Just a year ago, the Legislative Assembly of El Salvador was the center of all eyes of the world’s bitcoiners, after the approval of the so-called Bitcoin Law, promoted by the president of that Central American nation, Nayib Bukele.
After a long day of debates, around midnight on June 8 last year, El Salvador became the first country in the world that gave legal tender to the first cryptocurrency.
The approved legislation establishes, among other things, that bitcoin may be used “in any transaction and in any capacity that natural or legal persons, public or private, need to carry out,” as CriptoNoticias reported at the time.
Now, after a year, the Bukele government continues to focus on giving bitcoin a greater role in the daily life of Salvadorans. One of his strongest bets has been to acquire bitcoinsthe most recent being last May.
On this last opportunity, 500 bitcoins were bought at an average rate of USD 30,744, which is equivalent to an investment of just over USD 15 million. El Salvador would already have more than 2,301 accumulated bitcoins.
However, the only way to know the amount of BTC they bought is because Bukele notifies him through Twitter. This is one of the questions made by the Salvadoran developer and bitcoiner, Nelson “Ishikawa” Garay, when consulted by CriptoNoticias.
In Gary’s words, no access to public data on bitcoin purchases made by the government, there is no way to confirm it officially. It is also not possible to know if they have sold the bitcoins.
The shadows of bitcoin adoption
With the approval process of the Bitcoin Law, in June of last year the Salvadoran government began to deploy other policies that revolve around bitcoin, one of them was the launch of a state wallet called Chivo Wallet.
this tool does not generate payment of fees or commissions for transactions that users do. It includes the sending or receiving of remittances, making or receiving payments, conversion of bitcoin to dollars or vice versa. There are also no commissions charged to merchants. However, CriptoNoticias, after an evaluation, concluded that in some cases there are problems in its use, giving rise to incentives not to use this wallet.
In this regard, Garay commented that Chivo Wallet had between 3.4 million and 4 million downloads and this was motivated by the bonus of USD 30 in bitcoin that the government granted.
Although for the developer “those figures do not match reality, it would be expected that many people use it to purchase goods and services, but this is not the case. Very few businesses have decided to accept bitcoin.
The experience of salvadoran merchants with the tool called Chivo Comercio, which was designed for the commercial sector, has been “very bad” in Garay’s opinion, because “it has problems in its operation and that has caused businesses to avoid receiving bitcoin ».
In this regard, a survey by the Chamber of Commerce and Industry of El Salvador (Camarasal) confirms Garay’s perspective. For him 91.7% of entrepreneurs from various sectors of the economy, the entry into force of bitcoin as legal tender has been indifferent. While 4.7% of those consulted assured that bitcoin has generated complications for their business or has caused them to have fewer sales.
Along the same lines, a survey by the Francisco Gavidia University (UFG), carried out last May, showed that, ten Salvadorans, six they are against the Bukele government’s decision to use bitcoin as a second national currency.
A 62.3% said they disagree with the use of bitcoinwhile 23.7% of those surveyed do support the decision and 11.2% still doubt whether it was a correct decision or not.
Based on these data, Garay believes that one of the biggest problems has been education about bitcoin. Pointing out that there are no educational plans designed by the Government to instruct the population about bitcoin.
In that sense, those who have led the educational initiative are NGOs, bitcoin enthusiasts who are dedicated to education and also private companies, which, although they are having a minimal impact, make bitcoin have a little impact on the population, Garay said.
The developer cited among the main plans of private companies the “Bitcoin School” program, sponsored by the Paxful exchange; and the NGO “My First Bitcoin”, assuring that they are having a “significant impact throughout the country.” He also spoke about the initiative in which Garay himself is involved, with high-level education, called “Torogoz Dev”, where they teach about the development, programming of bitcoin and Lightning.
IMF with an eye on El Salvador
Among the repercussions of the Bitcoin Law, it is worth mentioning that financial organizations such as the International Monetary Fund (IMF) have assured that the arrival of bitcoin in El Salvador “involves serious risks for financial and market integrity, financial stability and consumer protection. ».
