When Nayib Bukele was elected president of El Salvador in 2019, it marked a significant shift for the small Central American nation.
Perhaps no initiative better encapsulates this vision than Nayib Bukele’s headline-grabbing move in 2021 to officially make Bitcoin legal tender in El Salvador through the passage of the Bitcoin Law.
This historic decision has cemented Nayib Bukele’s reputation as one of the most forward-thinking world leaders embracing cryptocurrency.
But beyond the global buzz and intrigue about Bitcoin, important questions remain about the tangible impacts of Bitcoin legalisation for El Salvadorians on the ground.
In this article, we review key milestones, successes and mishaps under Nayib Bukele’s leadership in the 18 months following Bitcoin’s legalization in El Salvador.
A Brief Background On Nayib Bukele Becoming President Of El Salvador 2019
42-years-old Nayib Bukele first gained widespread popularity in El Salvador as mayor of the capital city San Salvador, from 2015 to 2018. He was seen as a new kind of leader – young, tech-savvy and bringing a fresh approach to governance.
Frustrations were swelling in the country with the two old establishment parties, the FMLN and ARENA, who had dominated Salvadoran politics for decades.
Nayib Bukele moved quickly to distinguish himself from previous administrations. He developed populist policies aimed at helping ordinary Salvadorians, like distributing food packages during the COVID-19 pandemic.
But one of his most unexpected and trailblazing moves came in June 2021, when Bukele worked with GANA to pass legislation making Bitcoin legal tender in El Salvador.
This historic Bitcoin law meant businesses now had to accept Bitcoin as payment. El Salvador partnered with digital wallet company Strike to set up the country’s Chivo cryptocurrency infrastructure.
The government also offered $30 in free Bitcoin to every citizen who downloaded the Chivo app to encourage adoption.
With this unprecedented embrace of cryptocurrency as an official currency, Nayib Bukele aimed to boost financial inclusion, facilitate remittance payments, and position El Salvador at the forefront of digital currency innovation.
However, his Bitcoin Law has also proven controversial. As implementation has unfolded, important questions remain about coercion, volatility impacts and real beneficial outcomes for El Salvadorians.
Key Successes and Achievements
Here are some of the notable successes and achievements since the legalization of Bitcoin:
1. Increased Crypto Adoption
In the months after the Bitcoin Law was enacted, El Salvador saw meaningful growth in cryptocurrency adoption through increased Bitcoin wallet use.
By November 2021, around 3.9 million people—over 60% of the population—had downloaded the official government-backed Chivo cryptocurrency wallet.
And while initial uptake was likely boosted by the $30 Bitcoin sign-on incentive, Chivo wallet use remains notable, with currently over 2.7 million activated wallets holding at least some crypto.
2. Growth Of The Bitcoin City and The Bitcoin Bond
Bukele is forging ahead with an ambitious vision to build Bitcoin City, funded by revenue from El Salvador’s pioneering “volcano bonds.”
Designed to evolve into a fully functional metropolis run on renewable geothermal energy, Bitcoin City aims to attract crypto entrepreneurship and innovation.
While still in the fundraising and development phase, the Bitcoin City project and the $1 billion Bitcoin bond issuance took further steps towards becoming reality in 2022.
3. Boost to The Tourism Industry
Post-Bitcoin legalization, Bukele has aggressively promoted El Salvador as an exciting, new destination for crypto-curious travellers as a way to spur economic growth through tourism.
Tourism metrics showed some early success in 2022, visitor arrivals were up nearly 30% from 2021.
Morena Valdez, El Salvador’s Tourism Minister, stated about a year ago that local tourism increased by 30% in the first three months after the country implemented BTC. She explained that the country is particularly popular with Americans, who make up 60% of all visitors.
4. Improved Financial Inclusion
One of Bukele’s main arguments for embracing Bitcoin was its potential to advance financial access and inclusion for unbanked Salvadorian citizens through digital wallets. By some estimates, about 70% of El Salvadorians lacked bank accounts before the Bitcoin Law.
Today, over 2.5 million people have activated Chivo wallets, suggesting increased financial inclusion, although questions remain around ongoing engagement versus sign-ups enabled simply by the $30 bonus.
Challenges and Criticism
While Bukele positions his Bitcoin Law as a forward-thinking innovation, it has not been without controversy and critique. Two common concerns raised by opposition leaders, NGOs and citizens are coercion and privacy.
Specifically, some Salvadorans have accused the government of forced adoption tactics that infringed on civil liberties.
Issues like requiring merchant acceptance and tying government services like welfare and pensions to the Chivo wallet sparked protests over compliance pressure versus choice.
Privacy advocates have also critiqued the mandatory provision of personal identification to activate Chivo wallets, arguing this undermines the anonymity principles that attract many to cryptocurrency. In 2021, identity thieves exploited El Salvador’s Chivo Bitcoin wallet
The Bukele administration maintained that these measures were essential security steps to integrate a decentralized currency. However, continuing reports of identity fraud and hacking have fueled complaints about risks to personal information.
