Bitcoin fails as legal currency in El Salvador

A year ago the president of El Salvador, Nayib Bukele, adopted bitcoin as the current legal currency of the country. Since then, no type of economic growth has been experienced nor have the expectations generated been fulfilled. In addition, the Salvadoran government has been accused of opaque when implementing this monetary policy.

With the approval and entry into force of the bitcoin law, El Salvador became the first country in the world to have it as a currency, which has been a kind of laboratory for crypto assets. The objective of the Government was to obtain profits with cryptocurrencies and attract investment to the country. However, Bukele did not present any type of official plan or public policy for it.

The Salvadoran president, who was very active in promoting bitcoin, is now saving a long silence about this initiative. The last reference was made on June 30, when he announced buying 80 bitcoinswhich was part of a deep drop in its value.

An opaque monetary policy

Throughout this last year, Bukele has made numerous announcements on Twitter related to the adoption of this cryptocurrency, such as the purchase of 2,381 bitcoins worth more than 100 million dollars or the creation of a digital wallet to deliver a bonus to its users. However, much of the information about the implemented policies is still very opaque, as the economist has denounced José Luis Magaña for EFE.

Magaña has pointed out that “the Government has not yet been able to clearly say what the the objectives pursued by implementing this law”. The economist has added that in the absence of these objectives “it is very difficult to be able to evaluate, to be able to say if it has been successful or not”.

The expert has also stressed that this monetary policy has not provided any kind of boost for the Salvadoran economy. The Central Reserve Bank (BCR) announced that El Salvador registered a growth of 2.3% at the end of 2022, a figure that has been maintained like this “for decades and before the pandemic”. Magaña has reiterated that “there is no differentiating engine” that gives the “pattern to see a structural change in the economy” of the country.

Few payments made with bitcoin

In the center of San Salvador, which is characterized by its high commercial movement, few payments are received by businesses with this type of currency. For example, Wilfredo Mendozamanager of a cafeteria, has highlighted to EFE that payment with bitcoin in his establishment “It’s totally minimal.”

Of 100% of customers, only 0.05% used cryptocurrency

The trader has also mentioned that “there are few people who consume through the application“, referring to the government wallet. “Some foreigners do come to pay in bitcoin” but nationals hardly use it. Of 100% of customers, only 0.05% used the cryptocurrency, says Mendoza.

The influx of people in bitcoin ATMs is scarce, few citizens have downloaded the wallet application on their phones.
Although some Salvadorans only downloaded it to receive the 30 dollars that the Government granted as a bonus to encourage its use.

The Bureau of Economic Research published a report highlighting that only 20% of the population uses the government wallet. Magaña, in addition, has stressed that 80% of the people who downloaded the application did not touch it again.


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