Why El Salvador Made Bitcoin Legal Tender and Why It Won’t Work for the US

Key Takeaways

• As of February 2025, El Salvador earned about $265 million from Bitcoin investments, yet public adoption remains below 2%.
• The U.S.’s national debt exceeds $36 trillion, with interest payments projected to hit $1.7 trillion by 2034. Donald Trump’s Bitcoin reserve strategy could offset $21 trillion of this debt by 2049.

Over the past 15 years, cryptocurrencies have spurred profound changes in global finance. Hedge funds, companies and even governments are now exploring digital assets to diversify and increase wealth.

One nation took this exploration to a whole new level. In a groundbreaking financial experiment, it has adopted Bitcoin (BTC) as a national currency. While investors and tech enthusiasts frequently back digital assets, having a nation stake its economic future on one is an entirely different commitment.

El Salvador, a small Central American nation with a Gross Domestic Product (GDP) of about $36 billion , made history on Sept. 7, 2021, by adopting Bitcoin as legal tender alongside the U.S. dollar.

In contrast, the United States has taken a cautious approach toward cryptocurrencies. Under Gary Gensler’s leadership at the Securities and Exchange Commission (SEC) and President Joe Biden’s administration, regulatory oversight took precedence over integration.

Legal battles ensued one after another. Major crypto firms ended up in courtrooms, battling accusations amid unclear regulations. The uncertainty frustrated both investors and entrepreneurs: How can you innovate when you don’t know where the boundaries lie?

However, at the start of 2025, Donald Trump made a complete turnaround , adopting a more favorable regulatory framework for Bitcoin and other cryptocurrencies.

In this issue of CCN Reports, we delve into the contrasting Bitcoin strategies of El Salvador and the U.S. We analyze their motivations, results and what their choices might mean for the future of cryptocurrency in national economies.

El Salvador’s Search for Financial Autonomy

El Salvador’s move to adopt Bitcoin wasn’t an arbitrary decision. It was a calculated risk stemming from decades of economic dependence.

El Salvador’s economy has been tied to the U.S. dollar since 2001 when the country adopted the dollar through a process called dollarization. Its economy has followed the Federal Reserve’s lead, which often overlooked the needs of local farmers, shop owners and small businesses.

Dollarization aimed to reduce currency risk, lower interest rates, and stabilize the economy by eliminating exchange rate volatility. Additionally, it sought to attract foreign investment and strengthen economic relations with El Salvador’s largest trading partner, the United States.

The impact was immediate:

• Dollarization led to a 4% to 5% reduction in interest rates , resulting in annual savings for the private sector of about 0.5% of GDP in net interest costs. For the public sector, the savings amounted to approximately 0.25% of GDP, after considering the loss of seigniorage, the profit from issuing its own currency.
• Inflation rates remained low and stable, averaging 2.52% from 2001 to 2024, with a brief spike to 6.71% in 2008 during the global financial crisis.
• Foreign direct investment grew from $173.40 million in 2000 to $759.73 million in 2023. At the same time, trade with the U.S. expanded, with exports to El Salvador rising from $1.78 billion in 2000 to $4.6 billion in 2024.

Figure 1: Annual Inflation Rate | Credit: World Bank Group, IMF, The Central Reserve Bank of El Salvador, Toghrul Aliyev

However, this move wasn’t without its costs. El Salvador gave up control over its monetary policy, leaving it exposed to U.S. economic shifts. If the U.S. economy sneezed, El Salvador caught a cold. The government could no longer adjust interest rates or issue its own currency to respond to local economic shocks.

This dependency became painfully evident during the 2008 global financial crisis and the COVID-19 pandemic when El Salvador couldn’t stimulate its economy independently. Additionally, as mentioned earlier, the country lost seigniorage, estimated at 0.25% of GDP annually. While it may seem like a small percentage, it’s a significant amount for a developing economy. With a GDP of $36 billion, that’s around $90 million a year.

El Salvador heavily relies on taxes, which make up 22.9% of its GDP , and international loans to fund its expenditures. In 2024, the country’s debt-to-GDP ratio stood at 87.7%, making it one of the most indebted nations in Latin America and more indebted than 80% of countries worldwide .

What’s more, El Salvador had an average budget deficit of -2.48% from 2014 to 2024, indicating a persistent gap between revenue and spending.

Figure 2: El Salvador Budget Deficit | Credit: Central Reserve Bank of El Salvador, Toghrul Aliyev

And if that wasn’t enough, 24% of El Salvador’s entire GDP comes from remittance inflows. Remittances are funds that Salvadorans working abroad—mostly in the U.S.—send back home to support their families. These are often modest amounts sent regularly to cover essentials like food and housing.

Figure 3: El Salvador Remittance Inflows (% of GDP) | Credit: World Bank Group, Central Reserve Bank of El Salvador, Toghrul Aliyev

For years, Salvadorans have relied on traditional methods, like banks or money transfer services, to send money home. These methods come with fees that can reach 10% or higher, depending on the transaction, and processing times often extend across several days.

