El Salvador's Bitcoin Experiment Fails: 89% of Providers Non-Operational

El Salvador's ambitious experiment with Bitcoin as legal tender has encountered significant hurdles, with only a fraction of registered Bitcoin service providers meeting the country's regulatory requirements. According to data from the Central Reserve Bank of El Salvador, just 20 out of 181 registered Bitcoin service providers are operational, accounting for a mere 11% of the total. The remaining 161 providers have been classified as non-operational, failing to comply with the stringent standards set by the country's Bitcoin Law.

The Bitcoin Law mandates that service providers implement robust Anti-Money Laundering (AML) programs, maintain accurate financial records, and develop tailored cybersecurity measures. However, the data reveals that 89% of the registered providers have fallen short of these obligations, highlighting the challenges faced in integrating Bitcoin into the national financial system. Among the few firms that have met the legal criteria are the state-backed Chivo Wallet, Crypto Trading & Investment, and Fintech Américas.

El Salvador's adoption of Bitcoin as legal tender in 2021 was a groundbreaking move, central to President Nayib Bukele's economic strategy. However, the country's recent agreement with the International Monetary Fund (IMF) for a $1.4 billion loan has introduced new complexities. The deal requires El Salvador to limit the use of Bitcoin in public institutions and pay taxes in US dollars, effectively rolling back some of its Bitcoin-related initiatives. Despite this, President Bukele has stated that the government will continue to purchase Bitcoin, seemingly at odds with the IMF agreement.

The IMF's involvement has sparked speculation about the future of Bitcoin in El Salvador. Some analysts have suggested that the country may rescind Bitcoin's legal tender status, with a rollback law potentially taking effect on April 30. This uncertainty underscores the challenges El Salvador faces in balancing its innovative approach to cryptocurrency with the demands of international financial institutions.