El Salvador's Bitcoin Gamble: A Mixed Bag Three Years On

Napoleon Osorio is proud of being the first taxi driver to have accepted payment in bitcoin in the first country in the world to make the cryptocurrency

El Salvador became the first country to adopt bitcoin as legal tender three years ago in a bid to boost its dollarized economy. But despite President Nayib Bukele's grand ambitions for the cryptocurrency, a study by the University Institute for Public Opinion showed that 88 percent of Salvadorans had yet to use it.

Now, a taxi driver who was among the first to accept bitcoin in the country says that while the cryptocurrency has changed his life for the better, it has failed to deliver on Bukele's promises to revitalize the economy.

Napoleon Osorio, 39, began accepting bitcoin payments after being approached by John Dennehy, the US founder of the NGO My First Bitcoin, and now runs his own car rental company.

"Before I was unemployed... and now I have my own business," said Osorio, who uses an app to charge for rides in bitcoin.

He has made enough profit from the currency's rise to be able to buy four rental vehicles and no longer struggles to pay for his teenage children's education.

But he says that while bitcoin has helped him personally, it has not had the hoped-for impact on the country at large.

"I think bitcoin has helped me a lot in my personal economy, but I don't think it has helped the country that much," said Osorio.

"I don't think it has brought about the changes that the president promised."

Bukele's grand ambitions for bitcoin fell foul of the International Monetary Fund, which hesitated to grant El Salvador a $1.3 billion loan because of its official use of the cryptocurrency.

In August, however, the IMF announced a preliminary loan agreement with El Salvador, while saying it needed to mitigate "potential risks."

Launching bitcoin as legal tender on September 7, 2021, Bukele said he wanted to bring the 70 percent of Salvadorans who do not use banks into the financial system and promptly began plowing public money in cryptocurrencies.

To spur Salvadorans to use bitcoin he created the Chivo Wallet app for sending and receiving bitcoin free of charge and gave $30 to each new user.

But a year on from the launch, the government admitted that only around 3.5 million Salvadorans had downloaded the Chivo Wallet, and the enthusiasm for bitcoin appeared to have fizzled out.

One-quarter of Salvadoran GDP comes from remittances sent home by family members, mostly from the United States. But in 2023 only one percent of the transfers were made in cryptocurrencies.

In an interview with Time magazine in August, Bukele acknowledged that while "you can go to a McDonald's, a supermarket, or a hotel and pay with Bitcoin" it had "not had the widespread adoption we hoped for."

He added that "the positive aspect is that it is voluntary; we have never forced anyone to adopt it. We offered it as an option, and those who chose to use it have benefited from the rise in Bitcoin."

He also confirmed that he had around $400 million in bitcoin that is kept in a public "cold storage wallet" -- a way of storing bitcoin offline.

Bitcoin's fortunes have been mixed. This week it was trading at around $52,000, down from a peak of $73,616 on March 13. In November 2022 it fell as low as $16,189.

Independent economist Cesar Villalona told AFP that Bukele himself had hobbled bitcoin's take-up by stripping it of the usual functions of a currency.

"Bukele... said: there will be no salary in bitcoin, there will be no pensions in bitcoin, there will be no savings in bitcoin and there will be no price in bitcoin, and in so doing took away the three functions of money," said Villalona.

Luis Contreras, an instructor at My First Bitcoin, told AFP many Salvadorans were simply afraid of making the switch.

The organization has taken cryptocurrencies into public schools, teaching around 35,000 students to use bitcoin so far.

Contreras says the hardest thing about training people on bitcoin "is their fear of new things, which creates a fear of technology" as well as "the fear of moving from a classic currency in the current economy to one that is totally digital and decentralized."

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

The above is the detailed content of El Salvador's Bitcoin Gamble: A Mixed Bag Three Years On. For more information, please follow other related articles on the PHP Chinese website!