For a $100 transfer, a family might lose $10 to $25 or even more to fees. If remittance fees dropped to near zero, hundreds of millions of dollars could be reintroduced into the local economy annually, boosting small businesses and increasing household resilience—a win-win situation.

Furthermore, with almost half of El Salvador’s population (49.21%) unbanked , Bitcoin presents an opportunity to bridge the financial inclusion gap, too. It’s apparent how Bitcoin could address these problems, and President Nayib Bukele certainly recognized its potential.

Did Bitcoin Reshape El Salvador or Was It Bukele’s Iron Fist That Did the Job?

Since adopting Bitcoin as legal tender in September 2021, El Salvador’s economy has undergone changes. Some attribute these shifts to the country’s bold cryptocurrency strategy, while others point to the post-COVID-19 economic recovery or President Bukele’s decisive governance.

From an investment standpoint, El Salvador’s Bitcoin strategy has been remarkably successful. As of Feb. 24, 2025, the country held 6,088 BTC . The government adopted a disciplined approach, purchasing one Bitcoin per day regardless of price fluctuations. Occasionally, the plan deviated favorably.

Figure 4: El Salvador Bitcoin Purchases | Credit: Mempool, Toghrul Aliyev

For instance, on March 14, 2024, the country acquired 3,308 BTC in a single day. Although some of this may have been accumulated in 2023, on-chain data shows no purchases during that year. Regardless, the result remains unchanged: El Salvador is consistently buying Bitcoin, and its accumulation strategy has paid off handsomely.

Our calculations show that El Salvador’s average purchase price per Bitcoin is approximately $46,471. Even after accounting for market drawdowns in February 2025, the country has nearly doubled its investment in 4.5 years. For comparison, El Salvador’s gold reserves amount to just 1.37 tonnes , valued at $142.5 million. Over the past decade, gold prices have roughly doubled.

Figure 5: Bitcoin vs. Gold | Credit: TradingView, Toghrul Aliyev

In contrast, Bitcoin’s value has surged over 100 times during the same period. If the trend continues, Bitcoin’s potential remains staggering.

If Bitcoin hits $1 million by 2032-2033, El Salvador’s holdings would be worth $6 billion. By continuing to buy one BTC per day, the country could accumulate around 10,000 BTC by that time. This would bring the total reserves to $10 billion, which would be roughly a quarter of its projected GDP.

As of Feb. 25, 2025, El Salvador’s Bitcoin portfolio had generated a profit of approximately $265 million. However, while Bitcoin has boosted the government’s coffers, the question remains: Has it truly transformed the country for the better?

Bitcoin Adoption in El Salvador Remains Low Despite Bold Move

The government of El Salvador encouraged its citizens to embrace Bitcoin through the Chivo wallet, a state-sponsored digital wallet designed to facilitate cryptocurrency transactions. To incentivize participation, they offered $30 in Bitcoin just for signing up. In a country where the minimum wage is around $300, that’s equivalent to three days of work.

The wallet allowed Salvadorans to receive remittances, pay for goods and services and convert Bitcoin to dollars instantly. To make the transition smoother, the government installed Bitcoin ATMs across the country. It also mandated businesses to accept Bitcoin payments.

On paper, it sounded perfect. However, the reality was different:

• A 2022 report by the U.S. National Bureau of Economic Research revealed that 6 out of 10 users signed up for Chivo only to claim the $30 Bitcoin bonus and then abandoned the wallet.
• Hackers used stolen IDs to claim the $30 Bitcoin bonus and later leaked the personal data of over 5.1 million users, along with the wallet’s source code, in April 2024.
• Users faced numerous issues, including login problems, transaction delays, lost funds, ATM withdrawal problems, identity verification failures, and missing $30 bonuses.
• After Bitcoin’s value plummeted from $69,000 to $15,000 in 2022, Salvadorans lost trust in its stability. To protect their money, many quickly converted Bitcoin to dollars.
• Stores also encountered challenges with Bitcoin transactions, as price fluctuations made it difficult to set stable prices, leading to revenue uncertainty.

The usage trend observed in 2022 continued into 2023 and 2024. According to the Instituto Universitario de Opinión Pública (Iudop) at the Universidad Centroamericana José Simeón Cañas (UCA), the number of users using Bitcoin for transactions dropped threefold.

For a country that adopted Bitcoin as legal tender, the 2024 figure is surprisingly low. For context, according to Triple-A, India—which historically held an adversarial stance toward cryptocurrencies— had an 8.3% adoption rate in 2024 . The rate nearly matches El Salvador’s despite India lacking any government mandate.

Figure 6: Global Crypto Ownership Leaders 2024 | Credit: Triple-A

When looking at crypto remittances as a percentage of total remittances, only about 1% of all inflows were made using Bitcoin. This indicates that Bitcoin did not significantly reduce transaction costs for remittances, as adoption remained low. Most Salvadorans continued to use traditional methods, maintaining the status quo.

