El Salvador's Bitcoin Experiment: Success or Stalemate?
Summary:
Despite the re-election of Bitcoin-friendly president Nayib Bukele, El Salvador's ambitious Bitcoin experiment faces challenges. Jamie Robinson, CSO at The Bitcoin Hardware Store, cites a largely tech-illiterate population, lack of merchant enforcement, and the fluctuating Bitcoin market as hurdles. Initial problems were seen with the launch of the state's Chivo Wallet which was met with both technical difficulties and lack of demand from customers. However, Robinson also noted the aid of the private sector in overcoming these issues, along with a slow but progressing interest in self-custody by new Bitcoin users.
The aspiration of El Salvador to be a global pioneer in embracing Bitcoin may demand more than simply having a Bitcoin-friendly president back in the office, say Bitcoin enthusiasts and business owners in the country. Nayib Bukele, who held the presidency from June 2019 till December 2023, was the driving force behind legalizing Bitcoin as official tender in the country in September 2021. On February 4, Bukele was re-elected as president in a convincing victory, as initial results indicate he has won 83% of the counted votes.
Even so, the largely digital timid society, the lack of enforcement by retailers, and a barely varying Bitcoin market could hinder El Salvador's so-called "Bitcoin experimentation," says Jamie Robinson, chief strategy officer at The Bitcoin Hardware Store. He explains the issues initiated with the introduction of El Salvador's Chivo Wallet in September 2021, which he believes was a failure at launch. Even after solving the initial issues, the Chivo gadgets often ended up with no charge, lacked updates, and many retail store employees struggled with the technology required to reinstall it. A recent study reveals challenges in El Salvador's Bitcoin adoption, suggesting that the government-run Chivo Wallet is not widely used, despite government attempts.
Moreover, Bitcoin was not in high demand as a payment method, especially as its value dropped from a high of $69,000 to a 2023 low of $15,600. "A temporary backslide occurred," Robinson recalled. In 2023, only 12% of the local populace used Bitcoin at least once to pay for goods or services, down from the previous year, as indicated by a recent study by José Simeón Cañas Central American University. An earlier attempt by journalist Joe Hall to exclusively use Bitcoin for payments during a 2022 visit to El Salvador was met with failure, as many merchants refused to accept the cryptocurrency despite being legally obligated to do so. Having said that, according to Robinson, the private sector has moved in to help the government rectify these problems, with companies like Ditobanx, Tiankii, IBEX, and Athena helping facilitate easier Bitcoin transactions at major international brands like Walmart, Starbucks, Re-Max, and Domino's.
Industries such as casinos and restaurants have now started accepting Bitcoin as a method of payment as the digital currency's value begins to climb again. The Salvadoran government initially stated that businesses might face repercussions for refusing to accept Bitcoin, yet Robinson has not noticed any imposed fines or penalties. While the sector growth trajectory is positive, the pace is slower than desired.
Roman Martínez, community leader at Bitcoin Beach, highlights the need for endurance in a nation where the majority of the population has had limited access to mainstream banking services. He emphasizes that learning new financial systems overnight is unrealistic and the country is making progress, albeit slowly.
Furthermore, Robinson highlights the importance of focusing on educating locals about self-custody of digital currencies, which led to the establishment of The Bitcoin Hardware Store. He notes that many new Bitcoin users buy Bitcoin but leave them either on exchanges or custodial wallets. His store provides a platform for interested users to get information and learn about self-custody, and it's set to open soon in El Zonte, also known as "Bitcoin Beach" by locals, a short drive from the nation's capital, San Salvador.
Published At
2/6/2024 8:41:18 AM
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