The decision to be the first country to allow Bitcoin to be legal tender seems to be finding favour with the majority of El Salvador‘s citizens, as evidenced by growing adoption.
Bitcoin Adoption, El Salvador leads the world
The country’s president, Nayib Bukele, the protagonist of this revolutionary decision, was the one who gave the news. On November 14th, he enthusiastically announced that Salvadorans are the world leader in using Bitcoin.
The latest was the German ambassador in El Salvador, Peter Woeste, who posted a picture on Twitter of himself making a purchase using Bitcoin.
Germany’s ambassador to El Salvador using the #Bitcoin Lightning network for the first time.
🍊💊 😎 pic.twitter.com/3uDfeOPbqn
— Bitcoin Archive 🗄🚀🌔 (@BTC_Archive) November 16, 2021
After some initial difficulties and some protests from citizens, it now seems that the adoption of Bitcoin is becoming more and more common, even for making small purchases in the Central American country.
El Salvador Attracts Investors to Bitcoin
In the past two months, the government has tried to facilitate as much as possible both the adoption of the cryptocurrency and the activities related to it, such as mining. And many foreign crypto investors seem to be interested.
El Salvador’s vice-president, Félix Ulloa, said a few days ago:
“People from Asia, from South America, from Russia, they are interested in investing in El Salvador”.
To entice investors and crypto miners, Bukele has always used his favourite medium, Twitter, to announce incentives and favourable laws such as the cancellation of capital gains tax for Bitcoin or the granting of immediate permanent residency for all entrepreneurs in digital currencies interested in transferring their business to the Central American country.
Ulloa, in his interview with the British newspaper Politico, had this to say:
“A Swiss investor told me that they are interested in bringing about 13,000 and 15,000 machines to produce the Bitcoin”.
But there are still problems
There are still many problems, one of which being the great expenditure of energy that mining requires, which the country would like to address with a project to exploit the geothermal energy of volcanoes.
Another problem is the potential use of the mine by drug cartels in an area where drug trafficking is widespread, according to Ricardo Navarro, head of the environmental NGO Salvadoran Center for Appropriate:
“700 kilos of cocaine recently seized by Spanish authorities, which came from El Salvador”.
Finally, there is the big problem of the extreme volatility of Bitcoin, which could affect the purchasing power of citizens. A problem that even Vice President Ulloa admitted.
“How can you assure [regular payments]? You can be now at $66,000 and tomorrow you can be at $40,000, and that is one of the criticisms of this currency”.
In an attempt to address this concern, the government will issue a tender to anyone who can offer a financial contract to keep the value of Bitcoin stable for salary and pension payments.
But these future contracts could also be used to cover any losses to the public coffers, considering that the Treasury currently owns around 700 Bitcoin.