Figure 7: Crypto Remittances (% of Total Inflows) | Credit: World Bank Group, Central Reserve Bank of El Salvador, Toghrul Aliyev

The Factors Driving El Salvador’s Economic Growth

So, did Bitcoin improve El Salvador’s economy? The answer is nuanced. On the positive side, El Salvador’s Bitcoin investments have generated substantial returns.

Furthermore, El Salvador’s Bitcoin adoption garnered unprecedented international attention. Tourism skyrocketed, with visitor numbers and tourism revenue tripling, from 2021 to 2024. A new demographic of “crypto-tourists” emerged, traveling specifically to experience the world’s first Bitcoin nation. The influx generated additional income and supported local businesses.

Figure 8: El Salvador Tourist Arrivals | Credit: World Bank Group, Alexia Rivas, Morena Valdez, Toghrul Aliyev Figure 9: El Salvador Tourism Revenue | Credit: World Bank Group, El Salvador’s Ministry of Tourism, Toghrul Aliyev

However, the picture appears to be more complex: Bitcoin’s impact on El Salvador’s economic growth is intertwined with other factors, including global economic trends and President Bukele’s governance.

Let’s analyze El Salvador’s annual GDP growth compared to that of the USA, the EU, and the world average from 2014 to 2024.

Over the past decade, El Salvador’s GDP growth has been anything but predictable. At times, it outpaced the growth rates of the EU and the U.S., while other times, it has trailed the world average. Such volatility is common in smaller, dollarized economies that depend on external influences.

Figure 10: Annual GDP Growth | Credit: World Bank Group, IMF, Toghrul Aliyev

The COVID-19 pandemic hit El Salvador harder than most. GDP dropped by 7.89%, which was significantly worse than the U.S.’s -2.16%, the EU’s -5.58% and the world average of -2.88%. As a small economy that relies heavily on remittances and trade, the impact of global shutdowns was severe. Dollarization exacerbated the situation by preventing independent monetary stimulus.

In 2021, El Salvador’s GDP surged by 11.9%, outpacing the U.S. (6.06%), EU (6.36%) and the world average (6.35%). This coincided with Bitcoin’s adoption as legal tender in September, raising the question: Was Bitcoin the catalyst?

It seems unlikely. As lockdowns lifted and economies worldwide reopened, the U.S., EU and world average all saw growth rates exceeding 5%. For smaller nations, like El Salvador, these economic swings were felt more acutely. The 11.9% spike appears to align more with post-pandemic recovery trends rather than the influence of Bitcoin.

By 2022, the economy had cooled down, and the pattern changed. Despite lagging behind the EU and world average, El Salvador consistently outperformed the U.S.’s and EU’s GDP growth rate in the following years, except for 2022. It even surpassed all three benchmarks in 2023.

And here’s one of the most important reasons why.

Before Bukele: A Nation Paralyzed by Violence

Prior to Bukele’s presidency, El Salvador was plagued by fear. Gangs, like MS-13 and Barrio 18, ruled both urban and rural areas, reportedly extorting businesses, committing murders with impunity and creating a climate of insecurity that stifled economic potential.

Figure 11: Annual Homicides in El Salvador | Credit: Instituto de Medicina Legal, Fiscalía General de la República, Ministerio de Justicia y Seguridad Pública, Socorro Jurídico Humanitario, La Prensa Gráfica, Gustavo Villatoro, Policía Nacional Civil, InSight Crime, Toghrul Aliyev

Homicides peaked at 6,656 in 2015. In 2016, the criminal organizations announced a “Non-aggression Pact” to broker peace and reduce violence. The pact involved an agreement to reduce violence by limiting territorial disputes, which were a major component of gang-on-gang homicides.

The Bukele Effect

In 2019-2020, during the early days of Bukele’s administration, the government attempted secret talks with gang leaders . It’s possible the president offered criminals improved prison conditions, such as better food, medical care and visitation rights.

Additionally, economic opportunities through job training and financial incentives, amnesty or reduced sentences such as pardons or early release for ceasing violence, community investment in infrastructure and social programs to address poverty in gang areas, and political access by giving gang leaders a voice in local governance to encourage peace were likely part of the negotiations.

The results were undeniable: Annual homicides dropped by 50%. However, it was still not enough. From 2019 to 2021, gangs adapted by hiding violence to lower official counts rather than fully stopping it.

So, in 2022, Bukele announced the “Régimen de Excepción,” a controversial policy that suspended key constitutional rights , such as assembly, legal counsel, private communication and limits on pretrial detention. This enabled aggressive anti-gang crackdowns, including mass arrests and harsh sentencing.

And it worked. The homicide rate dropped below the global average and even below that of major economic superpowers, even when factoring in uncounted homicides. In 2024, there were ten times fewer homicides compared to 2019, when Bukele took office.

This significant drop in violence was likely one of the main drivers of the surge in tourism in El Salvador, if not the most important reason.

El Salvador Adjusts Bitcoin Stance to Secure IMF Loan

As noted, El Salvador’s debt-to-GDP ratio stood at 87.7%, in 2024. Additionally, budget deficits widened annually, increasing the gap between revenue and spending, and placing more pressure on the economy.

