The adoption of bitcoin as legal tender in El Salvador promoted by the government of Nayib Bukele to boost financial inclusion, attract foreign investment and improve the economy is a project that, three years after its implementation, has not convinced the majority of the population, who reject its daily use.
El Salvador captured the attention of the financial world in September 2021 with the adoption of the most popular cryptocurrency, but so far it has not achieved mass employment or realized the expectations generated by an initiative criticized by some sectors for its opacity.
According to a survey by the University Institute of Public Opinion (Iudop), 88% of Salvadorans will not use the bitcoin cryptocurrency in 2023, and 48.8% disagree with public spending for its implementation.
The Executive has allocated $150 million to a trust for the conversion of the cryptocurrency into dollars, of which $107 million have been used to purchase 2,381 bitcoins. In addition, it gives a $30 bonus to those who download the digital wallet.
Information on the use of these resources is handled with total confidentiality by state agencies. The only official source is President Bukele’s posts on the social network X (formerly Twitter).
“Everyday use of bitcoin has failed”
The government’s main goal was to ensure that citizens adopt bitcoin on a daily basis, but from the first few months “we realized that this did not happen,” economist Tatiana Marroquín told EFE.
“After almost three years, after analyzing and observing the behavior of the population, we can say that this government experiment has failed,” Marroquín said.
Another advantage attributed to this model was that it would be used massively for sending remittances, but Salvadoran emigrants “have preferred traditional methods to continue sending their money,” he explains.
According to figures from the Central Reserve Bank, family remittances received through cryptocurrency wallets in El Salvador registered a 34.5% drop in 2023 compared to the previous year and barely represented one percent of total remittances, estimated at $8,181.79 million.
The financial inclusion that was intended through the use of bitcoin also crashed into reality, due to “ignorance of the subject.”
The main challenge to consolidating the financial inclusion of Salvadorans is that most of them work informally and lack regular income. “They have no access to savings or credit,” says Tatiana Marroquín.
“It is not just about having an electronic wallet. El Salvador has had structural challenges for decades, it is the country that attracts the least foreign investment, the one that grows the least in the region,” a trend that has even worsened in recent years, he says.
“There is a large population living in poverty and economic vulnerability, who have no financial, social or mental space to get involved in the Bitcoin game,” says this economist, who is critical of the use of public funds to encourage the use of Bitcoin and the laws to facilitate the use of digital currencies.
“Despite the overwhelming reality that it is not functional for the needs of the population, the government continues to use funds and create institutions in a very non-transparent way,” he says.
By 2022, the Salvadoran government was expected to issue bitcoin instruments – known as volcano bonds – worth $1 billion to finance the construction of Bitcoin City, a city project in the east of the country, but neither the budget allocation has been made nor has the project begun to be built.
The beach where bitcoin is king
Where cryptocurrency has been successful is on El Zonte beach, located in the central department of La Libertad, where bitcoin is widely used.
In this place, which is heavily visited by foreign visitors, you can buy anything with bitcoin, from candy to hotel bills.
Bitcoin arrived in El Zonte as a project unrelated to the entry into force of the Bitcoin law, although legal regulations have promoted its use, Román Martínez, a local resident and regular user of the cryptocurrency, explains to EFE.
“When President Bukele approved Bitcoin as legal tender, he made a dream come true for many people around the world, for many Bitcoiners who dreamed of this (…), El Salvador has benefited greatly,” he says.
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