The Bitcoin Law in El Salvador has served to safeguard the Central American country from inflation and has encouraged some disruptive initiatives.
On September 7, 2021, the Bitcoin Law officially came into force in El Salvador, becoming the first country in the world to adopt a cryptocurrency as legal tender.
From that moment on, merchants, companies and citizens of the country had to accept Bitcoin as a form of payment for their products or services. Along with the measure, the government of Nayib Bukele also implemented the Chivo electronic wallet, which automatically converted Bitcoin into dollars and offered 30 dollars to all Salvadorans to download it.
The Bitcoin Law was met with frontal opposition from a portion of Salvadorans, as well as from some of the main international institutions, such as the International Monetary Fund, which has harshly criticized the measure on several occasions, going so far as to threaten not to buy El Salvador's debt.
Now that the Bitcoin Law has been in effect for a year, let's review how El Salvador has fared during this time.
How many Bitcoin has El Salvador bought?
Since September 6, 2021, when Nayib Bukele announced the first purchase of 200 Bitcoins, The Central American country has made more than 11 purchases and it is estimated that, in total, it will have bought more than 2.381 BTC.
The last purchase took place on June 30, 2022, when El Salvador acquired 80 BTC at an average ticket of $ 19.000 each.
Bitcoin Beach a world hub for BTC fans
Nayib Bukele's Bitcoin Law did not appear out of nowhere. Before the president presented his Draft Bill in June 2021, Bitcoin Beach was already a phenomenon around the world and, in fact, it was the international success of this space that inspired President Bukele to draft his law.
Bitcoin Beach is the name that has been given for some time to the El Zonte beach, a small fishing village, which has been transformed into an international hub for surfing and Bitcoin lovers.
In 2019, an anonymous donor made the first of many large Bitcoin donations to a group of local fans, with one condition: They couldn't convert Bitcoins into dollarsThe idea was to create the world's first circular economy based on BTC. Thus, the small fishing village became Bitcoin Beach.
Since then, Bitcoin Beach has been the scene of some of the biggest cryptocurrency-related events and a meeting point for the entire community. Since its creation, it has positioned itself as a project that brings together the most talent, that continues to grow and that helps other projects to develop.
El Salvador a pioneer country
Despite harsh criticism from institutions, especially the IMF, the Bitcoin Law of El Salvador It is a pioneering movement in the world. The nation has become the first to adopt a cryptocurrency as legal tender, sparking the interest of other nations, such as Central African Republic, who have followed in their footsteps.
Another common criticism of the Bukele government and the Bitcoin Law is the fact that the price of Bitcoin has fallen and caused the Salvadoran government's investment to be "worth less." However, as the country's Finance Minister Alejandro Zalay has pointed out, Until Bitcoin holdings are sold, El Salvador will not have actually lost anything.
The Central American nation has been one of the few that has avoided rising inflation, in as much as has stopped printing banknotes, focusing on Bitcoin investments. In fact, while some neighboring countries, such as Panama or Ecuador, are mired in revolts, El Salvador has invested part of the profits from its Bitcoin purchases in the creation of a veterinary Hospital.
Even with the crypto market crashing over the summer, the Bitcoin Law has been beneficial for El Salvador, at least from an economic standpoint. As stated by the Minister of Tourism, the influx of international tourists to the country has grown by 82% during the first half of 2022, as has foreign investment.
The bad part of the Bitcoin Law in El Salvador
On the other hand, a year ago, when El Salvador bought its first 200 Bitcoins, it did so at around $46.000 each; now the market is well below this price, which has caused the Bukele government some headaches.
The main one has been the Continuous delay of the so-called “Volcano Bonds” that El Salvador wanted to launch a few months ago. These bonds were designed to finance the operation and implementation of the Bitcoin Law.
The “Volcano Bonds” would be like any national debt bond, only they would be backed by Bitcoin, rather than any other legal tender. These bonds will have a $ 1.000 million value and should have been launched before the second half of 2022.
However, due to “extreme market conditions"The launch of these bonds has been delayed. Alejandro Zalaya, the country's finance minister, recently said that "the right moment is being awaited for the issuance of bonds" and that there are already "interested buyers."
During this year, President Bukele presented the idea of a “Bitcoin City”, the world's first Bitcoin city to be built with money raised by "Volcano Bonds." The city is to be self-sufficient, thanks to Bitcoin mining powered by the volcano's geothermal energy, at the foot of which the city is planned to be built.
Despite the initial euphoria, the project has also been delayed as the bonds that are to be used to finance the construction have not yet been issued.
What is the summary of the first year of the Bitcoin Law?
With its ups and downs, overall, El Salvador's Bitcoin Law has been a beneficial initiative for the country. Not only has it allowed it to escape the inflation problems suffered by its neighbors, but it has also managed to increase foreign investment.
Although the criticisms that claim that it is a “failed project” focus on the fact that Bitcoin has lost much of its value, the truth is that The benefits that the law has had for the country go beyond the value of the cryptocurrencyFor example, the Central Bank of El Salvador has reported that more than $50 million in remittances have been received between January and May 2022, which represents a large increase, thanks to the fact that transactions are cheaper.
Finally, it should be noted that El Salvador is a testing ground for the Innovation in Bitcoin and Lightning NetworkIn this way, the country becomes a perfect place to safely experiment with new applications that will allow building an ecosystem of proven and interconnected trust services.
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