By late 2024, cracks in the economy were too deep to ignore. El Salvador needed a lifeline, which came in the form of a $1.4-billion loan from the IMF. However, the financial assistance came with conditions that would force El Salvador to reconsider its Bitcoin strategy:

• El Salvador must improve its primary balance by 3.5% of GDP over three years to address high debt levels.
• The government must implement fiscal measures worth 1.5% of GDP in 2025 as the first step toward fiscal health.
• Banks in El Salvador must increase liquidity buffers from 11.5% to 15% of deposits by June 2026.
• The financial system must adopt Basel III international standards for banking regulation.
• The central bank must build up foreign reserves to protect against external economic shocks.
• El Salvador must make Bitcoin acceptance voluntary for all private businesses, eliminating the legal requirement that forced merchants to accept cryptocurrency as payment under the 2021 Bitcoin Law.
• The country must set a maximum cap on Bitcoin holdings as a percentage of national reserves, establish transparent reporting for all government Bitcoin transactions, implement risk management protocols for existing holdings, and potentially gradually reduce the exposure to minimize financial risks.
• The administration must restrict Bitcoin use in government operations, preventing ministries and agencies from conducting day-to-day transactions using cryptocurrency to minimize fiscal risk.
• El Salvador must gradually divest from the state-backed Chivo wallet application, either through privatization, operational scaling back, or complete closure of the platform.
• Officials must transition Chivo wallet users to alternative financial services, ensuring citizens maintain access to digital financial tools while reducing government exposure to cryptocurrency risks.
• The government must develop comprehensive digital asset regulations that extend beyond the 2023 Digital Assets Issuance Law to cover all cryptocurrency activities within the country.
• El Salvador must establish a licensing system for cryptocurrency exchanges and service providers, setting capital requirements, operational standards, and ongoing compliance obligations.
• Officials must implement robust consumer protection measures for cryptocurrency users, including mandatory risk disclosures, fraud prevention mechanisms, and complaint-handling procedures.
• El Salvador must create investor safeguards for the digital asset market, requiring service providers to segregate customer funds, maintain reserves, and implement security standards.
• The administration must strengthen anti-money laundering (AML) controls specifically for cryptocurrency transactions, including enhanced Know Your Customer (KYC) procedures and suspicious activity reporting.
• Officials must align all cryptocurrency regulations with Financial Action Task Force standards, making El Salvador compliant with international expectations for digital asset oversight.

The IMF aims to promote global financial stability and help countries avoid economic crises. When it provides loans, it attaches conditions to protect its investment and ensure the borrowing country can recover and repay the funds.

The Bitcoin restriction reflects the IMF’s cautious approach to cryptocurrencies. Due to Bitcoin’s volatility, the IMF likely viewed it as a risk to an already fragile economy. The other conditions, such as improving fiscal health and adopting international banking standards, are standard IMF practices to help countries regain stability.

For El Salvador, the deal was a double-edged sword. The loan provided essential support, preventing an immediate crisis and giving the government some time to address its debt. That was undeniably beneficial, considering the alternative could have been economic turmoil.

The deal was tough: El Salvador obtained stability but lost some of its freedom to experiment.

The United States’s Approach to Bitcoin and Cryptocurrencies

Biden and Gensler’s Approach: Regulation by Lawsuit

Under President Joe Biden, U.S. crypto policy primarily relied on regulators to control the industry. Biden’s strategy involved delegating much of crypto oversight to the SEC led by Gary Gensler, who has portrayed crypto markets as “rife with hucksters, fraudsters and scam artists.”​

Rather than creating new rules specifically for digital assets, he maintained that existing securities laws already offered clarity. Critics have labeled this approach as “regulation by enforcement.” Under Gensler’s leadership, the SEC aggressively sued major crypto firms for alleged violations without first providing clear guidelines on how these companies could comply.

For instance, the SEC filed high-profile lawsuits against Ripple (XRP) in 2020 and Coinbase and Binance  in 2023, accusing them of offering unregistered securities or operating unregistered exchanges. These actions occurred despite industry calls—and even internal dissent at the SEC—for clearer guidelines on which digital assets are classified as securities.

Commissioner Hester Peirce famously lamented :

“The lack of regulatory clarity has fostered an environment in which jokers and thieves thrive, while legitimate crypto projects struggle.”​

The SEC under Biden failed to set clear guidelines, which ended up hurting genuine innovators and exposing investors to bad actors, essentially defeating its own purpose.

During the period from 2021 to 2024, the agency launched 125 crypto-related enforcement actions , a substantial increase from the 70 actions taken under the leadership of Jay Clayton between 2017 and 2020.

The intensified efforts targeted initial coin offerings (ICOs) , lending products, and exchange tokens. However, the agency offered minimal proactive guidance, leading crypto companies to voice frustration: They often expressed their willingness to comply with regulations if only they had clarity on what those regulations entailed.

Figure 12: SEC Crypto Enforcement Actions | Credit: U.S. Securities and Exchange Commission, Toghrul Aliyev

Coinbase’s CEO, Brian Armstrong, shared that when the exchange attempted to register a crypto lending product, the SEC declined to provide a compliance pathway and later took legal action to shut it down. This approach kept the crypto industry in a state of uncertainty. Gensler appeared to regard crypto platforms as undeserving of regulatory clarity.

