This month marks a year since El Salvador adopted Bitcoin as a legal tender
It has been a year of ups and downs for El Salvador since the country introduced Bitcoin Law last September
By Shashank Bhardwaj
A sign promoting bitcoin transactions is seen outside an hotel in El Zonte beach, El Salvador, on August 27, 2022. Bitcoin celebrates one year as legal tender in El Salvador, with some unfinished plans. Image: Marvin Recinos/ AFP
On 7 September 2021, El Salvador became the first country in the world to adopt Bitcoin as a legal tender, marking a year of its Bitcoin Law in action. El Salvador President’s Nayib Bukele, an advocate for digital assets, had claimed that Bitcoin adoption would benefit 70 percent of the local population that lacked access to banking services. The government also projected that it would help attract foreign investment, create jobs, and reduce reliance on the US dollar. The one-year of Bitcoin adoption has been quite eventful for El Salvador.
A year ago, BTC was trading at around $46,000. The Salvadoran government bought 200 BTC at $10.36 million, or at an average price of $51,800. Cut to today, when Bitcoin has lost approximately 60 percent of its value, with prices falling below $19,000 last week. The government reportedly holds 2,381 BTC today, and the current prices are worth $62 million less than the price El Salvador paid for its holdings initially.
Despite this, El Salvador Minister of Finance Alejandro Zelaya stays firm on his belief that the tumbling prices did not mean many losses for the country. Many people also believe the country’s Bitcoin adoption to be a success since it had some positive impacts on the economy. However, given the current situation and the bear market conditions, many consider El Salvador’s bitcoin adoption to be a “failed Bitcoin experiment”.
To add to this debate, Bram Cohen, the creator of BitTorrent and founder of Chia Network, commented that the amount of benefits “isn’t very correlated with the amount of money it makes.” He continued, “Now that there's a cheap-but-annoying method of doing remittances using crypto, the banks have had to cut rates to the point where their slightly better user experience is worth the price.”
According to the Reserve Bank, Salvadorans living abroad sent more than $50 million in remittances from January to May 2022. There was also a 400 percent increase in Lightning Network transactions, which can be attributed to the Bitcoin adoption and the Salvadoran government-backed Chivo wallet Ibex Mercado CEO Jose Lemus said, “El Salvador is going to be the proving ground for so much innovation within Bitcoin.” In his opinion, there is no other jurisdiction that combines the "regulatory framework, the political will, the adoption and range of tools, and most crucially of all, the need for Bitcoin.” He continued, “This makes El Salvador the perfect place to safely experiment with new Lightning applications and to build a thriving ecosystem of trusted, proven, and interconnected services.”
Another win for El Salvador’s Bitcoin adoption is the increase in tourism and foreign investment. Reportedly, tourism has flourished in the country where they saw 1.1 million tourists in 2022 as of September.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash
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