The concerns of the multilateral organization are focused in the increase of the fiscal deficit and of the public debta fact reported by CriptoNoticias.
Even last February, the US risk rating agency, Fitch Ratings, lowered the long-term credit rating, known as Issuer Default Rating (IDR) of El Salvador. This implies that there is a high probability of not being able to pay your financial commitments.
A Bitcoin City and bonds that are not yet issued
The Bitcoin Law brought with it more plans to El Salvador. Salvadoran President Nayib Bukele announced last November the construction of the Bitcoin City. This would be the first financial city in the world to base its economy on the first cryptocurrency.
To finance the construction of the city, the Government chose the option of issuing a state bond of USD 1,000 million. From there, 50% would go to the energy infrastructure works and bitcoin mining in Bitcoin Citywhile the other 50% will be used to purchase more bitcoin.
But the bonus release has been repeatedly suspended since March of this year, the month in which the government had planned its activation. At first it was delayed by the conflict between Russia and Ukraine. More recently, the finance minister, Alejandro Zelaya, indicated that they had not issued it because there were no favorable conditions in the market for its launch and they expect the digital asset to rise in price.
Until now it is unknown when will be the date on which the bonds are issued, apparently we will have to wait for a bitcoin bullish rally to start. The Government has not given details on the regulatory framework planned for the bond issue either.
Bitcoin has benefited tourism and investments
One of the most positive aspects that the Bitcoin Law has left is related to tourism. The Ministry of Tourism of the Central American country has made announcements indicating that expectations were exceeded regarding the economic and visitor impact that Bitcoin would attract for the tourism sector in El Salvador.
According to the information, the arrival of 1.1 million tourists was expected, but the figure reached 1.4 million between November and December 2021. In fact, more than 40 bitcoin investors have gone to El Salvador with the intention of investing in tourism in that country, in November of last year.
For Garay, this is related to the fact that El Salvador has successfully launched its country brand. In his opinion, the Central American nation would never have reached the levels of publicity and popularity that it has at the moment were it not for bitcoin.
«Bitcoin gave us the opportunity to be on everyone’s lips, for this the figure of Bukele and bitcoin has been combined. Many people want and are coming to the country, especially to El Zonte beach, where Bitcoin Beach was born,” Garay positively highlighted.
El Salvador is attracting foreign investors, especially from the area of cryptocurrencies. Exchanges, digital wallet providers, payment processors and bitcoin custodians have arrived in the Central American country.
For example, the investment fund El Zonte Capital (EZCAP), created by journalists Max Keizer and Stacy Herbert and focused on the hyperbitcoinization of El Salvador, received a considerable contribution from the Bitfinex exchange.
In that aspect, for Garay, although foreign investments have arrived from the bitcoin sector, it has not been the amount that neither the government nor the population expected. Although the Government of El Salvador also launched a program, based on bitcoin, with the aim of granting financing to small and medium-sized companies in the country.
The micro and small businesses with funds in bitcoin, can access loans to cover their liquidity needs or promote new projects that require investment.
On the other hand, the Salvadoran government has managed to keep inflation at bay. Last May it was announced that inflation slowed down between the months of March and April, going from 6.7% to 6.5%. Placing El Salvador as the third economy with the lowest year-on-year inflation rate in Central America for the month of April.
This result served as a clear response from Bukele to the financial organizations that predicted the failure of his bitcoin-focused monetary policy, as mentioned earlier in this report.
Thanks to the profits left by the rise in the price of bitcoin to the FIDEBITCOIN trust in October 2021, a public veterinary hospital was built, called Chivo Pets.
The pet medical facility has 12 offices and gives approximately 384 daily queries.The medical center is divided by stations, the hospitalization of cats or dogs and has four operating rooms.
With all the data and information that have emerged over the course of a year, it could be considered that it is too early to fully measure the impact of bitcoin in El Salvador. Garaybelieves that the future will be positive for El Salvadoralthough he prefers to be conservative.