The result was a state of ambiguity. Numerous U.S.-based crypto innovators began relocating their operations to jurisdictions with more defined regulations. Countries, like the UAE, drew in talent and capital that could have remained in the U.S.

Figure 13: Registered Crypto Companies in the UAE | Credit: Dubai Multi Commodities Centre, Toghrul Aliyev

While the Biden administration did take strides toward a coherent crypto policy, progress was gradual. In March 2022, President Biden signed Executive Order 14067, “Ensuring Responsible Development of Digital Assets.”

This order aimed at protecting consumers and investors, ensuring financial stability, mitigating illicit finance, promoting U.S. competitiveness, and supporting responsible innovation in crypto. The order also initiated a comprehensive government effort, mandating agencies to study digital assets and recommend reforms.

Throughout the following year, agencies released reports on various topics, such as stablecoins, consumer protection, and the potential for a U.S. Central Bank Digital Currency (CBDC).

Although the executive order signaled that the U.S. recognized the significance of blockchain technology and aimed to maintain its leadership in financial innovation, it did not result in any immediate regulatory changes.

The administration moved cautiously, perhaps, too cautiously, as other nations advanced with definitive regulations. By late 2023, frustration grew even among members of Congress . During a September 2024 hearing, lawmakers criticized Gensler for the SEC’s aggressive tactics and the persistent absence of clear regulatory guidelines.

Bipartisan bills were introduced in Congress to define clearer boundaries between the SEC and CFTC and to establish tailored disclosure rules for crypto assets. However, none of these efforts succeeded in becoming law during Biden’s presidency.

On the brighter side, a tough stance was necessary to protect investors and the broader financial system. The 2022 collapses of high-profile entities, like FTX and Celsius , serve as stark reminders of the risks involved. By requiring crypto projects to adhere to existing laws, U.S. regulators sought to align this volatile and evolving industry with established investor protection standards.

In theory, this “same activity, same risk, same regulation” approach established fairness between crypto and traditional finance, effectively minimizing regulatory arbitrage. However, its downsides have been significant. The lack of clear rules or definitions—such as which tokens qualify as securities—created a chilling effect on innovation.

The U.S. has regulated crypto mostly through litigation rather than legislation. As a result, entrepreneurs frequently found themselves operating under the shadow of uncertainty, fearing that any new product, even if developed in good faith, might trigger a regulatory backlash.

By maintaining a reactive posture, neither businesses received the predictability essential for their operations nor investors the high-quality protection they required. Commissioner Peirce’s proposals for a temporary safe harbor—designed to allow new crypto networks time to develop before facing full securities regulation—were also disregarded.
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The U.S.’s competitive edge in crypto technology began to wane—a concern acknowledged even within the Biden administration itself. Ironically, while the administration’s whole-of-government studies emphasized the importance of supporting “responsible growth” of digital assets and upholding American leadership​, the practical regulatory environment often appeared hostile to legitimate crypto players.

In summary, Biden and Gensler’s approach to crypto has been characterized by stringent enforcement paired with cautious policymaking. It effectively targeted misconduct and reinforced the principle that crypto finance must adhere to legal boundaries, a reasonable stance considering the 2017 ICO’s boom excesses and the 2022 collapse of high-risk ventures. This gap left even well-intentioned firms stuck in limbo.

This era is defined by duality: A genuine effort to mitigate risks and protect consumers, contrasted with an unintended consequence of driving innovation away from the U.S. due to regulatory ambiguity. The legacy of this approach is now the subject of intense debate, as the nation evaluates how to balance innovation and regulation moving forward.

Why the U.S. Never Adopted Bitcoin as Legal Tender

The United States has shown reluctance to consider the idea of adopting Bitcoin as legal tender, likely due to factors such as a strong economy, established legal frameworks and general skepticism.

First and foremost, the U.S. issues the world’s reserve currency, the U.S. dollar (USD), a cornerstone of its economic power. As President Trump emphasized , the dollar is “by far the most dominant currency anywhere in the world,” and U.S. leaders are determined to maintain its supremacy.

Figure 14: Currency Composition of Official Foreign Exchange Reserves (COFER) | Credit: International Monetary Fund (IMF), Toghrul Aliyev

The dollar is stable, universally accepted and critical to Washington’s global influence. Embracing Bitcoin as legal tender would only threaten the dollar’s status—a position American policymakers strive to defend.

In addition to serving as the world’s reserve currency, the dollar also dominates international trade. Numerous commodities, such as oil, are priced in dollars—a framework commonly referred to as the “petrodollar” arrangement.

Furthermore, the dollar serves as the backbone of the international financial system, with global loans, debts and contracts relying on USD as the standard unit of account.

It gives the United States unique leverage, such as the capacity to run substantial deficits —as others seek dollars for investment—and the authority to impose sanctions by restricting access to dollar-based systems.

