El Salvador and the Bitcoin Experiment: A Two-Year Review
Date: 2023-09-11 Author: Dima Zakharov Categories: IN WORLD
In recent years, cryptocurrencies have garnered significant attention worldwide. El Salvador, in particular, took center stage when it decided to legalize Bitcoin as a national currency. What has transpired in the two years since that decision? In this article, we'll highlight the most discussed aspects of El Salvador's journey with Bitcoin.
The Dawn of a Cryptonation
On September 7, 2021, El Salvador took a bold step, recognizing Bitcoin as an official payment method alongside the US dollar. To facilitate this transition, the government:
- Introduced the official cryptocurrency wallet, Chivo.
- Launched an educational campaign for its citizens.
- Gifted $30 in Bitcoins to Chivo wallet users.
- Installed crypto ATMs throughout the city.
- Founded Bitcoin consultancy centers and embassies.
- Announced plans to create a "Bitcoin city".
- Initiated Bitcoin mining in the country.
- Created attractions for the cryptocurrency community.
- Allowed a licensing program for crypto exchanges.
- Established the National Bitcoin Bureau (ONBTC) to oversee crypto initiatives.
- Issued Bitcoin bonds.
At the time of writing, El Salvador owns 2,381 Bitcoins. In comparison, the USA holds 207,189 BTC.
Challenges Along the Way
However, the journey wasn’t smooth. Reports suggest that El Salvador’s Bitcoin revolution did not go as planned. As of November 2022, only a small portion of people actively used Bitcoin. Some early investors even lost money due to market volatility.
A documentary in the summer of 2023 revealed that cryptocurrency payments remain unpopular in El Salvador. Trust remains a key issue, with less than a third of the population having faith in Bitcoin. Traditional money still remains the preferred choice for most Salvadorans. One of the reasons is the lack of economic benefits since the legalization of Bitcoin, even as the government claims tourism has increased by 30% since recognizing Bitcoin.
The Thorny Path Continues
The Bitcoin community in El Salvador faced another challenge in 2023: the rise in Bitcoin network fees. This surge, spurred by the hype around the Ordinals protocol for creating NFTs on the Bitcoin network, resulted in even fewer crypto transactions. By April 2023, revenue from Bitcoin transactions via the Chivo wallet reportedly dropped by almost 20%.
Nevertheless, despite these challenges, President Nayib Bukele continues to champion the crypto vision.
