President Nayib Bukele is encouraging foreigners to come to El Salvador, promoting the country as the “new land of the free.” Bukele tweeted a poster in vintage American style that highlights various benefits El Salvador has to offer its citizens. Among these is the adoption of bitcoin as legal tender.
El Salvador as the New (Crypto) Paradise?
Bukele’s poster features a classic American family in a living room setting, celebrating the achievements of his government. The highlights of this progress are in the areas of security and economic policy. He advertises El Salvador as having “no fentanyl crisis,” “no shootings” and “no lootings” because of the tight security measures taken in 2022 and 2023. The poster also mentions that El Salvador is the first country to accept bitcoin as legal currency for tourists and residents.
This was an ideal opportunity to emphasize El Salvador’s stellar weather and beaches. Bukele claims these resources have helped the country recover from the Covid-19 pandemic by allowing tourists back in. He has made large investments in El Zonte beach, nicknamed Bitcoin Beach, allocating $203 million to build infrastructure such as bridges, bicycle roads, and a drainage system.
The Crypto Angle
Nayib Bukele caused a stir with his decision to make Bitcoin a legal tender in the country. Many parties questioned and fretted over the potential dangers of this choice. On November 18, 2022, he declared through Twitter that the government would begin buying one Bitcoin daily.
How is this going in a tumultuous 2023? It appears El Salvador’s bet on cryptocurrency is starting to pay off.
The small Central American nation made headlines in 2021 when it passed very crypto-friendly legislation. The law requires all businesses within the country to take Bitcoin as payment for services and goods. This gives the digital asset the same status as traditional fiat currencies.
Chivo Wallet, the wallet developed by the government of El Salvador, stated that 2.2 million Salvadorans had registered just one month after Bitcoin became lawful tender. To motivate implementation, every user who successfully downloaded the app was given $30 in Bitcoin. Nearly half of the nation’s residents had downloaded the app by early 2022.
The “Bitcoin bet” has seen mixed appraisals from global organizations and governments. Many groups express worries about the probable risks which could result from using cryptocurrency. The International Monetary Fund (IMF) recently discharged a statement on El Salvador’s decision to accept Bitcoin as legal tender, warning against potential risks associated with such sanction.
There haven’t been any serious risks so far following the adoption of Bitcoin. Still, the group noted it is critical for authorities to be alert when offering government exposure to digital assets.
The IMF also accentuated the importance of transparency when dealing with cryptocurrency transactions. The group further stressed that it is essential for regulators to remain consistent with anti-money laundering laws and regulations. It advised El Salvador to create powerful supervisory frameworks geared towards mitigating risks associated with cryptocurrency use.
A Path of Progress
Untroubled by IMF’s advice, El Salvador’s congress passed a digital securities law in January. This paved the way for the country to raise funds through the distribution of the world’s first sovereign blockchain bond. The law permits the utilization of blockchain technology in several important areas.
El Salvador’s tremendous success in the crypto market is proof of the benefits this industry has to offer. It is undeniable that the U.S. market is currently facing challenges within this industry. Yet despite the negative press, Binance lawsuit, FTX collapse, and an influx of government regulations, Bitcoin is on the rise. It has been 126 days since the implosion of FTX, but millions have been invested in digital currency regardless of the controversy.
And since most of these investments were a “discount” to Bitcoin’s current price of more than $28,000, it is easy to see which direction the pendulum is swinging in.