What Is the Currency of El Salvador?
Since El Salvador became an independent nation of Central America in 1838, it has made use of multiple types of currency. The history of its legal tender reflects the often turbulent history of the central american country itself. At times, it has adopted the currency of other nations, originally reflecting its Spanish roots and later forming a financial connection to the United States.
When El Salvador attained independence in the 1830s, Salvadorans informally used the macaco as their currency. These silver coins were often minted in other countries, but were not established as El Salvador’s official currency until 1856. El Salvador made wide use of the Spanish peso as well, and local farmers used brass coins, called “fiches de finca.” El Salvador issued its own currency, the real, first in the form of silver coins and then in paper currency starting in 1877.
In 1883, President Rafael Zaldivar oversaw the implementation of the First Monetary Law, which adopted the peso as El Salvador’s official currency. Each peso was originally worth 8 reales, later changed to 10 reales to adopt a decimal system. Three banks had the right to issue them: the Banco International, Occidental Salvadoreño and Agrícola Comercial.
In 1892, the Monetary Law was revised and the currency of El Salvador was changed from the peso to the El Salvador Colon (SVC), named in honor of Christopher Columbus. The exchange rate was two colons to each U.S. dollar. In 1919, the Second Monetary Law went into effect, removing old or worn-out coins from circulation and placing the Ministry of Finance in charge of the currency. In 1934, the Central Reserve Bank of El Salvador became the sole issuer or colon notes, controlling the volume and flow of the currency. It issued its first official banknotes on August 31 that year, and the Salvadoran colon remained El Salvador's official currency for more than 60 years.
El Salvador suffered a devastating civil war in the 1980s. When it ended in 1992, the government instituted a series of acts designed to spur the economy. These included privatizing the banking system and loosening economic restrictions. On January 1, 2001, the country introduced the U.S. dollar as its new official currency; the dollar had greater stability than the colon and kept the country’s currency from destabilizing. While the dollar remains El Salvador’s official currency as of 2011, President Nayib Bukele made El Salvador the first country to adopt the cryptocurrency bitcoin as a national currency. Despite warnings from the International Monetary Fund (IMF) about the volatility of digital currency, the now almost two year-old official currency remains in place, with bitcoin ATMs open in the capital, San Salvador. Because El Salvador cannot legally print USD, it began an education campaign to help its citizens understand the English-language denominations of the bills.