In line with the United States dollar, which was adopted as the country’s official currency in 2001, El Salvador made history by becoming the first nation in the world to legitimize the use of bitcoin as a form of payment. It happened a year ago, and the president of the country, Najib Bukele, who is a fan of cryptocurrencies, advocated the plan as something that would have a significant positive impact on El Salvador’s economy if it were implemented. After that, he stated that Bitcoin will entice foreign investment, result in the creation of jobs, and assist the populace in moving more quickly in the appropriate direction.
His goals were so lofty that he planned to purchase $1 billion worth of government bonds in order to finance the construction of a city that would be entirely run on bitcoin, a city in which there would be no taxes. The strategy called for investing half of the city’s bonds in bitcoin and using the other half to purchase bonds. He anticipated making a profit, which he intended to use to repay the bonds he had taken out.
The legalization of bitcoin did not just mean that users may treat the cryptocurrency in the same manner as the dollar. For instance, everything is in order when a person living in El Salvador wishes to make a purchase and pay for it with bitcoin, provided that the vendor is willing to take payment in that cryptocurrency. On the other hand, Bukele desired more than that. When anything is legalized, the vendor is required to take bitcoin as payment from anyone who wants to pay them in bitcoin, no matter what they sell. This applies to sellers no matter what they sell.
Additionally, in an effort to get more people to use bitcoin, the government developed a mobile application called Chivo Wallet (“chivo” is a local term for “cool”), which allows users to trade bitcoin for dollars free of charge. In addition, every citizen of El Salvador received a bonus of $30, which is not an insignificant amount in a nation where the average weekly pay is approximately $360.
Nevertheless, in spite of everything that, the experiment does not turn out well. The Chivo Wallet is only used for Bitcoin transactions by 20% of the population, according to the findings of a poll that was done in February of this year over the entire country of El Salvador and included 1,800 families. Over forty percent of the population downloaded the program, but they did so just to receive the thirty dollar incentive.
Only twenty percent of those polled who own businesses responded that they would accept bitcoin as a form of payment. The majority of these were larger corporations. According to the findings of another survey that was carried out in March of this year by the country’s Chamber of Commerce, only 14% of enterprises use bitcoin for transaction purposes.
Bukele’s plan to issue $1 billion in bonds did not materialize, which was fortunate for the people of El Salvador; yet, Bukele’s administration still spent $100 million on bitcoins. These bitcoins are worth significantly less than $50 million at the moment.
In July of 2021, when Buchelle unveiled his plan, the value of one bitcoin was approximately $35,000. One bitcoin was equivalent to approximately $45,000 by the time the law regulating bitcoin was enacted in September of that year. After another two months, it reached its highest price of $64,400 and is now being sold for somewhere under $20,000.
A year ago, Bukele encouraged people all across the world to purchase bitcoins. Everyone who has wasted their time listening to him has been cheated out of an unimaginable opportunity.
Credit bureaus operating on a global scale This year, El Salvador’s credit rating was lowered by Fitch as a result of worries regarding the country’s bitcoin policy. El Salvador was the first country to replace its currency with bitcoin, but no other nation with its own national currency, not even countries like Zimbabwe and Venezuela, has followed its lead. Given that the experiment was unsuccessful, it is highly unlikely that any nation will do so in the future either.