El Salvador, the Bitcoin adventure – The year 2022 was eventful between Bitcoin and the States. Some wishing to ban it, others campaigning for its adoption. If a few announcements had for a while presaged a legal adoption by the Central African Republic or more recently by Nigeria, there is nothing for the moment. However, if there is one that continues its road to democratization, against all odds, it is El Salvador. Foray into a turbulent 2022 for the small Bitcoin country.
El Salvador, pro Bitcoin, against all odds
2022, complicated democratization and delayed Volcano Bonds
The least we can say is that the year 2022 has not started auspiciously for El Salvador, first embroiled in open conflict with the IMF (International Monetary Fund). Indeed, the international body does not see with a very good eye the adoption by a country hitherto dollarized, of a potential competitor in the image of Bitcoin. And again, a competitor, what am I saying as nonsense. In this period of bear market, bitcoin is dead and not even worth paying attention to. However, this so-called “pseudo” currency seems relevant enough that the ECB (European Central Bank) takes the time to criticize it with the vigor that we know of.
Still, El Salvador, unfazed, continues to work on its Bitcoin-centric projects. In particular, one that is particularly close to his heart. And, on which moreover now rests a significant part of the reputation of the country and of the crypto ecosystem more generally. The Volcano Bonds. Nothing less than an unprecedented system of 10-year government bonds. Unpublished, because it would be based on the country’s bitcoin reserves and should bring in 6.5% per year to holders. However, this program, first announced in March 2022, is falling behind schedule and is still not in effect. Maybe it will be in 2023? Indeed, in November 2022, El Salvador’s Minister of Economy, Maria Luisa Hayem Brevé, submitted a bill regarding the issuance of digital assets. If this is adopted, it could help build the foundations necessary for the introduction of these famous Volcano Bonds.
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Bitcoin City, the dream of an ideal city for “buy the dips”?
In the meantime, far from being discouraged, Nayib Bukelethe President of El Salvador, continues to regularly buy the ‘dips’. And this, insatiably with each drop in the price of Bitcoin. This was the case in May 2022 during the Terra Luna crash, where a later in July. He even announced, in November 2022, to start buy 1 BTC per day. An exemplary model of DCA (Dollar Cost Averaging) therefore, if this is well implemented.
On the other hand, Nayib Bukele also unveiled in May 2022 the first model of his project Bitcoin City. A city built entirely around Bitcoin. A project probably largely marketing, of course. But, who could cause a real cataclysm in the next few years if it were born with the true will to embrace the ideals of Bitcoin. In addition, this ultramodern futuristic city should be strongly integrated into the surrounding vegetation. Something to delight Bitcoin and nature lovers.
Bitcoin adoption, a fight against international pressure
A summit meeting for El Salvador despite criticism
It was also during this very busy month of May that, at the initiative of El Salvador, the representatives from 44 countries, 32 central banks and 12 financial authorities, gathered around Nayib Bukele. The objective was clear, to discuss Bitcoin and the opportunities it can provide to many economies and governments. Nigeria, Egypt, Nepal, Pakistan, Bangladesh, Kenya… Let’s recognize that taking an interest in Bitcoin for any country is a real act of courage. In a world governed by the power of the dollar, international organizations such as the IMF and more generally the Bretton Woods institutions… Because this type of initiative involves depriving oneself of potential international aid in the event of financial difficulties.
It must be said that El Salvador has not had it easy in the end since it chose to adopt Bitcoin as national currency in September 2021. Indeed, since then, this new digital gold has seen almost nothing but decline. And this, since his All Time High (ATH) to $69,000 in November 2021. Today, with a price below 20,000 dollars, the country is reaping the losses. A bit like all crypto investors for that matter. These are the vagaries of the markets, but of course this does not help silence critics.
La Salvador on the long road to adoption
September 2022. Despite difficulties and criticism, El Salvador celebrated 1 year of Bitcoin legalization as the national currency. Like the brave pioneer of the adoption of this digital gold. El Salvador remains very concretely an open-air example of the development of an economy around Bitcoin. And, this model is scrutinized by all international bodies questioning the relevance of such a system. In 1904, less than 1% of the population had a car. Was the car industry then considered a failure? You just have to give time to time as they say. And let Bitcoin’s value proposition work its way into people’s minds, winning battle after battle in its fight against bias and misinformation.
And if there is one quality that we can recognize in El Salvador, it is the strength of its convictions. Despite a 60% drop in its Bitcoin holdingsa single watchword. HODL (Hold On for Dear Life). Despite successive cataclysms, the latest of which is neither more nor less than the fall of the FTX platform, El Salvador did not sell any bitcoin.
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Bitcoin adoption in El Salvador, a problem of method ?
A forced and too rapid adoption?
Despite the unparalleled enthusiasm of this small country for Bitcoin, it must nevertheless be recognized that the method adopted was probably not the most effective. This forced march adoption of Bitcoin by El Salvador may raise a question. Was Nayib Bukele’s will really to escape from the grip of the dollar? Or was it rather a gigantic marketing stunt ? Maybe the combo of the two? Because obviously, this small Central American country has never attracted so much attention since it decided to adopt Bitcoin as legal tender.
And this decision was perhaps made a little too hastily. Without real training and prevention work with the population. It is in any case the opinion issued by Vitalik Buterinco-founder ofEthereum, in November 2022. The findings after more than a year of adoption are, in fact, more than mixed. Salvadorans have downloaded the Chivo bitcoin wallet from El Salvador, first attracted by the $30 gift in bitcoin at stake. Of course, we can’t blame them. However, those who made the effort to keep them finally saw this amount divided by 3 according to the successive declines in the price of Bitcoin this year. And even if this descent into hell is momentary, trust can be undermined.
Furthermore, the lack of development of the wallet Chivo and the lack of means put in place to train the Salvadoran population does not plead in favor of rapid democratization. But, as said Vitalik Buterin, the first step is precisely to educate the population on the issues behind Bitcoin. It is only on this condition that democratization can really find its way. The road is therefore still long.
Rome Wasn’t Built in a Day: Salvadoran Advances on Bitcoin
Nevertheless, there is no denying El Salvador’s progress in this direction. At the end of November, we learned the creation of an administration entirely devoted to Bitcoin. This governmental organization will have the mission of coordinating the emerging adoption procedures in the country. This ” oficina nacional del Bitcoin » (ONBTC) will be responsible for driving the financial inclusion of the population of El Salvador, particularly through Bitcoin.
Another sign that Bitcoin meets a very real need for populations, the equivalent of 52 million dollars passed in the first 5 months of the year between the Salvadoran diaspora and their families back home. Through the Bitcoin network, money transfers can, in fact, be carried out almost instantaneously and at lower cost. In addition, it also avoids going through intermediaries like Western Union. Especially since the latter generously use themselves with commission fees that sometimes reach 20% of the amount sent. A significant competitive advantage for the Bitcoin network.
2022 will have been a year in which El Salvador has accumulated as much criticism as bitcoins. Proud of his workhorse, Nayib Bukele has been able to resist international pressure and continue his efforts to democratize this new digital gold. So ? Giant marketing stunt, risky bet, real convictions? A bit of all of this at once? Difficult to determine the real reasons behind the adoption of Bitcoin by El Salvador. Nevertheless, one thing is certain, if El Salvador wins its bet, no doubt it could trigger on a global scale an adoption momentum for this new digital gold.
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