A merchant accepts Bitcoin in El Salvador. (AP)

A merchant accepts Bitcoin in El Salvador. (AP)

LatAm in Focus: El Salvador’s Bitcoin Gamble

By Chase Harrison

President Nayib Bukele wagered on Bitcoin turning El Salvador into a digital utopia. The National Association of Private Enterprise’s Leonor Selva explains why it was no safe bet.

Leonor Selva

“Even Bitcoin supporters have to be aware of the fact that if you execute a public policy poorly, if you don't prepare the population there, then you're setting yourself up for failure. And then you're setting Bitcoin up for failure,” says Leonor Selva, executive director of National Association of Private Enterprise. Based in the country, she explains that the rushed implementation of the Bitcoin Law left citizens unprepared to adopt this new monetary system. For businesses, there was the issue that regulations were delayed in terms of release. For citizens, there was a lack of education about the cryptocurrency ahead of Bitcoin Day. On top of all that, there were technical issues with the Chivo application that enables Salvadorans to use Bitcoin, including the fact that it wasn’t available in all app stores on launch day.  

Bitcoin’s volatility has also been problematic, as its value fluctuates too much for many Salvadorans to feel comfortable using it for savings, investments, or remittance payments. “In order for Bitcoin to actually become a legal tender that is functioning, that can actually satisfy the necessities of a population as a currency then it has to hold its value. And so far, Bitcoin does not hold its value,” said Selva. The government has set up a $150 million fund to help stabilize the price of Bitcoin and facilitate its conversion.

"This was the first time the public opinion basically told [Bukele]: 'We are watching.'"

“You can't study the Bitcoin Law without looking at the whole context where we see a government that is taking decisive actions towards becoming a more autocratic, dictatorial entity,” explained Selva. In September, and even as the country readied itself for the cryptocurrency’s implementation, Bukele-backing officials took actions to weaken the judiciary and lift the ban on presidential reelection. But, while the president’s approval rating has never fallen below 75 percent, the Bitcoin Law has failed to earn the same support; some 70 percent of Salvadorans disagree with the initiative. Selva notes: “This was the first time the public opinion basically told him, ‘We are watching. We are evaluating your actions and we are giving you the first warning that you have to change course.'"

What does this mean for the future of Bitcoin? Selva says that countries such as Panama are watching El Salvador and modifying their pending cryptocurrency laws to learn from the mistakes. Still, El Salvador’s example may do little to convince skeptical governments of the virtue of cryptocurrency. “It's bad publicity for Bitcoin,” Selva concludes.

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Luisa Leme produced this episode. The music in this podcast was performed at Americas Society in New York. Learn more about upcoming concerts at musicoftheamericas.org.