Five years after El Salvador became the first country to adopt Bitcoin as legal tender, the government is adjusting its approach by introducing dollar-backed stablecoins as a practical solution for digital payments and remittances. President Nayib Bukele initially made headlines worldwide by adding Bitcoin alongside the US dollar in 2021 with aims to boost financial inclusion and streamline remittances. However, everyday adoption of Bitcoin remained low, and the government later scaled back its requirements for Bitcoin’s legal use.
Government-backed app to power stablecoin adoption
President Bukele’s administration is developing a new payment platform, Sivar, in partnership with technology company Modveon. The app is designed to let Salvadorans send and hold digital dollars for remittances and other payments utilizing Coinbase’s Base network, a layer-2 blockchain solution. Users will register and verify their identities through government-issued IDs, and the application will organize individuals into digital communities based on their location and interests.
Stablecoins differ from cryptocurrencies like Bitcoin by being pegged directly to fiat currencies such as the US dollar, mitigating price volatility and making them more suitable for everyday transactions. Officials expect this approach to bring the benefits of digital money without the unpredictability seen in the crypto market.
Mini dictionary: Modveon – A technology company collaborating with governments and organizations to develop digital payment platforms and blockchain-based solutions.
Stablecoins offer Salvadorans a means to enjoy the advantages of digital transactions, such as faster remittances, while avoiding the steep price swings associated with Bitcoin.
Pilot projects in small economies
El Salvador is not the only nation to explore government-backed digital dollar solutions. In 2023, Palau, an island nation in the Pacific with a population near 18,000, launched a pilot for its Palau Stablecoin (PSC) in partnership with Ripple. The pilot provided 200 government employees with digital tokens, each pegged one-to-one to the US dollar and backed by reserves, for spending at participating local retailers.
Palau President Surangel Whipps Jr. has argued that the nation’s small size helps it implement and test new financial technologies, aiming to advance government efficiency and local payments. However, Palau’s project faced challenges when it could not secure a custodian bank, while the International Monetary Fund (IMF) highlighted issues including reserve management, regulation, cybersecurity, and consumer protection.
The Marshall Islands, another Pacific nation, previously paused its SOV digital currency due to regulatory concerns. The country is now considering a national digital payment framework built around a US dollar-backed stablecoin, reflecting an ongoing interest in digital solutions for local economies tied to the dollar.
For nations such as Palau and the Marshall Islands, stablecoins represent tools to speed up payments, improve transparency, and enhance government control of financial systems.
| Country | Project Name | Status | Backing | Main Challenge |
|---|---|---|---|---|
| El Salvador | Sivar | In development | US Dollar | Early-stage adoption, technology rollout |
| Palau | Palau Stablecoin (PSC) | Pilot on hold | US Dollar 1:1 reserves | Custodian bank issue |
| Marshall Islands | SOV (paused), US dollar stablecoin (planned) | Under study | US Dollar | Regulatory, financial concerns |
Stablecoin adoption in Nigeria highlights wider trend
The adoption of stablecoins is also expanding rapidly across Africa, particularly in Nigeria, where digital assets have become instrumental for individuals and businesses moving money internationally. According to the IMF, stablecoins made up more than 65% of Nigeria’s crypto inflows in 2024 and represented around 60% of all stablecoin inflows to Sub-Saharan Africa between late 2019 and early 2025. Nigeria had 25.9 million digital-asset users by 2025, and stablecoins such as USDT and USDC dominated the market.
The usage extends beyond trading activity. Nigerian households rely on stablecoins for remittances, while small importers increasingly use them to pay overseas suppliers. Larger enterprises are also experimenting with stablecoins for trade settlements. Transaction costs are a motivating factor: World Bank figures show that sending $200 globally averages 6.49% in fees, with the cost rising to 8.78% in Sub-Saharan Africa. In comparison, stablecoin transfers typically incur only minimal blockchain fees before conversion and withdrawal costs.
However, this trend raises regulatory concerns. As more users hold digital dollars in stablecoins rather than local banks, countries could see increased digital dollarization, potentially limiting policymakers’ ability to manage their own monetary systems. The IMF has warned that this shift could erode monetary control in countries such as Nigeria.
El Salvador’s Bitcoin reserve milestone
Coinciding with the fourth anniversary of its Bitcoin Law, El Salvador recently purchased an additional 21 BTC, increasing the country’s total holdings to 6,313.18 BTC, valued at approximately $701 million. This move underscores the government’s ongoing commitment to cryptocurrency as a reserve asset, even as focus shifts to promoting stablecoin-based payment systems for the wider population.
