Is El Salvadors Bitcoin coldly embracing the United States?
This week, El Salvador became the first country in the world to make Bitcoin legal tender, sparking a wave of speculation about how the smallest country in Central America, which is among the poorest regions, will fare. with volatile cryptocurrency. Yet for a small Salvadoran seaside town, crypto is already a part of everyday life. El Zonte companies have been using it since 2019 after the launch of Bitcoin Beach, a program whose mission is to build a sustainable Bitcoin economic ecosystem on the coast of El Salvador. There are more than 50 establishments, from mobile phone stalls to vegetable and fruit vendors, stores, hardware stores, restaurants and hotels that use Bitcoin for daily transactions, said Carlos Enrique Ortiz Novoa, who started accepting Bitcoin in Olas. Permanent, her hotel. , restaurant and surf camp, in March 2020. Now the rest of the country is embarking on the El Zontes Bitcoin experiment after the countrys legislature passed a law encouraged by Salvadoran President Nayib Bukele, 39, forcing companies to accept it as a means of payment for goods and services alongside the US dollar. , which has been the countrys official currency since 2001. Bukele, who was elected in 2019 to the center-right Grand Alliance for National Unity party, has since festooned his crypto-branding Twitter account. His Twitter profile now features a photo of him with Bitcoin laser eyes and an ongoing discussion thread about a Bitcoin mining project using energy from one of El Salvadors volcanoes. I just instructed the president to @LaGeoSV (our national geothermal electricity company), to set up a supply plan for facilities for #Bitcoin mining with very cheap energy, 100% clean, 100% renewable, 0 emissions from our volcanoes It will evolve quickly! pic.twitter.com/1316DV4YwT Nayib Bukele (@nayibbukele) June 9, 2021  The first adopters of El Zontes share his enthusiasm. Mike Peterson, director of Bitcoin Beachs, said the citys pilot project was always aimed at demonstrating the power of Bitcoin to uplift the poor and those who have been excluded from the mainstream financial system. We have seen the impact it can have on peoples lives, Peterson told Al Jazeera. The fact that the government has watched this happen and is thrilled with it, not because it is going to help the rich but because it is going to help the people at the bottom of the ladder, has been enthusiastic about it. A matter of timing  But not everyone celebrates. Ahead of a meeting between the International Monetary Fund (IMF) and Bukele on Thursday, the organizations spokesperson said the adoption of Bitcoin raises a number of macroeconomic, financial and legal issues that require very careful analysis. El Salvador is seeking a lifeline of nearly $ 1 billion from the IMF. Others questioned Bukeles schedule: the announcement came the same week that US Vice President Kamala Harris was visiting other countries in the region, but not El Salvador. Historically a regional ally, the United States has also been criticized for supporting the countrys right-wing regimes, most notably during a bloody civil war from 1979 to 1992 that pitted socialist rebels against the countrys entrenched elite known as the names of the 14 families. More recently, US-Salvadoran relations have cooled since the United States criticized Bukeles decision to sack Supreme Court justices and the countrys attorney general as a takeover. And a US State Department report in May included five Salvadoran officials with close ties to Bukele on its list of allegedly corrupt Central American politicians. Bukele has also drawn closer to China. After the bribery list was published, Bukele took to Twitter to praise a $ 500 million public investment from China which he said was made without conditions. Previously, he tweeted his thanks to President Xi Jinping and the people of the Peoples Republic of China after receiving millions of doses of the countrys COVID-19 vaccine. Thank you President Xi Jinping and the people of the Peoples Republic of China https://t.co/jaKoyNNxhH Nayib Bukele (@nayibbukele) April 7, 2021  Yet because El Salvador uses the dollar as its currency, its monetary policy is tied to the United States even as relations falter. This could explain the motivation behind the Bitcoin movement, said Johnathan Ordonez, international consultant to the Guatemala-based think tank LAB-CA, the Central American Laboratory for Innovation and Public Policy. Many White House officials have expressed concern over the authoritarian ways in which President Bukele has ruled the country, Ordonez told Al Jazeera. I would say and this is my main thesis of the adoption of Bitcoin in El Salvador that President Bukele wants to avoid any sanctions or repercussions from the United States through the Salvadoran financial system. I think Bitcoin will be a risky alternative to alleviate the possible pressure Bukele could take from Washington, he