El Salvador’s Bitcoin Experiment Faces Challenges
Two years ago, El Salvador shrugged off a chorus of warnings and adopted Bitcoin as legal tender in a bid to revitalize its economy and improve access to financial services.
- Bitcoin has lost more than half its value since then.
- President Nayib Bukele’s currency gamble has not gone down well.
The Goals of Adoption
- President Bukele wanted to make it easier and cheaper for Salvadorans to receive remittances from family members abroad.
- He also aimed to provide financial services access to the 70 percent of people with no bank account.
- Remittances account for a fifth of the country’s GDP.
Lack of Trust in Crypto
- Two years after adoption, the goals have not been achieved.
- There is little trust in cryptocurrency among the population.
- A poll found that 71 percent believed Bitcoin has not improved their family economic situation.
- On the streets of San Salvador, people have a negative view of Bitcoin.
- Many believe it is a bad investment and a form of robbery.
- The currency’s volatility is a major concern.
- Bitcoin traded at about $45,000 two years ago and reached a record $68,000.
- Currently, it is worth just over $25,500.
Cash is King
- To facilitate Bitcoin transactions, the government created the “Chivo” digital wallet and promised each user the equivalent of $30.
- Only one percent of remittances came via Chivo, indicating low adoption.
- People prefer to use hard cash due to lack of confidence in cryptocurrency.
- Economist Carlos Acevedo believes it is too soon to call it a government failure.
- He suggests that Bitcoin’s price could rise at any moment, changing the scenario.
- The International Monetary Fund and World Bank warned about the risks of currency fluctuation and money laundering.
Bitcoin City and Bonds
- After Bitcoin hit $68,000, President Bukele announced plans to build a “Bitcoin City” powered by thermal energy.
- The country would issue $1 billion in Bitcoin bonds to finance the initiative.
- However, nothing has come of the project or the bonds to date.
Government’s Bitcoin Holdings
- The government has purchased 2,381 Bitcoin, but the rate is undisclosed.
- In November last year, Bukele said the government would buy one Bitcoin every day, but it is unclear if this has happened.
- Bitcoin does not exist in the local economy, as everything is paid in dollars.
- Some individuals, like YouTuber Jose Francisco Ayala, believe it is a matter of education and that the country is moving forward with Bitcoin.
© 2023 AFP
‘It’s robbery’: Salvadorans slow to adopt Bitcoin (2023, September 7)
retrieved 7 September 2023
This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no
part may be reproduced without the written permission. The content is provided for information purposes only.