Tree-covered cliffs along an ocean coastline. The bitcoin logo and the words "bitcoin accepted here" is layered over top.

Bitcoin in El Salvador

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In the spring of 2021 at the Miami Bitcoin conference, Salvadoran President Nayib Bukele announced that bitcoin would be legal tender in El Salvador.

Though the announcement went largely under the radar of mainstream media, the message sent shockwaves across the globe. The crypto community was ecstatic. Governments, bankers and other critics of the tech were sceptical at best and horrified at worst.

In the time that’s followed, from the official legalization to the crypto collapse of mid-2022 price, let’s have a look at the state of Bitcoin in El Salvador.

What is Bitcoin?

Unless you’ve been living in an off-grid bunker for the last few years, you’ve surely heard of bitcoin. And if like many people you don’t have a clue what it is or how it works, I’ll break it down for you in very basic terms.

Bitcoin is a digital currency that runs on a blockchain. What is a blockchain? The details don’t matter, not for this post at least. The same can be said for how bitcoin mining and other crypto-related jargon. For now, think of how you do most of your day-to-day banking.

Nearly everything is cashless in the industrialized world. We pay with cards and e-transfers. Behind the scenes, the computer systems of banks handle these transactions and adjust the balance in your account accordingly.

Bitcoin works similarly, with two key differences:

  • The bitcoin system isn’t controlled by a centralized authority (ie: a bank). The system runs on thousands of individual computers all over the globe. No one entity has control over the system.
  • The system cannot be altered. Even the highest-secured system in a bank can be hacked. Bank account information can be altered, money can be stolen and tracks cleared. Bitcoin, on the other hand, cannot. Every single bitcoin transaction in history is recorded and publicly available for anyone to see. And because of blockchain technology, these records can’t be changed.

How is Bitcoin Used

Bitcoin is used as a currency by using an app on your smartphone known as a wallet. From the wallet, you can send and receive bitcoins, or more commonly sats, short for Satoshis, each being 1/100,000,000 — or one-hundred-millionth of a bitcoin.

Each wallet has a unique ID that is recognized by the system. Sending or receiving is as simple as inputting the receiver’s ID or scanning a QR code. Within seconds, the transfer is complete and the transaction is recorded on the chain.

No cash, no cards, no banks, no middlemen. Just a transaction between parties.

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How to Use Bitcoin in El Salvador

If you’re curious about spending bitcoin in El Salvador and currently hold some, the only thing you really need is a Lightning wallet. Proper bitcoin transactions take a fair bit of time to process, which is something critics often bring up. Thankfully, a secondary layer, called the Lightning Network was created to make transactions nearly instantaneous.

Simply download any decent Lightning-supported wallet to your phone, and transfer some sats from your holding wallet.

When I visit, I use the Bitcoin Beach wallet, as the Bitcoin Beach movement helped spur the entire movement in El Salvador.

If you’re not currently holding any BTC, you can find plenty of information online on how to get started.

Most businesses that accept bitcoin will proudly display that fact. Signs in windows, on tables, and out on the street will point you to BTC-friendly establishments. You’re more likely to find these places in popular tourist spots like San Salvador, El Tunco and bitcoin beach itself: El Zonte.

But if you’re wanting to travel with BTC, it’s always good to ask around at any shop you’re in to see if they’ll accept it.

White brick wall with blue paint on one edge. Orange logo of "Bitcoin Beach" in the centre.
Bitcoin Beach is Where it all began

What do People Think

Since the announcement, Salvadorans have been torn on the issue. Many embraced it from day one with passion and excitement. Others vehemently opposed the idea, not without good reason.

The Bad

From the government wallet to the fall in price, critics have several angles to work from.

  • One of the first issues encountered with the adoption was the Chivo wallet. Chivo is the official bitcoin wallet of the Salvadoran government. Since its inception, the wallet has been plagued with problems, many of which remain unresolved.
  • Even while bitcoin prices soared to all-time highs in 2021 many locals were concerned about adopting the new technology. Especially in remote communities and ageing populations. Think about teaching your grandparents how to use the internet. Many elderly people don’t adapt well to change — it’s either too confusing or too much of a bother to learn.
  • As well, because the network runs over the internet, you not only need a device (ie: smartphone) but also an internet connection. Those of us living in highly-developed areas take this concept for granted. In parts of El Salvador some people don’t have this luxury.
  • Finally, in its current state, it’s not an independent currency. As much as bitcoin maximalists don’t like to admit it, it’s still tied to the US dollar. When you pay with bitcoin in El Salvador, you’re not paying X amount of BTC. You’re paying US dollar prices, with bitcoin. If that breakfast bagel is $6, the bitcoin price will be whatever the market determines at that time.
Price chart of bitcoin.
Not Ideal for Bitcoin

The Good

Downsides aside, a huge swath of the population is for bitcoin. This is for several important reasons.

