What Is the Currency Used in El Salvador?
Discover El Salvador's unique dual currency system, featuring the US Dollar and Bitcoin as legal tender for daily use.
El Salvador employs a dual currency system, primarily utilizing the United States Dollar (USD) alongside Bitcoin. Both currencies hold legal tender status. This monetary framework reflects El Salvador’s position as a pioneer in digital currency integration.
The United States Dollar
The United States Dollar became El Salvador’s official currency on January 1, 2001, replacing the Salvadoran colón at a fixed exchange rate of 8.75 colones per dollar. This change, known as dollarization, aimed to stabilize the economy and foster growth by mitigating inflation and attracting foreign investment.
All prices for goods and services are denominated in USD, and physical U.S. dollar notes and coins are widely used for daily transactions. While the colón is no longer in circulation and rarely encountered, the dollar provided a stable monetary environment.
Bitcoin as Legal Tender
El Salvador became the first country globally to adopt Bitcoin as legal tender on September 7, 2021, placing it alongside the U.S. dollar. This legislative action mandates that businesses must accept Bitcoin as payment for goods and services, and it can also be used to discharge debts or pay taxes. The government’s intention was to facilitate remittances, promote financial inclusion for the unbanked population, and attract foreign investment.
A key mechanism for Bitcoin transactions is the government-backed Chivo wallet, which allows users to send and receive Bitcoin or dollars, and to convert between the two currencies without incurring commission fees. While Bitcoin retains its legal tender status, recent legislative modifications indicate that businesses are no longer strictly obliged to accept it, and it cannot be used for tax payments or state bills. Despite its legal standing, the actual adoption and widespread use of Bitcoin for everyday transactions vary significantly among the population and businesses.
Currency in Daily Life
In everyday transactions in El Salvador, the U.S. dollar remains the predominant currency. Cash, particularly USD notes, is frequently used for smaller purchases and in informal sectors. Automated Teller Machines (ATMs) are widely available, dispensing U.S. dollars.
Digital payments are also a common aspect of daily commerce, encompassing both traditional credit and debit cards for larger purchases, and digital wallets like Chivo. The Chivo wallet facilitates transactions in both Bitcoin and USD, enabling seamless conversions and transfers. While Bitcoin offers an alternative, especially for remittances and among tech-savvy individuals, many transactions continue to be conducted in U.S. dollars.