El Salvador's Bitcoin: Flow of Cash vs. Flow of Approval

The disconnect is stark. President Nayib Bukele commands 91.9% approval from his citizens, a level of political capital that has held steady for years. Yet, when asked about his signature policy, only 2.2% cite Bitcoin as his biggest failure. This tepid public reaction reveals a policy that is popular for reasons unrelated to cryptocurrency, such as dramatic crime reduction.

This is a top-down strategy, not a grassroots movement. The state continues to accumulate Bitcoin, purchasing one Bitcoin daily since 2022. This systematic buying contrasts with the market reality: only 7.5% of Salvadorans actively use Bitcoin for transactions. The flow of cash into state reserves is decoupled from any flow of adoption among the populace.

The bottom line is that Bukele's political engine runs on security and stability, not crypto enthusiasm. His approval rating remains a powerful shield, allowing the government to pursue its Bitcoin agenda regardless of public sentiment.

The Shifting Financial Mechanics: From Legal Tender to Fiscal Concession

The program's structure has fundamentally changed. The IMF deal ended the mandatory legal tender requirement and ring-fenced public sector participation, removing the compulsion for businesses and citizens to use Bitcoin. This marks a retreat from the original, expansive vision of a Bitcoin-powered economy.

The government's direct role is now being scaled back. The state-owned Chivo wallet, a key tool for the digital ecosystem, is advancing talks to be sold. This move signals a clear shift away from building a national crypto infrastructure toward managing its financial assets.

The government's Bitcoin holdings are now a pure fiscal asset, exposed to market swings. With the Chivo sale negotiations underway and the state's accumulation paused, the portfolio is subject to price swings and new sale discussions. Its value is no longer a policy tool but a potential source of liquidity for a debt-laden state.

Catalysts and Risks: What to Watch for Flow Implications

The immediate financial signal will be the sale price and buyer for the Chivo wallet. The well-advanced negotiations with the IMF highlight this as a key step to de-risk the portfolio. The final terms will reveal the government's current valuation and its exit strategy for its primary crypto infrastructure.

The pace of Bitcoin accumulation is now a critical metric. The IMF deal imposes conditions to limit active increases in holdings, directly contradicting the president's earlier pledge to buy daily. Any deviation from this cap will signal a policy shift and expose the portfolio to new volatility.

Finally, monitor remittance flows through Bitcoin channels. The original economic thesis relied on this to boost inflows, but adoption remains low. With only 7.5% of Salvadorans actively using Bitcoin, the channel's impact on the economy's cash flow is minimal.