Beyond civil liberties questions, analysts have highlighted the economic instability caused by Bitcoin’s infamous volatility. A widely cited IMF report warned Bitcoin’s wild price swings could jeopardize financial stability and fiduciary responsibility.
Opposition legislators have pointed to the huge paper losses El Salvador has already incurred on its Bitcoin reserve holdings after prices crashed in 2022. Concerns linger that Taxpayer funds are being gambled on speculative crypto assets rather than invested to serve the Salvadorian people.
So while increased cryptocurrency usage and related infrastructure funding flowed from the Bitcoin Law, Bukele’s political opponents and international financial bodies continue to pose real challenges to the rollout.
Charges of coercion, privacy violations, volatility risk and reckless allocation of state resources remain thorns in the side of the Salvadorian Bitcoin experiment—important critiques for Bukele’s administration to reconcile with its lofty promises.
How Bitcoin’s Legal Status affected El Salvador’s Economy
El Salvador made international headlines in 2021 as the first country to grant Bitcoin legal tender status. The move was spearheaded by the young, populist President Nayib Bukele as a disruptive economic gambit intended to boost financial inclusion, facilitate remittance payments, and stimulate economic growth.
However, Bitcoin’s subsequent dramatic price crash in 2023 put El Salvador’s economy on a rollercoaster test ride.
Initially, after the Bitcoin Law was enacted, some economic signals seemed promising: cryptocurrency wallet adoption amongst citizens increased by over 60% in the first few months, according to government data.
The administration also touted metrics suggesting the use of Bitcoin was helping reduce average commission fees on remittances to near zero, offering savings for nearly a quarter of the population dependent on money sent back from overseas.
Tourism began seeing an uptick as Bitcoin-curious travellers were drawn to ‘Bitcoin Beach’ areas where local merchants pioneered acceptance.
However, when Bitcoin’s value sank 50–60% over 2022–2023, the downside of crypto volatility came into focus. Critics have cited IMF warnings about potentially catastrophic impacts on domestic prices and financial stability.
The nation’s Bitcoin reserve holdings purchased with public funds saw huge paper losses. Currency volatility also dampened some original economic projections around Bitcoin City plans funded by $1 billion in Bitcoin-backed bonds.
Surveys suggest many citizens have lost trust in Bitcoin’s stability, and nearly 80% believe legal adoption has yet to benefit their finances.
However, President Bukele’s administration remains staunch in asserting Bitcoin acceptance, which is now deeply integrated with the developing nation’s economy and will yield productivity dividends over the long term.
Most independent economists believe it is still too early to make a definitive assessment of Bitcoin’s legacy impact, for better or worse.
With Bitcoin’s legal status and promotion now tied to Bukele’s wider economic vision, El Salvador finds itself running a unique monetary experiment tied to the booms and busts of the crypto markets.
Early data provides a mix of both successes and struggles. But the outcome of harnessing volatile digital currency as a national legal tender remains a story still unfolding.
Vision For The Future
Even amid lingering critiques, Bukele continues to articulate an ambitious, long-term vision for Bitcoin and technology to transform El Salvador into a hub of innovation and economic growth.
Central to this vision is the planned Bitcoin City, funded by the country’s pioneering Bitcoin bonds, which Bukele touts as fully embracing “the ideas, effects and opportunities that Bitcoin brings.”
Designed to run on geothermal energy from the Conchagua volcano, Bitcoin City aims to attract technology entrepreneurs with promises of zero income, property, capital gains and payroll taxes.
Bukele also points to initiatives like partnering with crypto platform Koibanx to launch thousands of two-way Chivo bitcoin ATMs as part of goals to expand usage amongst unbanked citizens.
Additionally, El Salvador forged diplomatic ties with the Central African Republic in 2022 following their move to adopt Bitcoin as legal tender, hoping to shape the global conversation around cryptocurrency in governance.
Execution risks notwithstanding, Bukele has made it clear that he views Bitcoin and broader blockchain technology as key drivers to unlocking prosperity, sustainability and inclusive growth in El Salvador in the 21st-century model.
Conclusion
When Nayib Bukele passed the historic Bitcoin Law in 2021, El Salvador ventured into unprecedented territory by adopting cryptocurrency as a legal tender. The ambitious experiment drew both praise and skepticism.
Now, over a year later, assessing metrics around cryptocurrency usage, investment projects, tourism revenue, and financial inclusion points to genuine progress tied to the Bitcoin policies, albeit alongside ongoing gaps.
However, concerns persist around coercion, privacy infringements, market volatility and speculative investment risks using state funds. Real work remains to transform the promises into lasting advancement for citizens.
Still, Bukele is doubling down on the Bitcoin bet with larger visions of blockchain-powered innovation and growth ahead.
If deeper adoption and economic benefits accrue from this small nation’s pioneering leap into digitizing finance, El Salvador’s Bitcoin experiment may well be remembered as a transformative policy move under President Bukele’s forward-looking leadership.
