by AK Arora 
On June 9, 2021, El Salvador’s President Nayib Bukele announced something no country had ever attempted: Bitcoin would become official legal tender, standing alongside the US dollar as money citizens could use to pay for anything, anywhere, including their taxes. To understand exactly what Bitcoin is and how it works, read our what is Bitcoin guide.
The crypto world celebrated. Critics, including the IMF, warned of disaster. Five years later, the actual story is neither the triumph supporters predicted nor the catastrophe critics feared. It is something messier and more instructive: a real-world experiment in monetary policy that reveals exactly why so few countries have followed, and why even the two that tried have since walked much of it back.
This is what actually happened.
What Does “Legal Tender” Actually Mean?
Before examining the specific countries, it helps to understand what legal tender status genuinely involves — because it is a much stronger designation than simply “legal to use.”
Legal tender means a currency must be accepted as valid payment for debts and transactions within a country, often with a legal obligation for businesses to accept it. This is meaningfully different from countries where crypto is merely legal to own and trade, like the United States, India, or most of Europe — where Bitcoin can be bought, sold, and held, but no merchant is legally required to accept it for payment.
Globally, only two countries have ever granted Bitcoin this status: El Salvador and the Central African Republic. As of 2026, only one retains it in any meaningful form. For the broader global legal landscape, read our crypto laws by country guide.
El Salvador: The First Experiment
How It Started
El Salvador made history on September 7, 2021, becoming the first country in the world to adopt Bitcoin as legal tender, standing alongside the US dollar (which El Salvador had already used as its primary currency since 2001, having no domestic currency of its own).
The government’s stated reasoning centred on financial inclusion. Approximately 70% of El Salvador’s population lacked access to traditional banking services at the time. Bitcoin, accessible through a smartphone, offered a path to financial services for citizens the traditional banking system had largely excluded — particularly important for remittances, which form a significant part of El Salvador’s economy as money sent home by citizens working abroad.
The implementation included:
- A government-built digital wallet called Chivo Wallet, distributed to citizens with a $30 Bitcoin bonus for signing up
- A mandatory requirement for “technically capable” businesses to accept Bitcoin as payment
- Tax exemptions on Bitcoin capital gains
- Bitcoin ATMs (Chivo ATMs) installed across the country for converting between Bitcoin and cash
What Actually Happened
The rollout faced significant operational problems from the start. The Chivo Wallet experienced technical glitches during launch. Many Salvadorans remained sceptical of an unfamiliar, volatile asset being mandated as money. International financial institutions, including the IMF, repeatedly warned about risks to financial stability and consumer protection.
President Bukele’s government continued purchasing Bitcoin for the national treasury throughout the volatility of 2022, a strategy that drew both criticism and a degree of admiration from Bitcoin advocates globally for the conviction it demonstrated, even as the purchases sat underwater for extended periods during the 2022 bear market. For more on how Bitcoin’s volatility compares to claims of a speculative bubble, read our is Bitcoin a bubble analysis.
In 2023, El Salvador launched the “Adopting El Salvador Freedom Visa” program, offering residency with a path to citizenship for investors contributing $1 million to the country’s economy in Bitcoin or USDT — an explicit attempt to attract crypto-wealthy individuals and capital.
The 2025 Reversal Under IMF Pressure
Here is the part of the story that gets considerably less attention than the original 2021 announcement.
In February 2025, El Salvador amended its landmark Bitcoin Law under direct pressure from the International Monetary Fund, as part of a $1.4 billion loan agreement. The amendment removed the mandatory requirement for businesses to accept Bitcoin and eliminated Bitcoin as an accepted method for paying taxes.
In practical terms, this transformed Bitcoin’s status from genuinely mandatory legal tender into something closer to a permitted, tax-advantaged payment option that businesses can voluntarily choose to accept. The US dollar effectively returned to being El Salvador’s only practically functioning legal tender for compulsory transactions.
What remains in place as of 2026:
- Bitcoin transactions remain exempt from capital gains tax
- The government continues actively promoting voluntary crypto adoption through its official applications
- El Salvador continues holding Bitcoin in its national treasury
- The Freedom Visa investment program remains active
El Salvador, as of May 2026, remains the only country where Bitcoin retains any form of official legal tender status — though that status now means something considerably narrower than what was originally announced in 2021.
