El Salvador To Focus on AI, Using the Same Formula That Made It a Crypto Haven

Key Takeaways

• El Salvador has approved a new law to promote AI development.
• The law includes a zero percent tax rate on AI innovation, positioning the country as a potential tech hub.
• Despite its ambitions, El Salvador faces significant challenges, including low AI readiness and financial risks tied to Bitcoin.

El Salvador is doubling down on its reputation as a haven for emerging technologies, this time with artificial intelligence (AI).

The country has approved its first AI law , aiming to provide regulatory clarity and incentives for AI developers—mirroring the approach it took with Bitcoin (BTC).

While this new law positions the country closer to its tech hub ambitions, challenges like low AI readiness and financial risks tied to Bitcoin remain.

El Salvador Bets on AI With a Crypto-Inspired Strategy

El Salvador’s new legislation includes legal protections for open-source AI development, with Article 19 introducing safeguards such as sandbox provisions and protections against third-party misuse.

These measures aim to create a secure environment for AI innovation, reducing the regulatory uncertainty that often deters startups.

Beyond policy, El Salvador is setting up an AI Lab focused on research, development, and applications within government services.

The lab will target key areas such as traffic management, water quality monitoring, and geothermal energy optimization.

Additionally, it will provide educational resources to build local AI expertise, an area where the country currently lags.

To attract AI startups, the government is also offering a zero percent tax rate on AI development—a move reminiscent of its Bitcoin incentives.

With a regulatory framework in place and tax advantages on the table, El Salvador hopes to position itself as a prime destination for AI entrepreneurs and investors.

Applying the Crypto Playbook

President Nayib Bukele’s tech-driven agenda has already made El Salvador the world’s first country to adopt Bitcoin as legal tender. Now, his administration is following a similar blueprint for artificial intelligence.

The government previously launched a Bitcoin and Lightning Network developer training program and is preparing to release Bitcoin-backed bonds between June and September.

This approach—offering regulatory freedom and financial incentives—helped El Salvador attract crypto businesses. Officials now hope the AI sector will follow suit.

“El Salvador already boasts a zero percent tax rate on AI innovation and development, and now we provide a framework to build something extraordinary,” The Bitcoin Office wrote on X.

If successful, the AI law could bring in entrepreneurs, developers, and venture capital, strengthening El Salvador’s bid to become a tech hub in Latin America.

Hurdles Ahead for Bukele’s AI Ambitions

Despite the government’s optimism, El Salvador faces significant obstacles in its AI push. According to the Government AI Readiness Index , the country ranks 85th out of 194 nations, trailing behind regional peers like Mexico and Argentina.

Challenges include:

• A lack of AI infrastructure: The country has minimal AI-focused investment and research.
• An unprepared workforce: There are few skilled AI engineers, and tech education remains underdeveloped.
• A struggling economy: The informal nature of El Salvador’s economy makes widespread AI adoption difficult.

Moreover, El Salvador’s Bitcoin experiment has introduced financial risks that could complicate its AI ambitions.

Since adopting Bitcoin, the country has faced rising fiscal deficits, increased debt, and multiple credit rating downgrades. Bukele’s $100 million Bitcoin bet is currently down 45%.

Internationally, organizations like the International Monetary Fund (IMF) have expressed concerns, warning that El Salvador’s financial health remains vulnerable.

The IMF has withheld support, citing the risks tied to Bitcoin adoption—an issue that could extend to AI if not carefully managed.

A Bold Vision, but Will It Work?

El Salvador’s AI law cements its strategy of embracing cutting-edge technology with minimal regulation and financial incentives.

However, much like its Bitcoin experiment, the success of this initiative will depend on whether the country can build the necessary infrastructure, attract talent, and maintain financial stability.

Bukele’s vision is clear: turn El Salvador into a tech and innovation powerhouse. However, whether AI developers will follow the same path as crypto entrepreneurs remains to be seen.