Nayib Bukele’s Bitcoin Experiment in El Salvador

Nayib Bukele, the president of El Salvador who passed the bill to legalize bitcoin as legal tender in the Latin American nation, stated that the monetary experiment has yielded mixed results.

“Bitcoin hasn’t had the widespread adoption we hoped for. Many Salvadorans use it, and the majority of large businesses in the country have it,” Bukele said in an interview with TIME Magazine regarding the monetization of bitcoin.

“The positive aspect is that it is voluntary; we have never forced anyone to adopt it. We offered it as an option, and those who chose to use it benefited from the rise in Bitcoin,” he added. “I expected more adoption, definitely, but we always prided ourselves on being a free country, free in every way.”

The Bitcoin Law, passed on Sept. 7, 2021, during the height of the last bull market, made El Salvador the first country to adopt bitcoin as an alternative legal currency in an attempt to digitize the economy and reduce reliance on the U.S. dollar, which is the most widely circulating currency in the country.

At launch, the government spent $75 million to distribute approximately $30 in bitcoin to people who registered for the state-backed Chivo wallet. Additionally, the country has added bitcoin as a long-term treasury asset and plans to build a nationalized bitcoin mine powered by a volcano.

Bukele noted that “those who saved in Bitcoin have likely seen decent returns now that the price of bitcoin is back near all-time highs. Thank God for that. It’s good that people have those earnings. Those who decided not to use it did not have those gains,” he said.

“I’m not going to say it’s the currency of the future, but there’s a lot of future in that currency,” Bukele said, pointing to the growing footprint of Wall Street firms in the crypto industry and bitcoin becoming a campaign issue in U.S. elections.

Lauded by some as a “philosopher king” and criticized by others as an “authoritarian,” Bukele’s plan has drawn skepticism from national and international critics. For instance, Moody’s downgraded the country’s credit rating, citing Bukele’s fiscal policies. However, Bukele noted that the International Monetary Fund softened its critical stance on this policy and acknowledged that its expected risks “have not materialized.”

Despite the limited success in domestic adoption, Bukele stated that bitcoin improved El Salvador’s “branding,” attracted foreign investments, and led to a spike in tourism, with several bitcoin firms establishing offices in the country.

“In the end, the fact of being a ‘First Mover’ gives us a small advantage, as far as it goes. I feel that it could have been much better. I wouldn’t consider it a resounding success,” Bukele said. “Still, I do believe that the positive outcomes outweigh the negative, and the issues highlighted are relatively minor.”