The risks in El Salvador’s Bitcoin treasury

El Salvador’s Bitcoin Office reported 7,762 BTC in early September 2026, valued at $620 million. This treasury grew from a baseline of 5,968 BTC in December 2024. The IMF accepted an explanation that recent increases came from private donations. This explanation addresses the prohibition on voluntary public-sector accumulation under the $1.4 billion IMF program. The agreement restricts the government from buying new bitcoin or issuing bitcoin-indexed debt.

Compliance remains fragile.

However, blockchain forensics firm Arkham Intelligence tracked only 7,264 BTC in government-associated addresses. The 500-coin discrepancy between official reports and on-chain data creates tension. Can the government prove these donations without exposing its internal books? Volatility creates massive swings. A 50 percent price crash from the October 2025 peak of $126,000 to $63,000 in February 2026 slashed the value of holdings by $300 million.

Most Salvadorans use dollars.

Because tax obligations must be settled in US dollars, the digital asset functions more like a voluntary spending option for certain holders than a parallel currency for public debt or daily commercial settlements throughout the entirety of the Salvadoran economy.

Law reforms effective around May 1, 2025, removed the obligation for merchants to accept bitcoin. Business owners now choose whether to use the cryptocurrency. This follows Legislative Decree No. 199, which reformed the original June 8, 2021 Bitcoin Law roughly 90 days after publication. The 2025 reform also removed the state obligation to automatically convert bitcoin to dollars at a fixed rate. You should note this move is a retreat from the 2021 experiment. The state transitioned away from direct operations. The IMF required the government to phase out public-sector operation of Chivo by end-July 2025. The government transferred majority ownership and operational control to a private operator.

The operator’s identity remains unnamed.

Most Salvadorans stick to paper money for wages and rent. A January 2025 survey found 92% of the population had not used bitcoin in the prior year. Remittances through digital wallets accounted for less than 1% of total transfers in December 2024. Only 2.2% of Salvadorans view the bitcoin strategy as successful. The $1.4 billion IMF agreement provides for tranches totaling roughly $371 million through various reviews. The IMF projects real GDP growth of 4.5% for El Salvador in 2026, building on a 2025 growth rate of 3.9%.

The Bitcoin Office continues daily purchases of 1 BTC. This contradicts IMF demands to reduce crypto exposure. Volatility threatens the $1.4 billion IMF loan. A significant price plunge in early 2026 triggered $775 million in leveraged liquidations. In November 2025, the country acquired 1,090 BTC worth $100 million as prices dipped. This acquisition occurred despite the IMF requirement to limit public-sector accumulation.

The treasury shows significant unrealized gains despite market volatility. The Bitcoin Office reports 7,762 BTC in September 2026, an increase from 5,968 BTC in December 2024. In late May 2025, Bitcoin Treasuries data valued holdings at $678 million, showing an implied unrealized profit of $386 million based on a price of $109,000 per coin. The government continues to use bitcoin as a national asset even as the legal tender mandate has been abolished. On September 3, 2026, the IMF cleared compliance, potentially unlocking $140 million in disbursements.

The government borrowed 80 percent of private pension contributions between January 2023 and June 2024. This borrowing, along with forced bank purchases of domestic debt, raised public sector credit to 13.7% of total assets. These actions drive concerns about fiscal sustainability as the country works to reduce public debt to 80% of GDP by 2030.