Central African Republic: The Second Experiment, Reversed Entirely
How It Started
On April 22, 2022 — less than a year after El Salvador’s announcement — the Central African Republic’s parliament voted unanimously to adopt Bitcoin as legal tender, becoming the first African nation and the second country globally to do so.
The decision was particularly striking given the country’s circumstances. The Central African Republic is one of the world’s least developed nations, with extremely limited internet infrastructure, low digital literacy, and ongoing challenges related to rebel violence and political instability. The country used (and continues to use) the Central African CFA franc, a currency shared with six other regional nations and pegged to the euro.
The government framed the decision as part of a broader “visionary plan” connected to the Sango Project — an ambitious initiative aiming to tokenise the country’s land and natural resources through blockchain technology, intended to attract foreign investment and economic development.
Why It Failed
The Central African Republic’s experiment collapsed far faster and more completely than El Salvador’s.
Infrastructure simply did not support it. With extremely limited internet access and electricity availability outside the capital, the practical mechanics of using Bitcoin for everyday transactions were largely impossible for the vast majority of the population — making the legal tender designation, in the assessment of many observers, closer to a publicity gesture than a workable policy.
Regional monetary authorities objected directly. The Central African Republic’s currency union, CEMAC (the Economic and Monetary Community of Central Africa), raised significant concerns that the unilateral move threatened the stability and legal coherence of the shared regional currency framework that six neighbouring countries also depended upon.
International institutions warned clearly against it. The IMF and other international bodies cautioned that the country lacked the legislative and governance framework necessary to manage the risks Bitcoin adoption introduced.
In March 2023 — less than a year after adoption — the Central African Republic officially repealed Bitcoin’s legal tender status, reverting fully to the CFA franc as the country’s sole official currency.
El Salvador vs Central African Republic: A Direct Comparison
| Factor | El Salvador | Central African Republic |
|---|---|---|
| Adoption date | September 2021 | April 2022 |
| Reversal | Partial (Feb 2025, under IMF pressure) | Full repeal (March 2023) |
| Stated motivation | Financial inclusion, remittances | Sango Project, investment attraction |
| Infrastructure readiness | Moderate (smartphone penetration reasonable) | Very low (limited internet/electricity) |
| Time to partial/full reversal | ~3.5 years (still partially active) | ~11 months |
| Current status (2026) | Voluntary acceptance, tax-exempt | No legal tender status |
The comparison reveals a clear pattern: El Salvador’s experiment, while significantly walked back, has persisted in modified form for years. The Central African Republic’s collapsed almost immediately, primarily due to a basic mismatch between the policy’s ambitions and the country’s actual infrastructure capacity.
What About Other Countries Often Mentioned?
Several other jurisdictions are frequently — and incorrectly — described as having Bitcoin “legal tender” status. The distinction matters.
Switzerland (Zug and Lugano): Several Swiss cities, including Zug and Lugano, accept Bitcoin for specific municipal services and tax payments through local initiatives like Lugano’s “Plan ₿”. However, this is local municipal policy, not national legal tender status — Switzerland’s official currency remains the Swiss franc nationally.
Japan: Japan has one of the world’s most mature crypto regulatory frameworks and permits Bitcoin as a legal payment method between willing parties under its Payment Services Act. However, this means crypto is legal to use as agreed payment, not that merchants are obligated to accept it the way legal tender requires.
Germany, Portugal: Both offer favourable tax treatment for crypto, with Germany providing tax-free gains after a one-year holding period. Neither has granted Bitcoin legal tender status.
These distinctions matter because “legal to use” and “legal tender” describe genuinely different levels of government endorsement and obligation — and conflating them significantly overstates how widely Bitcoin has actually been adopted as official money globally.
Why Have So Few Countries Followed?
Given the global attention both experiments received, it is worth examining why, after more than four years, only two countries have ever attempted this, and only one retains even a partial version of it.
Volatility is fundamentally incompatible with the core function of money. A currency that can lose or gain 10-20% of its value within a single week creates serious problems for pricing goods, paying wages, and managing government budgets and tax revenue predictably. Read our why is crypto so volatile guide for the underlying reasons.
International financial institutions exert significant pressure. The IMF’s role in pushing El Salvador’s 2025 reversal demonstrates how dependent on, and influenced by, multilateral lending relationships sovereign monetary decisions can be — particularly for smaller economies seeking development financing.
Infrastructure requirements are substantial. The Central African Republic’s failure underscores that legal tender status alone cannot overcome basic gaps in internet access, electricity, and digital literacy required for practical day-to-day use.
