El Salvador - How Crypto is Revolutionising Economics

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As many crypto enthusiasts with an eye on global adoption rates may already know, El Salvador’s Bitcoin ($BTC) movement is perhaps the most interesting macroeconomic-DeFi crossover.

The country’s ever-polarising President Nayib Bukele inaugurated the OG crypto as legal tender on September 7th, 2021, making El Salvador the first country full-stack crypto-adopted nation of its kind. Such a move came in response to the almighty demise of the Salvadoran colón back in 2001, which forced El Salvador to transition into a US dollar-driven economy. 

In turn, this now means that Bitcoin sits alongside the US dollar as the country’s two official legal currencies.

Bitcoin’s Introduction in El Salvador 

Amidst its introduction a little over 2 years ago, El Salvador’s GDP had risen 11.28% (annually) by the end of 2021… which we could largely attribute to the year’s unforgettable crypto bull run. 

In contrast, figures then fell after the introduction of the ongoing crypto winter in Spring 2022, as the country’s GDP only rose another 2.6% in 2022 (per Macrotrends). 

Bitcoin in El Salvador - Local Sentiment 

El Salvador’s Ambassador to the USA, Milena Mayorga, has been one of the most prevalent figures to report on the country’s DeFi adoption over the past two years. 

Per the diplomat’s measured analysis of the move, Bitcoin adoption has been unequivocally beneficial to the economic and investment opportunities for its citizens thus far - a scenario that most pivotally has encouraged residents to stay and build businesses in the region, as opposed to leaving for more prosperous places such as the US.

“El Salvador is becoming a very interesting country to visit and to invest in. For me, it’s been so special because people are calling me because they want citizenship…they want to come here, they want to invest in El Salvador… they want to be part of this huge project”- Milena Mayorga, US Ambassador of El Salvador. 

On the practical side of things, many attribute the country’s 30% rise in tourism revenue to a result of Bitcoin-catalysed economic stability. As simple macroeconomics suggests, such economic stimuli are now emitting even more bullish ripple effects across the El Salvadoran economy. 

In illustrating the public’s bullish Bitcoin sentiment most proficiently, many El Salvadorans are reported to hold more confidence in the cryptocurrency compared to the country’s traditional alternatives (despite its innate price volatility, that is).  

Bitcoin in El Salvador - The Backlash

Despite reports of Bitcoin offering unwavering mass benefits, the discourse surrounding the somewhat contentious endeavor still remains mixed. 

As is often the case, the first criticism of the move comes with regard to the volatile nature of cryptocurrencies and how the nation’s Bitcoin holdings - something that it largely depends on - have reportedly shrunk 50% due to fluctuating prices. 

Additionally, bearish media outlets have been quick to call Bitcoin a ‘forced currency’ - a consensus that’s built on the narrative that President Bukele is a wacky ‘Elon Musk disciple’ and a kiss-up to US crypto companies. 

In reality, however, such a conclusion is largely based on surface-level assumptions that are drawn from his engagement with online memes (something that understandably doesn’t align with the values of more traditional onlookers).  

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That being said, there are several resources (namely interviews) that demonstrate Bukele’s level-headed and sophisticated approach toward Bitcoin adoption in El Salvador…so we suggest that you digest some of these before making any conclusions for yourself. 

Contrary to Bitcoin’s underlying decentralized premise, there have also been claims that El Salvador is now an ‘authoritarian state in a tech disguise’ since its introduction.

Bitcoin Education Infrastructures in El Salvador 

With full endorsement from authorities, Bitcoin advocates in El Salvador have initiated programs focused on building trust and knowledge among the local population. One such is ‘Mi Primer Bitcoin’ ('My First Bitcoin' in English), which aims to provide individuals with their initial exposure to the Bitcoin network.

Established by an American named John Dennehy in the immediate run-up to Bitcoin's legal tender introduction, the company embarked on its mission when adoption was in its infancy. Further, through observing many Salvadorans spending their entire paychecks in a single night at the bar, the project’s core philosophy is centered around enlightening people on the saving and financial planning potentials that are on offer through personally safeguarding an asset designed to be deflationary (i.e., Bitcoin). 

To promote awareness, Mi Primer Bitcoin organizes monthly events at various establishments in the capital city of San Salvador. Participants are offered free satoshis as an incentive to engage in their first Bitcoin transactions whilst also being invited to enroll in an in-depth 10-week course centered around DeFi and Bitcoin. Interestingly, such a program - which culminates in the award of 'Bitcoin Diplomas’ - doesn’t touch on the topic of crypto until approximately halfway through the course, as its initial focus is placed on enhancing financial literacy.

As with any subject, widespread education (or, in some cases, indoctrination) plays a pivotal role in achieving mass adoption. In the case of Bitcoin in El Salvador, this is being achieved through educational efforts that have prompted the Ministry of Education to launch a collaborative initiative with Mi Primer Bitcoin. In such partnership, the company has extended its reach to El Zante (now affectionately referred to as 'Bitcoin Beach') to deliver essential components of the Bitcoin Diploma curriculum to 25 public schools.

With this growing momentum, El Salvador's aspirations to lead the Bitcoin movement on a national scale and potentially expand into other Latin American countries are firmly set for 2024.

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