In El Salvador, President Bukele's pro-bitcoin policy is not taking hold
Under the leadership of its president, El Salvador was the first country in the world to adopt, in 2021, bitcoin as an official currency, in addition to the dollar. But while Nayib Bukele, candidate for re-election and big favorite in this Sunday's presidential election, wants to continue the experiment, the results are not there.
In 2021, the small, poor Central American country was the first to make bitcoin an official currency. AP - Salvador Melendez
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A little over two years ago,
Nayib Bukele
made bitcoin, a virtual currency, legal tender in El
Salvador
. A world first. “
In the short term
,” the young Salvadoran president promised,
“this will create jobs and contribute to the financial inclusion of thousands of people outside the formal economy.
» His bet: that cryptocurrency promotes money transfers from three million emigrants, mainly in the United States, who account for 21% of GDP, to their loved ones back home, saving them bank fees.
A few months later, with his cap on backwards, he went even further, announcing with great fanfare the creation of “Bitcoin City”, a paradise for cryptoenthusiasts, exempt from taxes and which was to operate using the thermal energy of a volcano. A bitcoin “Mecca” supposed to attract investors. Alas, two years later, the work has still not started and the use of cryptocurrency remains marginal.
Read alsoIn El Salvador, the bitcoin utopia
Only 1% of payments
Because, it is clear that Salvadorans have not adopted bitcoin. A recent survey by the University of Central America (UCA) indicated that 88% of the population did not use it in their transactions in 2023. Today, bitcoin represents barely 1% of payments. In 2022, only 1.6% of the more than $7.7 billion in
remesas
, money sent by migrants working abroad, moved into bitcoins. And transactions still fell by almost 35% in 2023. Nayib Bukele therefore did not win his bet.
However, the beginnings seemed promising. The government had created a virtual wallet called “Chivo” (cool, in French) and installed hundreds of ATMs across the country where Salvadorans could exchange their bitcoins for dollars. The equivalent of $30 was offered to anyone who downloaded the app and a few weeks after the introduction of bitcoin, the government announced that half the population had downloaded the app. But in this small, poor Central American country where extreme poverty has doubled since 2019, many residents actually converted their money directly into dollars and withdrew it from the ATM. And they never reused their virtual wallet.
Bitcoin City, this paradise for cryptoenthusiasts announced by Nayib Bukele with great fanfare in November 2021, has not yet seen the light of day. AP - Salvador Melendez
Since its advent in El Salvador, the currency has experienced ups and downs, losing three-quarters of its value in three months. If the digital currency has since regained color, its volatility seems far removed from the daily reality of Salvadorans who often live from day to day.
In fact, today, bitcoin remains the currency of a small elite, explains economist Julia Evelyn, from the Central American University of Salvador, speaking to
Carlos Herranz
, from RFI's Latin America editorial team. Young, well-off and tech-savvy... She describes their profile: “
This is a group of young men aged 20 to 35. They are mostly single and work in the world of technology and technological development, including artificial intelligence.
So these people have very, very high salaries. They often work in subsidiaries of international companies or are independent. They then run small, very dynamic structures in the technology sector. These people use the services not only of bitcoin but of all blockchain technology, therefore storage and sharing of data. These users represent approximately 12% of the population. It is therefore a group that is not very representative of the Salvadoran population.
»
IMF warnings
Even in El Zonte, this fishing village popular with North American surfers, and nicknamed “Bitcoin Beach”, the enthusiasm fizzled. Three years before President Bukele's decision to make bitcoin the national currency, the seaside resort was the site of an experiment led by an American, who saw cryptocurrency as a means of emancipation for populations. While some merchants still accept bitcoins, transactions are rare.
More generally, bitcoin has not had the expected influence on the country's economy. El Salvador's growth remains one of the weakest in Central America. Under the leadership of President Bukele, the State of El Salvador had invested in the digital currency: 119.8 million dollars, valued today according to the specialized site Nayibtracker.com, at 121.6 million dollars. Thanks to bitcoin's recent rebound, this is no longer a losing bet, and some economists believe that bitcoin is not responsible for the general state of the country's economy, but this 1.5% return will not nobody's salivating either, analyzes
Nathanaël Vittrant
, from RFI's Economy department.
In 2022, the country's public debt reached 25 billion dollars (23 billion euros), a record in thirty years. Monetary institutions, such as the World Bank and the International Monetary Fund (IMF), are urging El Salvador to withdraw bitcoin from the official market, deeming the cryptocurrency too volatile. And above all conducive to money laundering. A billion-dollar loan is in the balance. But Nayib Bukele, self-proclaimed "
coolest dictator in the world
", promised that if he was re-elected, bitcoin would remain one of the country's official currencies.
Read alsoSalvador: President Bukele’s shenanigans for his re-election
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