Bitcoin

One Year Later: The Success Of Making Bitcoin Legal Tender In El Salvador

One year since adopting bitcoin as legal tender, El Salvador’s grand experiment is having a wide range of success.

This is an opinion editorial by Jaime García, a Salvadoran-Canadian Bitcoin and co-host of Global Bitcoin Fest.

Today marks El Salvador’s first anniversary since it adopted bitcoin as a legal tender currency. Depending on who you ask, El Salvador’s efforts have been an utter failure, a resounding success or various stages in between. There is no shortage of opinions, but it’s only proof of work that can show if El Salvador has benefited from Bitcoin, and by that criteria, the decision has been a clear success.

Undeniably, the early Bitcoin rollout by the Salvadoran government with the Chivo state wallet was not ideal. Even today, adoption among the average Salvadoran is not high. However, despite El Salvador’s detractors making valid criticisms, they cannot deny that the country has experienced incredible growth over the last twelve months.

El Salvador Before Bitcoin

Let’s begin by recalling where El Salvador was before the Bitcoin announcement. The truth is that many won’t be able to remember because they could hardly point to the country on a map. At best, many Bitcoiners would have likely mistaken El Salvador for Ecuador and made remarks about how they would be able to spend their sats in the Galapagos.

Before El Salvador embraced Bitcoin, it endured centuries of colonial oppression, decades of military dictatorship and a 12-year-long civil war, a proxy battle between the U.S. and the Soviet Union. Once the Salvadoran government and the leftist guerillas signed the so-called peace treaty that ended the civil war in 1992, corrupt governments from both the right and the left of the political spectrum began to ransack the country. Unfortunately, they dedicated themselves to running corrupt personal enrichment schemes instead of reconstructing the country, further perpetuating El Salvador’s debt and its infrastructure and societal deficit.

In the early ’90s, the Bill Clinton administration deported many undocumented Salvadorans from the U.S., mainly from East Los Angeles, where many of their American-born children were engaged in street gang warfare. The exported phenomenon of the maras, or gangs, and the violence they brought to the country further sunk El Salvador’s dire economic situation.

Salvadorans grew tired of the political corruption, the gang violence and extortion, the lack of opportunity and the constant out-migration to the U.S. The electorate decided to give dark-horse Nayib Bukele and his New Ideas party the presidency and a supermajority in the National Assembly for a chance to fix the situation. It was the proverbial aligning of the stars that allowed the political conditions for El Salvador to adopt bitcoin as legal tender.

Ultimately, before the Bitcoin announcement, El Salvador was not in a good situation and had the deep scars of poverty, suffering and death as evidence.

The Greatest Country Rebrand In History

Presently, there’s no shortage of politicians on Twitter signaling that they are pro-Bitcoin, or worse, that they are pro “crypto.” Targeting Bitcoiners as a constituency is the latest affinity scam by the high-time preference political campaign complex. However, in El Salvador, adopting bitcoin was strictly about economic survival.

Bukele announced in 2017 that El Salvador would adopt bitcoin, even before he was president. Back then, the Salvadoran population did not even know what the extent of that announcement would mean. The statement was not to court votes but to warn his opponent that his government would do things outside of the box.

Dagoberto Gutiérrez, a political analyst who is widely-respected by Salvadorans, was recently asked to weigh in on the decision by El Salvador to adopt Bitcoin on a popular morning radio show. The host, Pencho Duque, asked Gutiérrez if he thought the project was a failure and pointed to the low adoption by Salvadorans as proof. The 77-year-old answered in a simple yet profound manner that even seasoned Bitcoiners still fail to articulate. Gutiérrez summarized his thoughts by saying that at this point, adoption and our opinions on it are inconsequential to the more significant forces at play. In his assessment, the move was about game theory, the first-mover advantage to a better monetary system and safeguarding El Salvador’s overreliance on the U.S. dollar when its hegemony is in its final decline.

It has taken a full year for many skeptics to realize what Gutiérrez has: that the obvious choice for a country like El Salvador is to seek refuge in the rising monetary system of our time instead of a dying one. Yet, despite such disarming arguments, many, including hardcore Bitcoiners, still criticize El Salvador and personally blame Bukele for being disingenuous (“LARPing,” as some would call it) and wasting money on investing in bitcoin.