Domestic monetary sovereignty concerns persist even in adopting countries. Both El Salvador and the Central African Republic retained their original currencies alongside Bitcoin rather than replacing them entirely — suggesting even the most enthusiastic adopting governments recognised the risks of full reliance on a single, highly volatile asset for core monetary functions.
What’s Next: Reserve Legislation Replacing Legal Tender Ambitions
Interestingly, the global conversation around sovereign Bitcoin adoption has shifted significantly by 2026 — away from legal tender experiments and toward strategic reserve accumulation instead.
In the United States, multiple state-level strategic Bitcoin reserve bills have advanced through legislatures in states including Arizona and Utah, with some passing in modified form. At the federal level, the American Reserve Modernization Act (ARMA), introduced by bipartisan US Representatives in May 2026, would authorise the Treasury to acquire up to one million Bitcoin over five years, held for a minimum holding period of 20 years.
This represents a meaningfully different policy approach from El Salvador and the Central African Republic’s experiments. Rather than mandating Bitcoin as everyday payment currency for citizens and merchants, reserve-focused legislation treats Bitcoin purely as a long-term sovereign asset, similar to gold reserves — sidestepping the practical payment and volatility challenges that undermined the original legal tender experiments entirely. For a complete understanding of Bitcoin’s broader role as a potential reserve asset, read our will Bitcoin replace the dollar analysis.
FAQ
Which countries currently have Bitcoin as legal tender?
As of 2026, El Salvador is the only country where Bitcoin retains any form of legal tender status, though its scope was significantly narrowed in February 2025 — mandatory merchant acceptance and tax payment use were both removed under IMF pressure. The Central African Republic fully repealed Bitcoin’s legal tender status in March 2023.
Why did the Central African Republic reverse its decision so quickly?
The Central African Republic’s adoption collapsed within less than a year primarily due to extremely limited internet and electricity infrastructure making practical Bitcoin use largely impossible for most citizens, combined with objections from CEMAC, the regional currency union, which viewed the unilateral move as a threat to monetary stability across the broader region.
Is El Salvador still using Bitcoin as money?
Yes, but on a voluntary rather than mandatory basis since the February 2025 amendment. Businesses are no longer legally required to accept Bitcoin, and it can no longer be used to pay taxes, though it remains tax-exempt for capital gains and the government continues promoting voluntary adoption.
Did El Salvador make money on its Bitcoin purchases?
This has varied significantly depending on the time period measured, given Bitcoin’s substantial price volatility since 2021. The government continued purchasing through multiple market downturns, a strategy that faced criticism during bear markets but has also been viewed favourably by Bitcoin advocates given the asset’s longer-term price trajectory.
Will more countries adopt Bitcoin as legal tender in the future?
Given the practical challenges demonstrated by both existing experiments, and El Salvador’s own partial reversal under IMF pressure, full legal tender adoption appears less likely going forward. Instead, the emerging global trend favours strategic reserve accumulation — treating Bitcoin as a sovereign asset rather than mandating it as everyday payment currency, as seen in proposed US federal and state-level reserve legislation.
What is the difference between Bitcoin being “legal” and being “legal tender”?
Bitcoin being legal means it can be owned, traded, and used by mutual agreement between parties — the status in most of the world, including the US, India, and Europe. Legal tender is a much stronger designation, legally obligating acceptance for debts and transactions, historically reserved for a country’s official currency.
Final Word
The story of Bitcoin as legal tender is not the simple triumph-or-failure narrative either side initially predicted. El Salvador’s experiment has persisted for years, but in a significantly reduced form that increasingly resembles tax-advantaged permission rather than genuine monetary mandate. The Central African Republic’s experiment collapsed almost immediately, undone by infrastructure realities no amount of political ambition could overcome.
Both cases offer a consistent lesson: making an asset legal tender by government decree does not resolve the practical challenges — volatility, infrastructure, international financial relationships — that determine whether a currency actually functions as money in people’s daily lives.
The shift toward strategic reserve legislation in 2026, rather than further legal tender experiments, suggests governments have absorbed this lesson. Bitcoin as a held, long-term sovereign asset appears to be a fundamentally easier policy to sustain than Bitcoin as mandatory everyday currency — a distinction that El Salvador and the Central African Republic’s divergent, difficult experiences have made unmistakably clear.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial or legal advice. Always conduct your own research before making any investment decisions.