Belgium-based SWIFT network (Society for Worldwide Interbank Financial Telecommunication) is crucial for facilitating global bank communications and transactions.

Given that most international transfers require dollar clearance through U.S. banks, the United States wields considerable influence, enabling it to sanction adversaries by blocking their access to dollar-based channels and SWIFT messaging.

Figure 15: The International Role of the U.S. Dollar | Credit: Bank for International Settlements

For example, Iranian banks and, more recently, Russian banks have been largely excluded from the dollar system through sanctions. This exclusion significantly curtails their access to global financial markets, effectively barring them from a considerable portion of international trade.

Bitcoin’s volatility significantly weakens its argument for legal tender status. As legal tender, it would require businesses and courts to accept it for debts and payments.

However, Bitcoin’s instability as a unit of account makes it impractical for contracts: A payment valued at $100 today could swing to $80 or climb to $120 within a month.

Fed Chair Jerome Powell has pointed out that crypto assets, like Bitcoin, “rarely function as actual money” due to their lack of stable value, which is essential for a functional currency. In Powell’s assessment, Bitcoin behaves as a volatile store of value—or risk asset—rather than a practical medium of exchange for day-to-day transactions.

U.S. policymakers are also driven by the need to preserve control over monetary policy and ensure financial stability. Legalizing Bitcoin as legal tender would hinder the Federal Reserve’s capacity to regulate the money supply, adjust interest rates and act as a lender of last resort during economic crises.

Unlike the dollar, which the Fed can issue or withdraw to adapt to economic conditions, Bitcoin’s fixed, algorithmically-driven supply offers no such flexibility.

It’s notable that no major economy has chosen to replicate El Salvador’s approach. For the U.S., in particular, the stakes are too high to risk undermining its fiat system.

The U.S. has been considering the introduction of a CBDC. If a digital cash alternative were to be implemented, Washington clearly prefers it to be a Fed-controlled digital dollar rather than a decentralized cryptocurrency like Bitcoin.

However, progress has been slow and measured. Powell emphasized that the Fed remains undecided on a CBDC and would not proceed without congressional authorization. By late 2023, he firmly stated that the U.S. would not launch a CBDC under his tenure as Fed Chair.

Instead, the U.S. has allowed the use of private USD-pegged stablecoins, like USDC and USDT , which account for nearly 100% of the stablecoin market.

Figure 16: Stablecoin Market Share by Currency | Credit: RWA.xyz, Toghrul Aliyev

Stablecoins have solidified the dollar’s dominance in digital finance without direct government involvement. Policymakers acknowledge that the crypto market operates firmly under USD hegemony, even in the absence of a state-issued digital dollar.

In 2025, the U.S. government, led by President Donald Trump, has flipped the narrative: Rather than viewing it solely as a threat, the administration now advocates for leveraging Bitcoin strategically to safeguard American interests.

In other words, if Bitcoin is destined to play a significant role in the global finance landscape, it is better for the U.S. to actively participate than to allow rival nations to dominate this space.

The 2025 executive order from Trump’s administration underscores protecting the sovereignty of the U.S. dollar as a key policy objective while promoting blockchain innovation.

In practice, this translates to U.S. regulators backing technologies that bolster dollar infrastructure, such as enhancing payment systems or supporting USD-pegged stablecoins under American regulatory oversight.

The U.S. crackdown on Facebook’s Libra project (later renamed Diem) in 2019–2020 is illustrative. Authorities were concerned that a private global currency—even one partially backed by the dollar—could undermine U.S. monetary influence. As a result, they intervened and effectively halted the project before its official launch.

Similarly, when Russia and China explored creating a gold-backed stablecoin or increased their gold reserves as part of efforts to de-dollarize, it sparked discussion in Washington. Some policymakers began suggesting that the U.S. should explore Bitcoin strategically– embracing an “if you can’t beat them, join them” approach.

As long as cryptocurrencies remain in the investment sphere, they pose a minimal direct threat to the dollar’s global dominance.

The United States had no compelling reason to adopt Bitcoin as legal tender, and many reasons to avoid it: The dollar’s strength, its established legal and financial framework, the risks associated with Bitcoin’s volatility, and the lack of control over its supply all made Bitcoin an unattractive option.

Trump’s Bitcoin Reserve Push

The idea of the United States holding Bitcoin as a reserve asset, once unimaginable, has become a tangible possibility under President Trump’s administration.

If the country that issues the world’s reserve currency starts accumulating Bitcoin in 2025, the implications would be profound. Such a move would send a powerful message to other nations, elevating Bitcoin from a speculative asset to a recognized strategic financial instrument.

Russia and China, in particular, are likely to pay close attention. President Vladimir Putin has explicitly praised Bitcoin’s potential as a sanction-resistant asset , especially after Western sanctions immobilized nearly $300 billion of Russia’s foreign reserves.

Should the U.S. start accumulating Bitcoin, it could prompt Moscow to expedite its own crypto reserve strategy, potentially triggering a geopolitical race to dominate the digital currency landscape.

