El Salvador’s Bitcoin plan is fraught with difficulties and will be a long process

In 2021, El Salvador made headlines by becoming the first country to adopt Bitcoin (BTC) as legal tender, defying warnings from the International Monetary Fund (IMF). President Nayib Bukele's bold move, announced just three months prior to implementation, allowed Salvadorans to claim $30 in free Bitcoin through the government’s Chivo app, and the country began accumulating BTC for its reserves. This marked a seismic shift for the small Central American nation and for Bitcoin enthusiasts who saw it as a step towards mainstream adoption.

El Salvador’s Bitcoin Plan Faces Difficulties

However, the journey has not been without challenges. El Salvador has faced a tough bear market, with Bitcoin losing 75% of its value at one point. Moreover, Bukele's focus shifted towards a harsh crackdown on gang violence, raising humanitarian concerns and sidelining his crypto agenda. The Bitcoin initiative, which initially created buzz, saw reduced enthusiasm as adoption lagged and the price of BTC fluctuated.

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A study by Yale School of Management revealed that while awareness of the Chivo app was high, most Salvadorans stopped using it after spending their initial bonus. Contrary to assumptions that Bitcoin's volatility would deter users, the main concern among Salvadorans was the lack of anonymity.

In a candid interview with Time magazine in August 2023, Bukele admitted that Bitcoin had not achieved the widespread adoption he had hoped for but argued that it had brought benefits like increased investment, tourism, and global attention. He pointed out that those who saved in Bitcoin since its launch likely profited, especially with BTC regaining value thanks to institutional interest in Bitcoin ETFs.

El Salvador’s Bitcoin Plan Is a Long-Term Process

Samson Mow, CEO of JAN3 and a key player in El Salvador's Bitcoin initiatives, graded the country's efforts as a B+. He acknowledged the challenges in educating the public on Bitcoin's benefits but stressed that adoption is a long-term process. Mow emphasized the importance of patience, likening Bitcoin adoption to a marathon rather than a sprint.

Looking ahead, El Salvador continues to accumulate Bitcoin, adding 1 BTC daily to its reserves, which now total 5,865 BTC, valued at $320 million. Mow suggests the next step should be to educate Salvadorans on Bitcoin's practical applications, particularly in areas like remittances, which are crucial for the country's economy. Bitcoin can offer a cheaper, faster alternative to traditional money transfer services, potentially benefiting local economies by reducing transaction fees and speeding up transfers.

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Despite the modest progress, Mow remains optimistic that other nations will follow El Salvador's lead in adopting Bitcoin, viewing the country's experience as a valuable case study for financial sovereignty and economic empowerment.

With Bukele in power until 2029, El Salvador’s Bitcoin experiment is far from over. While the president enjoys strong approval ratings, it remains to be seen whether his vision for crypto will ultimately resonate with the Salvadoran people.