A year ago today, the government of Nayib Bukele, President of the Republic of El Salvador, adopted bitcoin (BTC) as its official currency, along with the US dollar. With this decision, the country became the first in history to give legal tender to a cryptocurrency. At the time, the news made headlines and was widely criticized. Today, the question is what was the real impact of this initiative.
Twelve months of bitcoin in El Salvador: a nuanced assessment…
To date, El Salvador has acquired a total of 2,381 BTC. Yet, with the bear market, this investment lost nearly 50% of its dollar value. However, the Salvadoran Minister of Finance, Alejandro Zelaya, valued that the country has not suffered any losses so far, since it has not sold its assets. Indeed, he argued that the country is part of a logic of long-term investment.
Moreover, the adoption rate is still relatively low. According to data from El Salvador’s central bank, only around 2% of remittances involve crypto wallets. Moreover, bitcoin was supposed to help the 70% of the local population who do not have access to financial services. However, it seems that Salvadorans who regularly use the wallets are mostly young, educated and banked. Which doesn’t really match the profile of the target audience.
… But there are still several positive points
It is clear that in just one year, bitcoin has largely contributed to the economic development of the country. First, tourism in El Salvador has jumped dramatically by around 82%, with an influx of 1.1 million tourists to the country in the first half of 2022. Additionally, Douglas Rodríguez, President of the Central Bank of Salvador, revealed that the Salvadoran diaspora had repatriated nearly $52 million in bitcoins between January and May 2022 thanks to Chivo, the wallet country official.
Also, El Salvador had the chance to welcome many foreign investors to present its plans for Bitcoin City, a futuristic city for bitcoin.
Today, it is still too early to judge the success of the Bitcoin experiment in El Salvador. A lot of data is missing in the equation for this exercise to be carried out perfectly. That said, this initiative has the merit of having allowed the Lightning Network (LN) to acquire great legitimacy. Insofar as this network is at the heart of the exchanges carried out in the country.
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