This raises an important question: Is there enough Bitcoin to go around? Out of the 21 million total Bitcoin cap, 19.8 million have already been mined , leaving just 1.2 million yet to be released. The situation is further constrained by the estimated 5 million Bitcoins that are permanently lost. This means the effective circulating supply is closer to 14.8 million.

Figure 17: Bitcoin Adjusted Circulating Supply with Dormant Wallets (3+ & 5+ Years) | Credit: Glassnode

If multiple countries begin stockpiling Bitcoin, the limited supply coupled with soaring demand would indeed propel its price to unprecedented levels. This brings us to a critical motivator for the U.S. and potentially others to view Bitcoin as a reserve asset: National debt.

The Growing Mountain of U.S. National Debt

Over the past 30 years, the U.S. national debt has grown at an increasingly rapid pace.

Figure 18: USA National Debt | Credit: U.S. Department of the Treasury, Toghrul Aliyev

• It increased by 59.49% between 1995 and 2005, rising from approximately $4.97 trillion to $7.93 trillion.
• From 2005 to 2015, the growth surged 128.80%, reaching approximately $18.15 trillion.
• From 2015 to 2025, the debt nearly doubled again, with a 99.44% increase, pushing the total above $36.2 trillion, in 2025.

To put this in perspective, the national debt in 2025 is over 7 times larger than it was in 1995. However, it aligns with historical trends, as U.S. debt growth per decade has often been higher, averaging approximately 216% during periods of significant borrowing for world wars and other major crises. As of 2025, the gross federal debt exceeds $36 trillion, equivalent to roughly 120% of GDP.

Each major surge in debt corresponds to periods of economic stimulus or crisis. For example, the Great Recession of 2008 and the COVID-19 pandemic of 2020 prompted massive deficit spending, resulting in sharp increases in national debt.

Notably, the largest single increase in debt occurred immediately following these crises. However, even in the absence of emergencies, the debt has steadily increased due to the accumulation of annual deficits.

Figure 19: USA Budget Deficit | Credit: U.S. Department of the Treasury, Toghrul Aliyev

The Double-Edged Sword of National Debt

On the positive side, federal borrowing allows the government to invest in economic growth and national strength. By running deficits and accumulating debt, the government can fund essential infrastructure projects, education initiatives, and research, as well as support safety-net programs. These investments drive productivity and enhance the overall well-being of citizens.

Additionally, federal borrowing provides policymakers with the flexibility to stimulate the economy during downturns. By issuing debt, the government can inject funds to create jobs or bail out industries during a recession, helping to mitigate the impact of economic crises.

The ability to spend during challenging periods without the need for immediate tax increases has enabled the U.S. to recover more swiftly from wars and financial crises. In essence, the national debt has served as a mechanism to “spread costs over time,” strengthening the economic stability and national security in the long run while postponing the immediate financial burden.

The U.S.’s emergence as a global superpower is closely tied to its readiness to borrow strategically for monumental endeavors. Moreover, the U.S. Treasury debt is widely regarded as one of the world’s safest assets, offering the global economy a reliable and stable store of value through the issuance of bonds.

On the downside, excessive debt can weigh on the economy over time. Every borrowed dollar accrues interest that must be repaid. As the debt grows, so do the associated interest costs.

In 2024, U.S. net interest payments on the debt reached approximately $892 billion, with projections indicating a rise to $1.7 trillion by 2034.​ Furthermore, beyond a certain threshold, significant government debt can potentially impede long-term economic growth .

Bitcoin as a Strategic Reserve Asset

The U.S., with over 8,100 metric tons , maintains the world’s largest gold reserves as a financial backstop. Gold’s value lies in its ability to hedge against currency risk and provide confidence in a country’s creditworthiness. In a similar vein, Bitcoin, as a reserve asset, offers the potential to enhance the U.S.’s balance sheet.

The U.S. has two compelling reasons to consider Bitcoin as a strategic reserve asset: Gaining dominance over the global Bitcoin and leveraging Bitcoin’s potential value growth, which could help reduce the national debt burden.

As the issuer of the world’s reserve currency, the U.S. recognizes the critical role of currency control in maintaining economic dominance. By securing a substantial share of Bitcoin’s supply, the U.S. could position itself to influence a significant segment of the global digital economy.

Michael Saylor argues that if the U.S. acquires 20% of the total Bitcoin supply (4.2 million BTC), it could secure financial dominance for the next century. In his view, this would be akin to the Bretton Woods Agreement, which cemented the dollar’s role as the world’s reserve currency.

Saylor believes that only a single nation-state can attain this level of strategic dominance due to Bitcoin’s scarcity, underlying the urgency for the U.S. to act before its geopolitical competitors do.

Bitcoin presents a potential solution to the U.S.’s mounting national debt. Unlike fiat currency, which depreciates over time due to inflation, Bitcoin’s fixed supply is inherently designed to increase in value.

Over the past decade, it has achieved an average annualized return exceeding 100%. Even with cautious projections, it is likely to continue appreciating as global adoption continues to expand.

