Here’s what to know about El Salvador’s move to accept Bitcoin as legal tender.
This week El Salvador became the first country in the world to make Bitcoin legal tender, prompting a flurry of speculation about how the smallest Central American nation, which ranks among the region’s poorest, will fare using the volatile cryptocurrency.
Yet for one small Salvadoran beach town, crypto is already part of daily life. Businesses in El Zonte have been using it since 2019 after the launch of “Bitcoin Beach”, a programme whose mission is to build a “sustainable Bitcoin economic ecosystem on the coast of El Salvador”.
“There are more than 50 establishments — from mobile-phone-minute stands to vegetable and fruit vendors, shops, hardware stores, restaurants and hotels — that use Bitcoin for daily transactions,” said Carlos Enrique Ortiz Novoa, who started accepting Bitcoin at Olas Permanentes, his hotel, restaurant and surf camp, in March 2020.
Now, the rest of the country is getting in on El Zonte’s Bitcoin experiment after the country’s legislative assembly passed a law spurred by 39-year-old Salvadoran President Nayib Bukele requiring businesses to accept it as payment for goods and services alongside the United States dollar, which has been the country’s official currency since 2001.
Bukele, who was elected in 2019 from the centre-right Grand Alliance for National Unity party, has since festooned his Twitter account in crypto branding. His Twitter profile now features a photo of him with Bitcoin “laser eyes” and an ongoing thread about a project to mine Bitcoin using energy from one of El Salvador’s volcanos.
El Zonte’s early adopters share his excitement. Mike Peterson, Bitcoin Beach’s director, said the town’s pilot project was always aimed at demonstrating “the power of Bitcoin to uplift the poor and those who have been locked out of the traditional financial system”.
“We’ve seen the impact it can have on people’s lives,” Peterson told Al Jazeera. “The fact that the government has been watching that happen and is excited about it, not because it’s going to help the wealthy, but because it’s going to help the people on the bottom rung, we’re thrilled about that.”
A question of timing
But not everyone is celebrating. Ahead of a meeting between the International Monetary Fund (IMF) and Bukele on Thursday, the organisation’s spokesperson said the adoption of Bitcoin “raises a number of macroeconomic, financial and legal issues that require very careful analysis”. El Salvador is seeking an almost $1bn lifeline from the IMF.
Others have questioned Bukele’s timing: the announcement came the same week that US Vice President Kamala Harris was visiting other countries in the region, but not El Salvador. Historically a regional ally, the US has also been criticised for supporting the country’s right-wing regimes, including during a bloody civil war from 1979 to 1992 that pitted socialist rebels against the country’s entrenched elite known as the 14 families.
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More recently, US-Salvadoran relations have cooled since the US criticised Bukele’s move to dismiss Supreme Court judges and the country’s attorney general as a power grab. And a US Department of State report in May included five Salvadoran officials with close ties to Bukele on its list of allegedly corrupt Central American politicians.
Bukele has also been moving closer to China. After the release of the corruption list, Bukele took to Twitter to praise a $500m public investment from China he said was “made without conditions”. Previously, he tweeted his thanks to “President Xi Jinping and the people of the People’s Republic of China” after receiving millions of doses of the country’s COVID-19 vaccines.
AlJazeera