  • Many Salvadorans are either unbanked or have very little access to banks or ATMs. As long as they have access to the internet and a phone, they’ll always be able to transact.
  • Incredible amounts of money are sent into El Salvador from family members working in foreign countries, to the staggering sum of over $500 million annually. This has typically been via money transfers such as Western Union — which takes upwards of 33% of each transaction. With bitcoin, money can be sent digitally in seconds with a minuscule network fee, saving tens of millions.
  • On the same token (pun intended), when money is sent the old-fashioned way, Salvadorans typically need to pick up physical cash. Gang members know where these locations and people regularly fall prey to these vultures after picking up their money.
  • Finally, since 2001 when the Salvadoran economy fell apart post-war, El Salvador has been using the US dollar as an official currency. While this isn’t inherently bad, it does mean some reliance on a foreign country. And while bitcoin isn’t Salvadoran-specific, the removal of a middleman — say, a powerful government — provides a little more sovereignty.

How Widespread is Bitcoin in El Salvador?

Although bitcoin is legal tender in El Salvador, it isn’t used everywhere. As mentioned above, many people are opposed to it. As a result, and the simple fact that such a change needs to be gradual, adoption isn’t mandatory for businesses.

A lot of small shops, local buses, guest houses and other spots won’t accept it. In El Salvador, cash is still king. This is understandable and their personal choice.

That said, it’s possible to use bitcoin in many places. From restaurants and malls to hotels and real estate, to the visa fee at the border — bitcoin adoption is spreading. There’s even a guy in El Zonte who accepts bitcoin at his fruit cart on the beach!

Smaller shops and cash can be a problem in El Salvador as they often don’t have change for larger denomination bills like the $20 bills that you get from ATMs. This is something that’s often overlooked in bitcoin adoption. Being able to pay a specific price without worrying about making change would hugely benefit many shop owners.

Small kiosk with several signs on the front, one reads "Bitcoin accepted here"
Bitcoin Accepted Here

Bitcoin City

Riding the wave of bitcoin’s high prices in 2021, President Bukele made another wild announcement: Bitcoin City.

The plan is to build a city in the country’s southeast, at the base of Conchagua volcano — using the geothermal energy beneath the mountain as the main power source. A significant aspect of the city is to be a focused tech hub, hoping to attract large companies and new startups, boosting the Salvadoran economy.

It feels right out of Elon Musk’s playbook (Muskian, perhaps?). Though bold as it is, things have been quiet. The bitcoin bonds meant to fund the project have yet to go on sale and with the price of bitcoin a fraction of what it was when this all started, it’s anyone’s guess what will happen.

Graffiti of a pixelated punk wearing sunglasses.
CryptoPunk graffiti near La Libertad
A Sign that Crypto Culture is Spreading in El Salvador

Bitcoin Crash

The price of bitcoin is falling.

I’m writing this in November 2022, during the FTX crisis and one of the biggest blows to the crypto industry in its short history. The price of bitcoin sits at around $16,000. Down nearly 25% in the last month alone.

It looks like this so-called crypto winter may be turning into a crypto ice age. And critics have not been kind to the president.

Bukele first bought bitcoin between September and October 2021 when bitcoin climbed from $43,000 to $60,000. When the price fell, he continued to “buy the dip” when it dropped steadily from its all-time high down to $19,000 in late 2022. El Salvador currently holds 2381 coins with a total loss in value of 60%.

Yet with these devastating losses, Bukele remains committed. In November 2022, Bukele Tweeted that El Salvador would purchase one bitcoin per day going forward — to what end is anyone’s guess.

Time Will Tell

Regardless of the current downturn, the majority of Salvadorans I spoke to are optimistic about bitcoin. At worst, they’re neutral but remain curious. They’re excited about the progress the country is making by taking such a step. They look forward to the ways it may help improve El Salvador for visitors and locals alike.

What will happen in the long run is anyone’s guess. But for the time being, it feels like bitcoin is here to stay in El Salvador.

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