Quick recap; the Salvadoran Colon currency failed due to inflation, then they switched to the US Dollar and then they added Bitcoin as legal tender in 2021. El Salvador’s new Bitcoin law requires every trader who is technically able to do so to accept the cryptocurrency. People are also able to pay their taxes in Bitcoin. Note, this is a multi currency approach, people can still use USD or Colon if they prefer; the Chivo wallet also accepts USD.
The Eeyore take is that Bitcoin is a last desperate Hail Mary pass that will fail. Tigger’s view is that El Salvador is a lighthouse pointing to the future. As is obvious from the headline I am with Tigger on this.
Tourism has risen by 30% since El Salvador made Bitcoin legal tender. That is a lot of money in a lot of poor people’s pockets. In 2019, tourism share of GDP was 11.8%, but fell to 5.3% in 2020: yes, the pandemic stopped travel!
Eeyore points out that the issuance of a $1 billion 10-year Bitcoin bond, planned for March, was postponed due to market turmoil from Putin’s war in Ukraine. The bond was planned to finance the construction of a Bitcoin city powered by geothermal energy from the Conchagua volcano.
Eeyore also points out that is unclear whether tourism revenue will continue to go up beyond 11.8% in 2019. Tigger’s reason for optimism is that Bitcorati (people who made a lot of money from Bitcoin) are staying longer and they are spending more money than tourists in the past.
There is certainly a lot of negative press, perhaps a classic “then they fight you” (with words) phase, including that President Nayib Bukele is “authoritarian”, that the Chivo wallet has glitches and that the public has been slow to embrace Bitcoin
The IMF is also making it clear that if El Salvador wants a $1.3 billion loan, withdrawing Bitcoin’s status as legal tender will be important – the are fighting with cash.
El Salvador is the David and sensible people bet on Goliath to win – like IBM vs Microsoft or MySpace vs Facebook.
El Salvador’s Bitcoin benefit needs to move from tourism to being a place for innovation and entrepreneurs. This maybe happening. Miami-based serial Bitcoin entrepreneur/investor Samson Mow has created a new company called Jan3 focused on promoting bitcoin adoption and has signed a memorandum of understanding to develop digital infrastructure in El Salvador.
Some subjects are too complex for our short attention spans, so we do 4-5 posts one week apart, each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.
Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.
