More useful to the president than the citizens. Four months of legal bitcoins in El Salvador

Exactly four months after Bitcoin was introduced in El Salvador, over $96,000 has already been stolen, through computer fraud, From at least 50 wallets One of the largest number of Salvadoran citizens. However, the security problems do not seem to cause a major headache for the authorities. Chief Bukele goes straight. He tweets regularly with rhetoric that echoes Lenin a century ago: “El Salvador is the spark that started the revolution.” The government is safe: coins Fiat (Euro, dollar, sterling, etc.) will soon be replaced by cryptocurrencies. On the other hand, at this point, the authorities of San Salvador, the capital, do not have many alternatives: “Bukele introduced Bitcoin in line with his political proposition: young, innovative, millennials,” Tiziano Breda, an analyst at the ‘International Crisis Group’ who lives in Central America has been following political events in El Salvador for several years. “He wants to rename his country. Build an international reputation that is no longer just linked to corruption and violence.” But if the crypto experiment fails, it would be a huge blow to the political determination of the 40-year-old who came to lead the country in 2019.


We can’t predict the future, but in the meantime we know one thing: It’s the golden moment, both domestically and globally, for Niep Böckel. “After four successive presidents under investigation or arrested on corruption scandals, Bukele represents the great modernity of the Salvadoran political scene,” says Tiziano Breda. There was fatigue towards the old political class. Bukele, born in 1981, was able to present himself as a modern and technological politician.”

The tecnocaudilloBecause the media often calls him not in his favour, he wants to rename his country. From a nation founded on corruption, among the most violent in the world due to perpetual war between local gangs, to a nation that aspires to modernity, open to new technologies and tourism. “Right now, thanks to the introduction of Bitcoin, Bukele has come halfway: the evidence is that it is being talked about in the media on half the planet,” Breda says. Thus, since September 9, residents of El Salvador have been able to pay their daily expenses not only in US dollars – the main currency after the collapse of the colon in 2001 – but also in Bitcoin. Simply download the official government-provided wallet, Chivo, on your smartphone.

Breda was in El Salvador a few days before the Christmas holidays. “From what I’ve seen, he says, Salvadorans are not yet accustomed to bitcoin. In fact, cryptocurrency is spent mainly because it is tied to beneficial government-backed offers. If you go to fill up petrol with bitcoin, for example, you will get a discount on every liter.” Not to mention that when you download Chivo, the government automatically deposits $30 in Bitcoin for your first transactions. A very attractive incentive, especially for the 30% of the population currently living below the poverty line.

MARVIN RECINOS via Getty Images

The need to nurture the image of the leader cool On purpose: Chevuin the local vernacular, it means looks good Not the only motive behind the introduction of Bitcoin. “El Salvador has been through a period of bilateral tension in relations with the United States for several years now,” Breda recalls. And for a country in Latin America, especially if its economy is fully dollarized, maintaining good relations with the behemoth of stars and stripes can represent a cause of political stability, both internally and in relations between the hemisphere. “Bukele started closer economic ties with China.” Thus, El Salvador is experiencing enormous diplomatic pressure from Washington to cut the new axis with Beijing. Some local officials are subject to US sanctions. With the introduction of Bitcoin, the San Salvador government has found a way to partially bypass US economic sanctions, since the cryptocurrency is decentralized and not currently regulated on international exchanges.”

Then there is the issue of transfers. Perhaps a more realistic motive was Bukele, who presented himself as his country’s “CEO” on Twitter, to focus on Bitcoin. “El Salvador has two million citizens living abroad, mostly in the United States, who regularly send money to their relatives back home. With Chivo, the Salvadoran government has killed two birds with one stone,” Breda explains. “It allows you to send transfers without paying disproportionate fees and commissions to the usual Western Union and other expensive international transaction agencies.” A radical change, especially if we think that remittances account for 23% of GDP in El Salvador. The Italian analyst sums it up by saying: “Hence, it is also a political process.”

By making remittances cheaper, Bukele won the favor of millions of Salvadorans in Campania. Indeed, as Breda points out, those outside have never participated in voting at home. Because they are often political refugees, and thus are clearly opposed to governments that have followed each other in the past. “It is no coincidence that in the week prior to the introduction of Bitcoin, Bukele approved a new oversea voting law.”

Thus, the honeymoon between Bitcoin and El Salvador continues without many obstacles, despite protests in the first weeks: “That’s right, the locals are not yet used to using cryptocurrency. They do this for convenience. But it is also true – and Breda continues – That these protests have been largely exploited by the political opposition The adoption of Bitcoin is certainly an important logistical effort: it must be accepted by merchants by law and the public administration is still behind in installing the necessary infrastructures for payments with Chivo There are still some doubts, and a few before For months, more than half of Salvadorans said they were against the introduction of bitcoin. But the protests were also aided by a weak opposition to Bukele in the hope of fueling discontent with the president. However, for the time being at least, this does not appear to translate into a drop in his popularity in the polls.”

Photography via Getty Images

But 2022 does not seem to be a source of optimism, according to experts on Central American issues. Indeed, El Salvador’s economy, which has been hit hard by the pandemic, is not doing very well. “The government has borrowed heavily to keep social spending high and not to exacerbate an already suboptimal social situation.” To pay off future debt, Bukele announced the issuance of $10 billion in crypto-bonds over the next 10 years. Government bonds, partly “secured” by Bitcoin in government hands, that will be used to finance the birth of Bitcoin City, a city that will rise in the east of the country, in a region rich in volcanoes.

The energy released by the geothermal activity of the area will fuel the activity Mining – Cryptocurrency mining – which Bukele wants to start as soon as possible, with the intent of not relying excessively on outsiders to supply the new currency. But Technocaudio’s optimism, for now, doesn’t seem to have paid off. Also due to the volatility that characterizes the world of cryptocurrency, investor confidence in the country of the isthmus has collapsed. While waiting for crypto bonds, regular government bonds in El Salvador have collapsed. The 10-year yield, due in 2032, has lost more than 40%. Rating agencies have revised their sovereign debt rating downward: Moody’s has moved from B3 to Caa1. If El Salvador’s economy wants to avoid big problems in the future — and get a loan of more than $1 billion from the International Monetary Fund — the crypto experiment will be better off. Meanwhile, Bukele enjoys international fame. on Twitter It has already crossed 3 million followers. Not bad for a head kid Copy Central America.

Leave a Comment