Julian Figueroa, a Canadian Bitcoiner and filmmaker, recently proposed that the funds and effort invested into Bitcoin have produced significant returns through tourism revenue. In a recent video, Figueroa suggests that the aim of the bitcoin investments may really be to improve the country’s brand. The return is undeniable, even garnering a positive assessment by The World Tourism Organization.

And to put the investment in perspective, Bukele has stated that his government invested more money in women’s rights than it did in bitcoin, though critics rarely point to that as “LARPing.”

O.G. Bitcoiner and El Zonte Capital investor Stacy Herbert has called El Salvador’s Bitcoin legal tender adoption effort, and the tourism boom it has generated, “the best rebrand in history.”

Bitcoin Has Been Good For El Salvador

Although the tourism card may start to look like it’s being overplayed, we just need to look at other economic indicators from a variety of sources to notice additional tangible improvement for the country:

El Salvador achieved the metrics above during a bear market and in the second year of the COVID-19 pandemic, despite constant criticism from the traditional finance sector.

Additionally, after many months of FUD by the mainstream media, claiming that El Salvador would default on its sovereign bond obligations, Morgan Stanley is now recommending investors buy El Salvador bonds. Many believe El Salvador is positioned to honor its 2023 and 2025 bond commitments.

Bitcoiners’ Experiences

It can be easy to dismiss empirical evidence that El Salvador’s adoption of Bitcoin is improving life for everyone there, but this evidence abounds. For example, one year ago, people would be hard-pressed to find a travel video on YouTube featuring El Salvador. Yet today, not only can you find many of these videos, but many Bitcoiners have taken to documenting their lives and their journeys of moving to El Salvador. You only need to look at the plebs on Twitter sharing their photos and hanging out with locals and Bitcoiners in El Zonte and San Salvador to know that something special is happening.

Add to this the two Bitcoin conferences held there last November, with another planned this year, the 44 bankers who descended on Bitcoin Beach, the weekly Bitcoin meetups taking place all over the country and the founding of two successful educational non-profits, My First Bitcoin and Torogoz Dev. El Salvador also hosted two international surf competitions, and more of the Salvadoran diaspora has returned home. These improvements, both quantitative and qualitative, are not coincidences, but rather due to the transformative power of Bitcoin.

Security Of The Individual Is Freedom

Yet, one of the most significant transformations in El Salvador is underway and not without some controversy. To put it plainly, Salvadorans have never been truly free; on paper, maybe, but in real life, freedom was hijacked by violence — first, the civil war and then the crime brought by the maras.

Bitcoin offers different incentives, and El Salvador has realized that to keep attracting its enthusiastic diaspora to come back home and Bitcoiners to invest in the country, it must first offer safety. The goal is to eliminate crime and insecurity, to make crime a less enticing incentive and to show the population how adapting to a bitcoinized economy can provide a better life.

To address this issue, El Salvador temporarily suspended individual rights, with the claimed intention of arresting dangerous gang members shaking the population down for “safety” money or renta. Additionally, the National Assembly modified the penal code to increase the severity of sentences for gang-related activities. These moves have brought significant criticism, but it seems that for the average Salvadoran, the suspension of these rights was justified — a poll found that 91% of Salvadorans support the so-called “state of exception.” This may be because they are finally experiencing the peace and tranquility promised in 1992 when the peace treaty was signed.

As of this writing, there have been a reported 190 days without murders in El Salvador, which would transform it from the most dangerous country in the world to one of the safest in Latin America, according to Bukele.

When It Comes To El Salvador, Don’t Trust, Verify

Of the world’s 195 countries, El Salvador is the only one that has been truly orange-pilled and will find itself on the right side of Bitcoin’s history. It had an incredible and challenging first year, but it has provided a template for the world to follow. Far from a failure, more countries are now paying close attention to its experiment. However, the most arduous parts of this climb to the top of the volcano are far from over, as El Salvador continues to tackle adoption challenges as it strives to issue its Bitcoin bonds and build its Bitcoin City.

But to those still wondering: The best way to measure whether the introduction of bitcoin as legal tender has been positive is to go down there yourself. Don’t trust, verify.

This is a guest post by Jaime García. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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