added. Volatility versus access  Political motivations are not the only question. While Ortiz called Bukeles move a big step for the country and said using Bitcoin as a payment method has been great and convenient in El Zonte, he also recognizes the pitfalls. For those who want to invest, this presents a great risk due to the fluctuation of the currency, Ortiz said. It is these fluctuations that skeptics say will make Bitcoin impractical for everyday use, especially in a country as poor as El Salvador. Almost a third of the country lives on $ 5.50 per day or less, according to the World Bank, and 8.5 percent live in extreme poverty, or on less than $ 3.20 a day. The wild fluctuations in the value of Bitcoin could make a real difference on this scale. And the swings have been in full swing this year. After hitting an all-time high of $ 64,899 on April 13, inflated by an investment from Tesla and hype from its CEO, Elon Musks Bitcoin price fell to $ 30,000 on May 19 after Musk criticized energy consumption of cryptocurrencies. In El Zonte, El Salvador, even small stores like this accept Bitcoin through a program known as Bitcoin Beach. [Credit: Mike Peterson]  Bitcoin is now hovering around $ 37,000, but headwinds are strengthening. The backlash to its carbon footprint has been severe, and discussions about tighter government regulations continue to gain momentum. Meanwhile, China and other countries are cracking down on cryptocurrency, while Bitcoins credibility as a currency beyond government control has been questioned after U.S. law enforcement recovered a part of a Bitcoin ransom paid by a pipeline company. But Bitcoin supporters still see an advantage for developing countries forced to live in a global financial system dominated by big banks. Peterson believes that the decentralized nature of Bitcoin, which eliminates banks by allowing peer-to-peer transactions, has the potential to empower unbanked Salvadorans and reduce the fees associated with receiving money from the bank. foreign. Remittances represent 23 percent of El Salvadors gross domestic product, and about 360,000 households depend on it, according to the countrys central bank. But traditional transfer companies charge a fee to send $ 200 from the United States to El Salvador, for example, the fee ranges from $ 2.99 to $ 12.99, depending on global banks. discount price database. Some of the poorest people in the world pay some of the highest fees to access the financial system, so Bitcoin totally solves that, Peterson said. They can receive remittances and transfers from family members virtually free of charge. Great experience  Peterson said he started Bitcoin Beach after receiving a large donation from an anonymous Bitcoin holder who told him that if we could figure out how to actually use Bitcoin he would be willing to invest in some of the projects we we were with the young people. the. Peterson and his wife own a restaurant business in San Diego, California, and run a Christian nonprofit organization in El Salvador. They used this first donation to pay community volunteers in El Zonte. El Zonte has billed itself as a destination for Bitcoin investors, with signs like this that read Bitcoin Changing Lives! and you are at Bitcoin Beach [Courtesy: Mike Peterson]  We started using Bitcoin to pay the young people in the community who were involved in different projects like cleaning the river and cleaning the beaches, Peterson said. We now have 62 certified lifeguards who are paid in Bitcoin. From there, Bitcoin Beach helped educate the community on how to use it in everyday life, creating their own flash wallet that people use on their mobile phones. The Bitcoin Beach wallet now has around 7,000 users, said Peterson, who complete around 1,200 transactions per day. The app has a map showing locations that accept Bitcoin in town and allows people to send money to each other directly through their usernames. Users can also create scanned and paid invoices with a QR code. Residents of El Zonte also use the Strike app, which allows you to send funds from within the United States and receive them in Bitcoin or U.S. dollars, Peterson said. But while Bitcoin is more volatile, Peterson said he has heard from many Salvadorans that they prefer to keep their money there rather than fiat currency because this is the first time they can actually invest in an asset. Once people start using Bitcoin, they naturally become savers without even thinking about it, Peterson said. People realize that this is likely to increase over time, so they are reluctant to part with it. As the rest of El Salvador embarks on the Bitcoin experiment, other questions remain, including how a country where drug trafficking and corruption are major issues will ensure transparency in the notoriously murky world of crypto. Peterson thinks so. Its a small country in Central America, he said, and the people there are turning the global financial system upside down, so keep an eye out for them.