well, that didn’t happen. instead, bukele’s ambitious bet ran into the great cryptographic crash of 2022.
bitcoin, a high risk bet for bukele, seems to have failed. approximately 70 percent of Salvadorans do not have a bank account and work in the informal economy. Meanwhile, remittances play an outsized role in the country’s economy: At roughly $6 billion in 2021, they accounted for more than 25 percent of GDP, ranking among the highest shares in the world. Approximately one-fifth of the population of El Salvador lives in the United States.
but 10 months after el salvador officially adopted bitcoin as legal tender, the cryptocurrency has lost about 60 percent of its value. bitcoin is a form of cryptocurrency or digital currency that is traded openly without the intervention of a central bank and allows people to make payments to each other through an online system.
As part of the launch, bukele’s administration budgeted $200 million to create a government-sponsored crypto app called el chivo wallet, which included an initial $30 bonus as an incentive for users to download it. So far, experts have estimated that the country has spent $425 million on its bitcoin project.
See also: How to Mine Crypto on Raspberry Pi
Bukele’s decision to make his government an early adopter of bitcoin earned him praise from leading crypto experts and criticism from the international financial community. Most of the data on bitcoin spending and usage comes from bukele himself via twitter. in January, the president said there were 4 million users of the el goat wallet.
But three economists recently conducted a national survey to measure the use of cryptocurrencies and their effects in El Salvador. Their findings were published in April by the US National Bureau of Economic Research. Despite many efforts by the Salvadoran government to make bitcoin a reality (for example, it established a public veterinary hospital where all services cost 25 cents as long as payment is made with a crypto wallet), its use has been disappointing, according to experts. economists.
“[u]sage of bitcoin for daily transactions is low and concentrated among the banked, educated, young and male population,” the researchers wrote. Initially, more than half of Salvadoran households downloaded the El Chivo wallet, but virtually no one has downloaded it this year. found that nearly 20 percent of people who downloaded the app have not used their $30 bonus. nearly 61 percent of people haven’t used the app after spending their bonus.
Perhaps that is why many Salvadoran political observers and local pundits have called Bukele’s bitcoin gamble a stunt “to cover up his government’s growing authoritarianism on the world stage,” as Salvadoran journalist Nelson put it rauda zablah in a new york times article. ed last week. Rauda Zablah called Bukele’s experiment a mirage. A political scholar at the London School of Economics recently told CNBC: El Salvador’s economic policy “is essentially magical thinking.”
“maybe $425 million for the united states or even for california is nothing. But in El Salvador, that’s about 6 percent of their national budget,” Ricardo Valencia, an assistant professor of communications at California State University, Fullerton, said in an interview. “We are seeing the effects of the bitcoin bet on the lack of investment in infrastructure there.”
According to Valencia, cryptocurrencies in El Salvador will end up looking more like hell than a mirage. “It comes with authoritarianism, dissent, repression,” he said, referring to Bukele’s strongman ways and his hard-line policies to deal with rising gang violence.
however, bukele is doubling down. he insists that “bitcoin is the future” and is still very loved by Salvadorans; an opinion poll put his approval rating at 85 percent, the highest of any Latin American leader.
Meanwhile, in Africa, the Central African Republic adopted bitcoin as legal tender in May. It is one of the poorest nations in the world and ranks penultimate in the United Nations Human Development Index. your government had better heed the early lessons of bukele’s bitcoin experiment.
Marcela García is a columnist for the globe. she can be reached at firstname.lastname@example.org. follow her on twitter @marcela_elisa and on instagram @marcela_elisa.