On September 7, 2021, El Salvador’s President Nayib Bukele made history by declaring the world’s first cryptocurrency, Bitcoin (BTC), as an official legal tender in his country. However, this bold initiative has not delivered the anticipated results. While El Salvador became the first nation to recognize Bitcoin and its economic potential, Bukele has since admitted that “the experiment did not go as planned.” Let’s explore what went wrong and whether Bitcoin still holds promise for the Salvadoran economy.
The Adoption of the Bitcoin Law
In June 2021, Bukele proposed a new law that, once enacted, would make Bitcoin a legal form of payment and require all businesses and marketplaces in the country to accept it, provided they had the necessary technical capabilities. The "Bitcoin Law" received backing in the Legislative Assembly, and soon after, it took effect, making El Salvador the first country in the world to take such a step.
Congressman Chris Guevara described this decision as the most significant of the legislative session, and the president repeatedly emphasized that Salvadorans would reap considerable benefits from it.
Despite the government's ambitious plans, the majority of Salvadorans remained indifferent to the initiative. This is evident from the results observed three years into the experiment. Bukele had hoped that his small Central American nation would embrace the new technology with enthusiasm, just as he did as a “leader of the millennial generation.” However, for many people preoccupied with their own economic issues, Bitcoin’s high volatility proved less appealing than the more stable US dollar, which remains the country’s only currency.
Criticism of Nayib Bukele’s Crypto Enthusiasm
The precedent of officially adopting Bitcoin in El Salvador naturally stirred global interest. Many financial experts and analysts from various countries began discussing the event, trying to view it through the lens of their respective economies. Not only Bukele's actions but also his character came under scrutiny.
The legalization of Bitcoin coincided with a bearish trend in 2021 when the price of the leading cryptocurrency fell to a low of $15,476, leaving El Salvador’s investments deeply in the red.
A theory emerged suggesting that the introduction of cryptocurrencies was little more than a publicity stunt with minimal real benefits for the country. El Salvador still faces more traditional economic challenges, and some experts, including the World Bank and the International Monetary Fund (IMF), argue that adding a DeFi sector is impractical. Bukele believes that while the experiment did not yield the expected outcomes, it at least did not harm the country.
Nayib Bukele became the President of El Salvador in 2019 and quickly gained a reputation as a dynamic, ambitious, and progressive leader focused on benefiting his citizens. Under his leadership, the country has seen a reduction in crime rates, due to a large-scale campaign aimed at dismantling violent street gangs, which resulted in the arrest of approximately 1% of the population.
Positive Assessment of Bukele’s Policies
El Salvador's decision has encouraged other nations to consider adopting cryptocurrencies as legal tender. For instance, in April 2022, the Central African Republic became the second country to legalize Bitcoin as an official payment method, and in the summer of 2023, the United Kingdom approved a bill permitting stablecoins.
In the European Union, cryptocurrencies are recognized as assets and are legally used in payment transactions, although their official status as a payment method remains uncertain.
Conclusion
Despite the lukewarm response from the public, President Bukele remains optimistic about promoting cryptocurrencies. In an interview with TIME magazine, he stated that the use of digital assets is voluntary, and individuals are free to choose what they need at any given moment.
“We have always taken pride in being a free country, free in every sense,” Bukele added.
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Crypto and the Rise of Digital Nomads” and “Solana vs Avalanche: Which Crypto Offers Better Profits?”.
