What happened to El Salvador: 2 years after the legalization of Bitcoin

El Salvador was the first in the world to make Bitcoin its national currency. The editors of BeInCrypto decided to find out how things are going with crypto-payments in the country two years after the legalization of BTC.

What did El Salvador do to make Bitcoin take root?

On September 7, 2021, Bitcoin, along with the US dollar, became the national currency of El Salvador. The country's authorities have become pioneers in recognizing BTC as an official means of payment at the national level. This is what local regulators have done to “accustom” citizens to crypto-payments and put the economy on crypto rails:

• launched the official Chivo crypto wallet;
• carried out explanatory work with the population;
• distributed $30 in bitcoins to users of the Chivo crypto wallet;
• installed crypto ATMs on city streets;
• created centers where citizens of El Salvador can get advice on working with cryptocurrencies;
• opened Bitcoin embassies;
• announced the construction of a Bitcoin city;
• launched Bitcoin mining within the country;
• began to create themed places and attractions aimed at members of the crypto community;
• organized regular purchases of bitcoins;
• launched a licensing program for crypto exchanges;
• created a highly specialized regulator - the National Office for Bitcoin (ONBTC), whose task is to control crypto initiatives in the country;
• organized the launch of Bitcoin bonds.

Interesting! As of the time of writing this review, El Salvador controls 2,381 bitcoins. For comparison, the US authorities have 207,189 BTC.

Rating of countries whose authorities control the largest number of bitcoins.

Local authorities also proposed issuing citizenship in exchange for investments, thereby attracting public interest in their crypto innovations.

Against the backdrop of the legalization of cryptocurrency, reports appeared in the media about the impending default of the first Bitcoin country. President of El Salvador Nayib Bukele laughed at the authors of negative forecasts.

You won't be nice by force

News periodically appears in the media that the Bitcoin revolution in the country has not gone according to plan. For example, in November 2022, Bloomberg wrote that only a few people use cryptocurrency in El Salvador. And those few who believed the authorities and purchased Bitcoin lost money amid the general fall of the crypto market.

The vertical line is the date of Bitcoin legalization in El Salvador. Bitcoin chart: TradingView

Confirmation of the statistics according to which local citizens are in no hurry to switch to Bitcoin after two years can be found on the YouTube channels of crypto enthusiasts. Here is an example of a documentary filmed in the summer of 2023, the authors of which concluded that crypto payments are not popular in El Salvador:

According to media reports, less than a third of Salvadoran citizens trust Bitcoin. Therefore, it is impossible to survive in the country without classical money. One of the reasons is that locals did not see the economic effect of the legalization of cryptocurrency. The authorities have a different opinion. In February 2022, regulators announced a 30% increase in tourism amid the recognition of Bitcoin as a national currency. However, the protests, whose participants are seeking to cancel El Salvador’s policy on the further introduction of Bitcoin into the economy, indicate that Bitcoinization, nevertheless, is not going according to plan:

In 2023, a few participants in the crypto community faced another problem - increasing costs amid rising commissions on the BTC network. One of the latest surges in transaction costs occurred in May. The reason is the hype around the Ordinals protocol, with which you can create NFTs on the Bitcoin network.

As a result, the already low activity of the crypto community in El Salvador fell even further. In April 2023, information appeared in the media that the income of the country's authorities from Bitcoin transactions carried out in Chivo decreased by almost 20%.

Despite the losses due to the fall in the BTC rate and the refusal of the majority of the country’s citizens to work with cryptocurrency, according to media reports, Bukele continues to adhere to the crypto program.

What's the result?

Over two years of active popularization of cryptopayments in El Salvador, the authorities managed to transfer only a small percentage of the population to payments in Bitcoin. Locals do not trust cryptocurrencies and want the authorities to abandon crypto initiatives. Regulators, in turn, report on the growth of tourism and talk about plans to continue the bitcoinization of El Salvador.

It can be assumed that the failures of local authorities are, among other things, due to the fact that the period of Bitcoin’s integration into the country’s economy coincided with the decline of the digital asset market. Probably, against the background of BTC’s transition to a growth phase, some citizens of El Salvador will “warm up” to the crypto initiatives of their president.