Written by Sara Kinosian and Nelson Renteria
BERLIN, El Salvador (Reuters) – James and Nicky Malcolm have moved from New Zealand to El Salvador to join President Nayib Boukre’s Bitcoin dream sale in 2021. This dream led to the Central American country becoming the first country in the world to accept Bitcoin. Legal tender.
A few months later, Bukele gave a presentation at a beach club, including an avatar of himself aboard a spaceship, to address a crowd of enthusiasts about BIT, a tax-free cryptocurrency haven that harnesses geothermal energy from volcanoes. I sketched a plan for Coin City.
As the popular Mr. Bukele prepares to win a second term this Sunday, Bitcoin City is not yet on the ground. But undeterred, the Malcolms, along with 15 other foreigners and a Salvadoran couple, convinced more than 100 businesses in Berlin, a coffee-growing mountain town in eastern El Salvador, to accept Bitcoin.
“The adoption is a huge deal for us. It’s something we feel is important and how Bitcoin wins,” said the former mortgage advisor and director of the effort to make Berlin a crypto mecca. Nicky, a member of the group, said: “Bukele put the flag on the ground.”
Despite credit institutions warning that the national treasury is dangerously short, Bukele presses ahead with plans to turn the country into a crypto haven, and is hoping for a quick cash injection from the International Monetary Fund (IMF). potential is impaired.
Bukele gloats about Bitcoin’s soaring value on his social media feeds and promotes infrastructure plans in videos set to club music. However, this belies the harsh reality. El Salvador’s economy is largely stagnant, with one of the slowest economic growth rates in Central America. Extreme poverty has doubled since 2019, with almost half of the population living with food insecurity.
“It’s unusual for someone to use Bitcoin,” said Kevin Valle, 24, who sells Salvadoran produce at Berlin’s main market. “What I can say is that the price of tomatoes and onions has doubled and people are worried about low jobs and low salaries.”
The country’s public debt in 2022 will be $25 billion, the highest in 30 years.
After initial negotiations with the IMF for a $1 billion deal broke down early in his first term, Bukele’s government has since returned to the negotiating table and even hired the IMF’s former Western Hemisphere chief last April. .
The IMF has recommended that El Salvador remove Bitcoin’s legal tender status during negotiations over financial aid.
The foundation did not respond to requests for comment.
But the 42-year-old firebrand’s resolve has been further solidified by Bitcoin’s recent rally. With the resurgence of cryptocurrencies, El Salvador’s alleged investments (no one really knows how much they have) are in the black.
According to Nayibtracker.com, an unofficial website that tracks El Salvador’s Bitcoin portfolio based on Bukele’s social media, his Bitcoin portfolio now stands at $121.6 million compared to an initial investment of $119.8 million. The return is said to be 1.5%.
Following the recent announcement that the U.S. Securities and Exchange Commission (SEC) will allow U.S. exchange-traded funds (ETFs) to track Bitcoin, Bukele told Reuters that the government plans to enact virtual currency legislation in its second term. He said he would double the amount.
Some economists say the country’s adoption of cryptocurrencies alongside the dollar is not the main cause of the overall economic situation, pointing to low foreign direct investment and government overspending. .
But amid questions over the state’s spending habits and apparent liquidity problems, critics note that Bitcoin has yet to bring significant benefits.
Economists like Tatiana Marroquin question Mr. Bukele’s decision to gamble an unknown amount of taxpayers’ money on risky investments that could be spent elsewhere.
Vice President Felix Ulloa told Reuters that initial investor skepticism was “reversing”.
Bukele projects an image of a more modern, economically enlightened El Salvador through a carefully crafted media machine that suppresses dissent.
But it was his massive crackdown on violent criminal organizations, at the expense of civil liberties, that catapulted him to dizzying popularity among Salvadorans.
Bukele works for the Salvadoran people and once said he changed his bio on X to “the world’s coolest dictator” in response to concerns about democracy.
To date, most Salvadorans have ignored Bitcoin. They are concerned about the volatility of cryptocurrencies in a cash-based economy where many people live hand-to-mouth.
According to a survey by the Institute of Public Opinion at Central American University, about 88% of Salvadorans did not use it in 2023. Only 1% of remittances were sent in Bitcoin.
Nearly two dozen people interviewed by Reuters said they did not want to understand cryptocurrencies, but were increasingly concerned about the lack of jobs and rising costs of housing and food.
Coupled with a security victory, Bukele’s Bitcoin swing has re-branded El Salvador and helped boost tourism.
In Berlin, business owners said there are several Bitcoin transactions a day, mostly from tourists.
Bitcoin Beach, El Salvador’s cryptocurrency hub, is seeing a surge in tourists. While many local businesses welcome the influx, others lament the soaring land prices caused by foreigners accumulating seaside properties.
They handle a small number of Bitcoin transactions, but have complained about problems with Chivo, a digital wallet the government hastily created in 2021 for Salvadorans to hold and send Bitcoin.
“It wasn’t executed well. What was supposed to happen didn’t happen,” said Philip Ong, a Singaporean Bitcoin entrepreneur who invested $1 million to open the San Salvador office.
He told Reuters he was a “strong supporter” of Bukele’s Bitcoin initiative. But he left El Salvador last year — largely because, he said, there was “no momentum.”
(Reporting by Sarah Kinosian and Nelson Renteria; Additional reporting by Rodrigo Campos and Diego Ore; Editing by Christian Plumb and Claudia Parsons)