El Salvador: after two years with Bitcoin as Legal Tender.
How far has it progressed?
It is evident that Nayib Bukele made history for Bitcoin and El Salvador in 2021; Bitcoin changed from being money by consensus to becoming a legal currency in the Central American country. This announcement put El Salvador at the center of interest of the entire Bitcoin market, not only because for the first time Bitcoin would be Legal Tender, but also because of the promises and projects that were announced shortly after this.
Two years have passed since this event, how much of this dream has materialized?
Bitcoin as currency
Bitcoin officially enters the Salvadoran state in September 2021 with a purchase of 200 BTC, at an approximate price of USD 51,769. Today El Salvador has in its reserves a total of 2,968 BTC valued at the time of writing this at 76,452,726.84 USD (-37.21% than its purchase value).
But this is the Bukele government, the rest of the country has had an uneven. According to a report from the US National Investigation Office, it is estimated that the peak of Bitcoin users in El Salvador reached 1.6 million users of the El Salvador Bitcoin wallet, known as Chivo Wallet. However, the same report indicates that 60% of those users stopped using it after getting the free BTC that the government offered them as an incentive.
According to the Chivo website, there are 50 ATMs throughout the country for the purchase and sale of Bitcon in the country in fact, the Bukele government assigned a trust of 107 million USD for exchanges from ATMs or the app. But the infrastructure was much greater than the demand by Salvadorans, who really do not feel confident in bitcoin as money, and prefer to trade in dollars, many out-of-service ATMs have been reported, or little attendance at them.
Today, it is estimated that no more than 10% of the population uses Bitcoin, a significant number considering that 8% of the economically active population uses Bitcoin. Yet, it is clear that full state provision, plus considerable investment in infrastructure, is not enough to drive adoption in a population that simply has no interest in Bitcoin.
So… is that all?
Well, not quite, the Bukele government maintains efforts to promote the use of Bitcoin, along with other private sector companies such as Bitfinex, although not with the same intensity (for the Bukele administration).
An example of this is the National Bitcoin Office, a government entity that aims to develop activities that reinforce the adoption of Bitcoin, and have achieved moderate successes, such as the collaboration agreements in Lugano, or the El Salvador CUBO+ university program, to train developers of Bitcoin and the Lightning network, which awarded full scholarships to 21 finalists.
In July 2022 Bitfinex contributed 600,000 USDt and 36 BTC in the development of small businesses in the country, as part of the commitment to develop Bitcoin as a tool that encourages financial freedom, this together with a strong presence and advice to the government.
Enormous efforts have also been made from the educational area, an initiative of the Ministry of Education of El Salvador, seeks to incorporate Bitcoin into the curriculum of public schools by the year 2024. To implement this idea, the Ministry of Education has partnered with the non-governmental organization Mi Primer Bitcoin, which has designed an educational program on bitcoin that is taught to more than 25,000 people in El Salvador.
But the question remains, has it been enough? The results have been modest, and Bitcoin is not really designed to be imposed, and so far, few Salvadorans have joined the use of Bitcoin. Even so, there has been progress, although less than the initial projections, mainly due to the bear market, which has discouraged the public, as well as potential investors.
How about the rest of the announced projects?
What happened to the mining facilities? Bitcoin City? Volcano Bonds? The bear market once again stands as responsible, and the truth is, considering the size of the investments necessary for many of the proposed projects, it is a good idea to wait for a more idyllic market moment.
Let’s remember that both Bitcoin City and the mining facilities would be financed by 50% of the volcano bonds, which sought to raise 1 billion USD. The launch of the bonds has been continuously delayed, waiting for an “adequate” moment, in fact the CTO of Bitfinex (the company where said bonds would be sold) announced in March that they would be released to the public between June and September. Even so, there is no a specific date yet.
What about the “Bitcoiner Nation”?
It is undeniable that efforts have been maintained both by companies allied to the Bukele government, and by the Bukele government itself, But frankly we are far from the first vision of El Salvador as the first Bitcoiner country.
This is not necessarily bad, we are facing an unprecedented situation, and much is being learned from it. El Salvador is still a test and is providing a lot of information for when you want to implement the same in other countries, perhaps in two years the panorama is very different, while all that remains is to wait.
