Citation:
Boos, T. , Grigera, J. (2023): The political economy of Bitcoin as legal tender in El Salvador: Temporary bandages to permanent wounds?. WIDER Working Paper 2023/136. Helsinki: UNU-WIDER. https://doi.org/10.35188/UNU-WIDER/2023/444-1

Abstract:
This paper provides a contextual analysis of the adoption of Bitcoin as legal tender in El Salvador. First, it outlines the historical context and political situation of the period 2019–24, providing background for the passage and implementation of the Bitcoin law (Decree No. 57). It identifies the institutional and political context along with key areas of contention. It then examines the macroeconomic context of El Salvador, detailing fundamental economic features and how they connect to currency issues. The analysis reveals that Bitcoin adoption is deeply intertwined with tensions around dollarization, remittances, and foreign debt. The paper concludes with hypotheses on the potential dynamics and future of Bitcoin as legal tender in El Salvador, extending beyond President Bukele's tactics.