El Salvador: The Bitcoin Revolution that has just begun

Being a vocal opposition to the ‘traditional’ financial market is no easy feat. Yet, El Salvador, a small Central American country with an area comparable to that of New Jersey, has bravely done just that. In September 2021, El Salvador made history by becoming the first country to recognize Bitcoin as an official currency. This move has been met with a great deal of resistance from the traditional financial institutions around the world who considered it as an “economic disaster”. After all, El Salvador is advocating for a free-market economy and a decentralized approach, a stark contrast to the centralized markets that most financial institutions are deeply entrenched in.

Since that historic September, El Salvador has become the world’s Bitcoin capital. However, as with any bold move, not everyone is enthusiastic and thrilled about it. The success of this “experiment” could encourage other countries to follow suit, while its failure could cause other nations to avoid it entirely. This is precisely the aim of bitcoin oppositions: to intimidate other countries into adopting a decentralized approach to their economy.

Despite some attempts to portray the experiment as a “failure,” it’s essential to acknowledge and applaud President Nayib Bukele’s boldness in challenging the status quo. As a young and charismatic leader, Bukele deserves recognition for his historic accomplishments in El Salvador, despite facing criticism. Taking office at the young age of 37, Bukele has already made significant strides in El Salvador’s history. Independent and reputable polls on Latin American governments consistently report that, three years into his presidency, Bukele enjoys support rates between 85% and 95% among citizens. These polls are unbiased and represent the collective voice of the people. Bukele’s unique style and straightforward approach have made him a rising star in the continent, unafraid to go against the tide. Despite criticism, he has undeniably succeeded in his efforts.

As per the US National Bureau of Economic Research, almost a quarter of citizens who downloaded the government’s Bitcoin payment app, CHIVO WALLET, continue to use it for various payment purposes. El Salvador has experienced a 52% surge in tourism revenues over the past year, with over 500 local tourism firms reporting receipt of Bitcoin payments. In September last year, digital wallet transfers of foreign residents to their families in El Salvador reached $96 million, representing a 500% increase compared to March of the same year. Furthermore, 5% of citizens currently pay taxes using Bitcoin. This is particularly significant and vital in a country where 70% of the population does not even have a bank account, despite the gradual implementation of the process.

El Salvador – safest country in Latin America 

But that’s not all – El Salvador’s economy has shown remarkable growth. The country’s national output rose by approximately 11% in 2021, and this trend continued into 2022. In addition, the employment rate in the country increased by 7%, while energy production grew by 19% last year, and exports increased by approximately 16%. What’s more, the security revolution led by the president has succeeded in an astonishing way: the crime and murder rate, which had made El Salvador the most violent country in the world, has decreased by a staggering 95%! This achievement has made it the safest country on the entire continent. These are unprecedented numbers, by any measure.

Unlike those who are “waiting in the corner,” the products of the economic revolution in El Salvador are not the result of just one or two years. The country’s goal is not to replace the dollar as the official currency, but rather to introduce an “alternative” to the existing centralized economic system, which the government has successfully accomplished. Claims in the media that “60 million dollars have gone to waste” due to a temporary decline in Bitcoin’s value are baseless. It’s widely known that money is not “wasted” unless it’s converted back to the dollar after buying Bitcoin, which is not the case in El Salvador. President Bukele recommended to his followers on Twitter to “stop looking at the graphs and enjoy life” and emphasized that in Bitcoin, “patience is key”; And yes, This virtue is essential, not only in Bitcoin.

Furthermore, the Congress of El Salvador recently passed the world’s first law on “digital assets management.” The law establishes a national committee for digital assets in El Salvador that oversees the regulation of asset issuers and digital service providers. It also allows for the use of any cryptocurrency, not just Bitcoin, for the first time. Once again, President Bukele is leading the way with innovations. The law separates crypto activities from other financial products, creating a regulatory framework suited to the new technological era. The government is in the process of creating a digital asset providers registry, which will lead to the full legalization of crypto. The law also defines currencies and tokens legally, regulates public issuances of digital assets, and provides an attractive outline for tax exemptions in certain cases.

Until just recently, El Salvador was a little-known country to many. However, the decision to recognize Bitcoin as the official currency is one of the boldest moves in the global economy, making El Salvador the international hub of crypto. Today, El Salvador is not only a world-renowned surfing destination, but also a country that has opened the door to genuine and practical conversations about free economics worldwide. President Bukele’s decision has had a more significant impact abroad than domestically, and it is changing the way the world views developing nations. El Salvador is leading the way in the digital economy, while paving the path for other countries to follow suit.

Yossi Abadi is the honorary consul of El Salvador in Israel and considered by Forbes as the leading israeli investor in the Central America.