VanEck, a leading asset management firm, suggests that Bitcoin could be used to address the national debt. The first explored a scenario where the U.S. amasses a Bitcoin reserve of 1 million BTC—roughly 1/20th of the total supply—over a five-year period, aligning with the framework outlined in the BITCOIN Act introduced by Senator Cynthia Lummis.

Under conservative projections, such a reserve could potentially reduce the U.S. national debt by approximately $21 trillion by 2049, or about 18% of the estimated U.S. debt at that time.

The estimate assumes that Bitcoin’s price would appreciate at a compound annual growth rate of 25%, increasing from around $100,000 today to about $21 million per BTC over 24 years, while U.S. debt grows at an annual rate of roughly 5%.

Figure 20: How a U.S. Bitcoin Reserve Could Offset National Debt Over Time | Credit: VanEck

However, Bitcoin on its own is unlikely to resolve the issue of U.S. national debt due to persistent budget deficits. Even if Bitcoin reserves were utilized to lower the debt, the persistent deficit could outweigh these efforts, resulting in a net increase in debt.

In other words, Bitcoin cannot serve as a definitive solution for U.S. debt unless the root cause—budget deficits—is addressed through measures like the Department of Government Efficiency (DOGE) .

The U.S. cannot rely entirely on Bitcoin due to the cryptocurrency’s inherent volatility. Bitcoin’s price can fluctuate by 50% or more within a year, and in some cases, even within a single month during periods of market turbulence. A sudden price crash at a critical moment could worsen the financial situation rather than provide relief.

The U.S. could purchase Bitcoin using budget surpluses generated by the DOGE, which is focused on reducing federal spending by $1 trillion to $2 trillion annually. As Bitcoin appreciates over time, portions of the reserve could be sold at a profit, allowing the proceeds to be used to reduce the debt principal.

An alternative strategy could involve the creation of a sovereign Bitcoin fund, managed similarly to a pension fund or endowment. The government could allocate a set amount of Bitcoin purchases annually, holding it as a long-term asset and potentially lending portions safely to generate yield. Over time, this fund could grow substantially, and if Bitcoin performs as anticipated, it could transfer profits to the Treasury.

The government could also explore accepting tax payments in Bitcoin or issuing Bitcoin-denominated bonds. Collecting taxes in BTC would allow for the organic accumulation of the asset; however, this approach poses significant currency risk to the budget. Such a strategy would likely remain impractical unless Bitcoin achieves far greater price stability.

Bitcoin bonds, like El Salvador’s “ Volcano bonds ,” would involve the U.S. either borrowing in BTC or using BTC as collateral for its debt. This approach is complex and would only be viable if Bitcoin markets became significantly deeper and more universally accepted.

Nevertheless, such bonds present theoretical mechanisms through which Bitcoin could potentially contribute to national financing strategies.

That said, the first-mover advantage holds significant weight. By taking early action, the U.S. positions itself to gain considerable benefits, both strategically and financially. Fast-forward a decade, and it’s easy to imagine national Bitcoin reserves being viewed as a hallmark of financial strength.

In essence, Bitcoin could act as a high-growth asset within the national portfolio, similar to an ultra-volatile sovereign wealth fund.

This concept mirrors how some nations use oil revenues or other natural resources to improve their fiscal standing, except in this case, the resource would be Bitcoin, amassed and maintained for its potential value appreciation. Holding Bitcoin might also enable the government to hedge against the risk of currency debasement.

Conclusion

El Salvador and the United States occupy opposite extremes on the Bitcoin adoption spectrum.

El Salvador embraced Bitcoin out of necessity. With a dollarized economy, the country was exposed to U.S. monetary policy, lacking control over its own currency. President Nayib Bukele’s daring move to make Bitcoin legal tender was a calculated risk intended to secure financial independence, lower remittance costs, and draw international investment.

It was a bold stand against a system that had long kept El Salvador economically reliant. For the nation, Bitcoin came to represent more than just a digital currency—it became a powerful symbol of sovereignty and a means to reshape its financial destiny.

However, without the trust of its citizens, the necessary infrastructure, or the financial stability to sustain such a bold move, Bitcoin as a national currency risks being seen as a gamble.

In contrast, the United States is taking a strategic, long-term approach. Unlike El Salvador, it doesn’t rely on Bitcoin for survival but views it as a potential tool for maintaining supremacy.

As the issuer of the world’s reserve currency, the U.S. benefits from the continued dominance of the dollar and, at the same time, recognizes the transformative potential of Bitcoin and other digital currencies.

By accumulating Bitcoin, the U.S. could solidify its financial dominance in a world where digital currencies grow in influence.

So, one uses Bitcoin to break free from the existing order, and the other considers it to reinforce its control over that order.

Bitcoin has transcended its role as merely a financial asset or speculative tool. It has evolved into a geopolitical instrument, a currency of influence, and a hedge against financial vulnerability. The nation that leads in mastering this digital currency won’t just shape markets—it will shape the trajectory of global power.

CCN Reports is a regular series that delves into the details to provide in-depth analysis of cryptocurrencies and the companies associated with them. We aim to engage a global audience interested in what’s what, who’s who and perhaps even why’s that.