El Salvador appears to be heading deeper into an economic crisis with funding sources drying up, one year after it adopted bitcoin as legal tender
Daniel Alvarenga / Rolling Stone : Tweets: @rollingstone and @rollingstone Tweets: @rollingstone : El Salvador's authoritarian government is continuing to crack down on citizens speaking out against bitcoin. Critics say they have seen their democracy dismantled, human rights suspended, and their economic futures threatened. https://www.rollingstone.com/ ... https://twitter.com/... @rollingstone : The roll out of Bitcoin in El Salvador so far is playing out like a car crash in slow motion. With funding sources drying up, the Bitcoin implementation almost feels like a diversion for a country heading into deeper into a political and economic crisis. https://www.rollingstone.com/ ...
Context & Ripple Effects
El Salvador's bitcoin experiment is now a full year old, and the arc runs from launch to deterioration: the September 2021 rollout paid citizens $30 to sign up for the Chivo wallet, the NYT documented an unwilling population having bitcoin imposed by an increasingly authoritarian Bukele that October, and by six months in, citizens, economists, and developers were detailing cracks in the whole project. The new reporting adds a fiscal dimension to that political one — external funding sources are drying up just as the state's own bitcoin position has soured.
First-order effects
- President Bukele's government faces a tightening budget at the same moment its ~$56M unrealized loss on 2,301 purchased bitcoin has raised concerns about debt repayments — the two pressures compound rather than offset each other.
- Salvadorans who speak out against the bitcoin policy face continued crackdowns, with critics describing a dismantled democracy and suspended rights layered on top of economic deterioration.
Second-order effects
- The credibility gap left by retreating funders cannot be filled by the foreign crypto evangelists who championed Bukele's adoption push — their advocacy, per Bloomberg's later accounting, did not translate into durable financing for the state.
- As fiscal stress deepens, the government's incentive to suppress dissent grows, since the bitcoin policy has become politically inseparable from the regime itself.
Third-order effects
- If the pattern holds, El Salvador becomes the reference case that decouples 'bitcoin as legal tender' from financial-liberty promises: a national adoption driven top-down, sustained by political control, and judged by whether sovereign finances survive it.
- The episode points toward stricter scrutiny of any future state-level crypto adoption, where lenders and rating institutions weigh a government's digital-asset exposure against its repayment capacity.
The trend: State-level bitcoin adoption is colliding with sovereign credit realities, turning El Salvador's first-year crisis into the test case for whether national crypto policy can survive a funding squeeze.