Bitcoin, Bukele’s bet that has not finished starting more than two years later

The great economic bet of Nayib Bukele, who this Sunday is running for immediate re-election in El Salvador, for the adoption of bitcoin as legal tender is presented as one of his “failures” and a “black hole” in public finances more than two years after its implementation.

El Salvador captured the attention of the financial world in September 2021 with the adoption of the most popular cryptocurrency, without massive use being recorded, nor the expectations generated by a project criticized for its opacity having materialized.

“Yes, we could talk about failure in terms of not complying with the arguments that were expected, the reasons why the measure was initially promoted.“, economist José Luis Magaña told EFE.

The initiative, he says, has left “a black hole in public finances” as the information related to the more than US$ 200 million used for its implementation, Bukele’s alleged daily purchases, the installation of ATMs and their maintenance has been placed under secrecy.

He recalled that the three “big promises” were financial inclusion, growth in foreign direct investment flows, which in his opinion “It has not had a significant change either.“, and remittances via bitcoin, but “none of the three things have really been fulfilled”.

According to a survey by the University Institute of Public Opinion (Iudop), 88% of Salvadorans did not use the cryptocurrency bitcoin during 2023.

According to figures from the Central Reserve Bank (BCR), family remittances received through cryptocurrency wallets in El Salvador registered a drop of 34.5% in 2023, compared to 2022, representing only 1% of total remittances of US$ 8,181.79 million.

No effects on other areas

According to Magaña, the adoption of this cryptocurrency has not represented changes in other economic aspects of the country, such as poverty, which has had “significant increases”.

“It seems to me that it is going to close, according to statistics, as the first government where poverty is greater when it leaves than when it enters.“, he told EFE.

Official figures indicate that monetary poverty went from 22.8% of households to 26.6% in 2019, with a growth of 3.8 percentage points.

Extreme poverty alone in these four years measured by the Multiple Purpose Household Survey went from 4.5% of households in 2019 to 8.6% in 2022.

Regarding the foreseeable continuity of the project, he pointed out that it is a measure that has been too publicized for the Bukele Government to back down, especially in a foreseeable second term.

But an agreement with the International Monetary Fund “it becomes more and more necessary”, so the profile of the initiative could be lowered, given that in 2021 it was one of the brakes on receiving about 1.4 billion.

Furthermore, by 2022, the Salvadoran Government was expected to place bitcoin bonds, known as Volcano Bonds, for $1 billion to finance the construction of Bitcoin City in the east of the country, but the financial movement and construction of the project were not carried out.

On the streets

Bitcoin is present on the streets of San Salvador, it is accepted in some jewelry stores and cafes, but less than what Bukele had predicted.

In the historic center of the city, near the square where the cathedral is located, the recently inaugurated large National Library and the National Palace, with preparations in full swing to apparently host the new president’s speech on Sunday, there are two small bitcoin kiosks, known as Chivo.

There is a bitcoin ATM and several young people who assist users when withdrawing their money or getting started with this virtual money. They explain to EFE that ATMs can deposit between 100 and 1,000 dollars a day and withdraw between 20 and 1,000 dollars. Mostly people who receive remittances, small investors, and ““Foreigners who come to withdraw their bitcoin because they cannot withdraw it in their countries.”

In a nearby cafeteria, where Bitcoin is accepted, two young people are seen working on their laptops, decorated with stickers with the virtual currency logo. They are workers of the company Plan B Network, which they define as “an online university about bitcoin.”

“We have a project in El Salvador (to) implement in different schools in the country, teach children what bitcoin is, how it works and how they can use it in their lives.”Jonathan Ramos tells EFE. This year, he says, they are going to schools once a week.

Ramos recognizes, however, that in the country it did not happen “the mass adoption that was expected or believed at the beginning”, but notes that after the “bassoon“From the first year, in the second the implementation has increased, and highlighted the foreigners who come to the communities in the country where bitcoin has been widely implemented, or the Salvadoran companies”who were born and focused on bitcoin and are trying to grow with it”.