Ghost in the Pupusa: Paying with Bitcoin in El Salvador


Following the Bukele government’s decision to make bitcoin legal tender, El Salvador bought 1,100 bitcoins between September 6 and October 27. The Finance Ministry earmarked $205.3 million to make bitcoin legal tender. The ministry used $150 million to establish a fund to back bitcoin conversions at the country’s development bank (Banco de Desarrollo de la República de El Salvador).

The government launched a digital wallet called Chivo (slang for “cool”). It also installed 200 Chivo ATMs and 50 branches to allow users to buy bitcoin or convert it to cash, with the government absorbing commission fees. After downloading the app, Salvadorean users received a $30 stipend in bitcoin, a sum equivalent to nearly 8% of the country’s monthly minimum wage. Bitso (the largest crypto platform in Latin America) handles Chivo’s custody and exchange services.


On September 7, Bitcoin became legal tender in El Salvador. Large chains in San Salvador started accepting payments in bitcoin, including food franchises such as  Starbucks, McDonald’s, and Pizza Hut; the mobile company Claro, supermarkets; and electronics stores.

Using bitcoin in payments has surprised foreign crypto enthusiasts: “For me, [bitcoin] is a store of value. But when I was recently in El Salvador, I was using bitcoin I have on my phone… to buy coffee, to buy breakfast, to buy dinner. So I was using it as a medium of exchange,” said Peter McCormack, host of the podcast What Bitcoin Did.


Glitches marred Bitcoin’s September 7 rollout. Most Salvadoreans did not have a seamless experience using bitcoin as a payment instrument. Protesters marched on the streets. That day, the crypto asset’s price fell nearly 10%.

The Chivo app’s performance depends on good connectivity. “The annoying thing is that there isn’t always coverage, but, when [the app] works well, it works well,” said Luis Alfredo Gomez, a 31-year old customer. Josué Martínez, a 26-year-old barista in San Salvador, said customers walk out of his coffee shop when the Chivo app is down.

Merchants’ limited adoption of bitcoin creates uncertainty for customers. “I felt very insecure after I funded my account in the app, [as] there is no guarantee of a clean transaction,” said a user after having trouble paying bitcoin to several retailers who reverted or cancelled the transactions.

On September 7, the Chivo app was only available on Huawei phones. The app went offline due to an overload in the servers’ capacity. “It’s like an on and off switch, and if they take it offline, what recourse do you have?” said architect Carlos Hernández.

Several users found nefarious actors had already depleted their Chivo. “If someone has opened a Chivo account in your name, that wallet might be used to transfer funds from drug dealing, illegal weapon sales, human trafficking and corruption,” said lawyer Enrique Anaya.

Cases of hacking are on the rise. The Chivo app has asked users to exercise caution to prevent fraud. The Tracoda watch group has tracked at least 2,000 cases of stolen identity.

El Salvador risks becoming a haven for money laundering and tax evasion, according to the World Bank and the International Monetary Fund. The World Bank declined to help with the bitcoin rollout, citing environmental and transparency issues. “There is a lot of risk associated with bitcoin and that risk will be borne by the taxpayers,” said Steve Hanke, an economics professor at Johns Hopkins University.

El Salvador will also have to deal with systemic bitcoin problems, such as transaction capacity limits. Bitcoin is “a network that isn’t stable, doesn’t have accountable actors, and doesn’t have track record of providing the kind of price stability and liquidity that a currency is supposed to provide,” said Rohan Grey from the Digital Currency Global Initiative.

Esteban de la Peña Padilla, founding partner at IBEX Mercado, said El Salvador was “as ready [for the bitcoin rollout] as Latin Americans can be for this.” “No one had any expectation that this would be completely smooth,” said Brock Pierce, crypto evangelist, and tech investor.


Many Salvadoreans and financial analysts are worried about the impact of bitcoin’s price volatility on El Salvador’s inflation dynamics.In a poll by Universidad Centroamericana, most respondents (54.3%) said that bitcoin would accelerate price increases for essential goods.

Making Bitcoin legal tender “will be equivalent to an increase in the country’s monetary supply, which will temporarily boost El Salvador’s economic activity, but will also pressure inflation higher and with that, interest rates will rise,” wrote Gabriela Siller, head of economic analysis at Banco Base in Mexico.


Salvadorean customers are keenly aware of bitcoin’s volatility:

“They say the price [of bitcoin] varies and that it’s a bit like the stock market. Most people are afraid because of the lack of information,” said Ricardo López, a chauffeur.

“If you are going to buy, please pay in dollars; otherwise, I won’t sell to you,” said Reyna García, a seller in San Salvador.

“The dollar is a currency I can hold, but this – what kind of security is it going to give me?” said Marina Pérez, a homemaker.

“We really don’t know how that system is going to work. You can lose what you invest and not gain anything,” said Evelin Vásquez, 52, a mobile phone retailer.

“The population continues to reject the use of bitcoin as legal tender [… The poor downloaded the app only] to use the 30 dollars to buy goods and services, not to enter the world of bitcoin, invest and see what happens because their economic conditions do not allow it. […] The dollar will always be considered legal tender by households and Salvadoran microenterprises, said Óscar Cabrera, former president of the Central Reserve Bank.

Some Chivo users took to day trading, speculating on Bitcoin’s price swings. The Chivo wallet had to restrict trading to curb speculation. “It’s become really hard to trade, convert, and even guarantee your money in dollars,” said Alexander Sermeño, a day trader and consultant.


Many low-income Salvadorans converted their bitcoin funds into cash as soon as they could. Withdrawing cash from Chivo ATMs is not fast or easy.

Elizabeth Gonzáles, a 53-year-old housewife, said she would use the bitcoin funds in her Chivo wallet to buy groceries. “I am only going to use the app today. My family and I are accustomed to U.S. dollars. Why would I use [bitcoin] again?”

“I have lost when [bitcoin price has] gone down. I prefer not to have it,” said Idalia Mejía, who sells pupusas (the national dish of El Salvador) in El Zonte, accepts bitcoin in payments, and cashes it out as fast as possible.

Wilfredo Hernandez, a 37-year-old cook, was shocked when the $60 in bitcoin he and his wife planned to convert to U.S. dollars had dropped to $57 while he waited in line to use a Chivo ATM.

On September 7, Francisco Alemán, a 24-year-old student, waited in line to withdraw $120 in bitcoin funds from relatives. However, his withdrawal fell to $118 due to bitcoin’s volatility. Alemán was lucky: he was one of three people able to use the Chivo ATM that day.

Between May and June 2021, when the Salvadorian Assembly made bitcoin legal tender, the share of consumers holding savings in cash spiked from 36.7% to 50.4%, per a poll by the Foundation for Economic and Social Development (Fusades)

On September 15, anti-government marchers in San Salvador protesting against Bitcoin and the Bukele administration vandalized and set fire to a Chivo ATM.


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