin is a lousy currency but I'm glad it's valuable because it shows how much of a scam the fiat system is. It's ALL a scam. ALL OF IT. What part of 'ALL' don't you people understand?

    When Bitcoin, a currency with a measly transaction throughput of 4 transactions per second max and which consumes more electricity than all of Argentina will be worth $1 billion per coin and every rich person around us will be a complete imbecile and every intelligent person will be broke, people will still not comprehend that the fiat system itself is the scam! Einstein was right, human stupidity is infinite.

    Bitcoin has been growing from strength to strength for almost 15 years now and worth almost 2 trillion market cap... Even if you think it's a bubble, then what's to stop everything else from being a bubble too? Nothing, that's what, it is a BUBBLE it is ALL a bubble and nothing but a bubble and a scam.

    Consider a system which can support a 2 trillion dollar scam for 15 years straight and ruin an entire generation of young people... What do you call such a system? That's not a sound system. How can you trust such system? What kind of gullible fool you have to be to trust such an obvious scam system?

    It's like the system found all the most gullible people on the planet then bribed them to the eyeballs, gave them access to global media platforms, so now they run everything and can force their delusions on everyone else.

    Did you people even hear about the recent USAID scandal or did it bounce right off your thick skulls? It's all a scam; whether you realize it or not; you're a scammer, your spouse is a scammer, your mum is a scammer, your dog is a scammer. We're all dealing in counterfeit money.

    I've been saying this over and over again for like 10 years straight. Every year what I'm saying is increasingly obvious, but people still don't get it. People's skulls have been getting thicker faster than the information could penetrate it.

  • by zombiwoof on 2/4/25, 3:31 AM

    What about $MELANIA

  • by pkrulz101 on 2/4/25, 5:12 AM

    They just added 11 BTCs to their reserves?

  • by k__ on 2/4/25, 12:16 AM

    "if someone owes you money and wants to pay you in bitcoin, you can refuse to be paid in bitcoin, but you cannot refuse if it’s legal tender"

    Wat

  • by hsuduebc2 on 2/4/25, 2:16 AM

    This is not really a surprise.

  • by outside1234 on 2/4/25, 12:43 AM

    Who could have predicted this

  • by october8140 on 2/4/25, 4:25 AM

    Has anyone in this thread used Bitcoin to buy anything in the last month? What was it?

  • by 9cb14c1ec0 on 2/4/25, 2:50 AM

    Sorry bitcoin enthusiasts. This was always the most likely outcome.

  • by WhereIsTheTruth on 2/4/25, 6:15 AM

    The people behind bitcoin perhaps thought of creating technologies for their respective CBDC

    But for the common mortal, cryptocurrencies are not about replacing anything, it's a highly volatile speculative playground, digital gangsters who want to make a quick buck

    Nobody cares about the ideology

    Bitcon as legal tender? lol

  • by dgfitz on 2/4/25, 12:51 AM

    I hope this is the domino that tips crypto over the edge.

  • by NonEUCitizen on 2/4/25, 12:50 AM

    "Failed Experiment" is euphemism for "IMF pressure."

  • by Smithalicious on 2/4/25, 7:40 AM

    Bleh. Seems like the IMF, which was against this for blatantly selfish reasons, basically strongarmed them into this. This is essentially a continuation of colonialism by other means.

  • by justo-rivera on 2/4/25, 12:16 AM

    Should have used monero, virtual cash with a little less privacy

    By the way all the comments in a thread like this will look like bots

  • by exabrial on 2/4/25, 12:36 AM

    Bitcoin has a lot of flaws as a currency. Don't worry.... there are at least 100,000 other "coins" to choose from. /s

  • by sebmellen on 2/4/25, 12:12 AM

    All for a mere $1.4B in international loans from the (supposedly evil and corrupt) IMF…

    Wasn’t El Salvador supposed to be Balaji’s first “Network State”? What happened to strike wallet and that whole crypto grifter crew?

  • by wnevets on 2/4/25, 2:11 AM

    this is good for bitcoin

  • by openrisk on 2/4/25, 3:12 AM

    Imagine if the amount of ingenuity that went into building the elaborate speculative digital game that is crypto was actually used to lift underdeveloped countries from their misery. Fighting corruption, enabling healthier local economies, reducing the siphoning of wealth to offshore centers, improving financial literacy etc. etc.

    Solving real problems is hard. Being distracted by snake oil salesmen, whether they sell digital scarcity or AGI only makes things worse.

  • by yuppiemephisto on 2/4/25, 12:13 AM

    Unsurprised. I got the impression Bukele picked bitcoin in a sort of manic ADHD moment and no one pushed him on it, figuring it was their president’s personal indulgence.