The risks in El Salvador’s Bitcoin treasury strategy

The IMF rewires the Bitcoin plan

The IMF $1.4 billion agreement changes how El Salvador manages its Bitcoin holdings. This 40-month program forces the public sector to limit Bitcoin-related economic activities. I see the May 2025 legal reforms as a direct response to IMF pressure. Legislative Decree No. 199 made Bitcoin acceptance voluntary for the private sector. It also removed the requirement to pay taxes in Bitcoin. You should know that these changes came after years of negotiation. The state also phased out the Chivo wallet from public operations by July 2025. This phase-out addressed concerns that the state-run wallet created fiscal risks. The IMF also prohibits the issuance of any Bitcoin-denominated or Bitcoin-indexed debt. Before the 2025 reforms, the government required all businesses to accept Bitcoin as legal tender. Now, merchants decide whether to use the digital asset. This shift removes the pressure that once strained relations between shopkeepers and authorities. The agreement follows years of tension between President Bukele and the IMF.

Treasury holdings and the dollar mandate

The government treasury holds 7,606 Bitcoins as of September 2026.

The stash remains large.

The treasury value shifts with market volatility. One Bitcoin is added daily to the vault. The government uses these gains to seek better loan deals and pay down national debt. I find the disconnect between the digital vault and the local economy impossible to ignore. Most people use the US dollar for wages and rent. The US dollar remains the only practical currency for tax and public obligations. The government spent $329 million on the Bitcoin project, which equals 0.7 percent of the national GDP.

I view the reliance on the US dollar as the only reason the system stays afloat. The treasury holds approximately $620 million in Bitcoin. This amount fluctuates based on the daily price of $74,800. In May 2026, the reserve held 6,494 BTC. The average purchase price for many coins was $45,200.

The adoption gap and economic fragility

The divide between digital ambitions and rural reality remains wide. While coastal tourism in El Zonte grew by 40 percent, inland farmers lack the smart phones or internet needed for digital transactions. Remittances accounted for 24 percent of El Salvador’s GDP in 2024. Most of these flows rely on traditional money transmitters and cash. Most migrants sending money from the US use familiar services instead of Bitcoin. In 2021, 91 percent of Salvadorans preferred the US dollar.

The volatility of Bitcoin creates instability. The debt is high. This volatility makes it difficult to manage public debt, which hit 95.4 percent of GDP in 2020. The IMF warns that the massive price swings in Bitcoin could compromise the $1.4 billion loan program, which provides the essential liquidity needed for El Salvador to manage its national economic stability and growth.

I judge the lack of transparency in the Bitcoin project as a massive failure. The government spent $329 million on the project, but the true costs are hidden. The treasury stash grows, yet the general population remains tied to the dollar. Does the government have enough cash to guarantee conversion if the market crashes?