Bitcoin: the story of the country where you can buy anything with this currency

In El Salvador you can buy and buy almost anything, from trinkets and tacos to gasoline and even homes with Bitcoin. Buying with cryptocurrency from street vendors and large retail chains is a wonderful experience.

It shows how far bitcoin has come since it was invented on internet forums in 2008.

President Najib Boukeleh’s decision to legalize cryptocurrency means that in theory it must now be accepted by all companies along with El Salvador’s other currency, the US dollar.

But the recent collapse of cryptocurrencies has raised more questions about this policy, especially with the use of nearly $ 100 million in public funds to buy bitcoin, and the president celebrated each purchase with a tweet on his Twitter account.

(The BBC is not responsible for the content of external websites)

El Salvador has 2,300 bitcoins that are currently worth half of what the government paid for them, but the finance minister shrugged off the criticism, saying there was “very little financial risk”.

Zonte, a small town on the south coast known for its fishing and surfing, is where the Bitcoin movement began in El Salvador. In that small town, an anonymous donor made the first donation of bitcoin to a group of crypto enthusiasts in 2019.

No one admits he knows who he or she is, but the agreement was that the city could keep the cryptocurrency provided it was not converted into dollars.

The idea was to create the world’s first circular Bitcoin economy where people could pay with Bitcoin, an online cash system, and rely on this economy.

It was a radical idea where Bitcoin could be used for online purchases in the rest of the world, but with the exception of a small number of trendy coffee shops or one-off projects, it was not possible to use Bitcoin in Main Street.

The city of Zonte has so far received $ 350,000 from the anonymous donor, a large sum for this beautiful but dilapidated city, now also known as Bitcoin Beach.

Caterina Contreras was one of the first beneficiaries.

Two years ago, during the pandemic, she was offered a drowning rescue course, and it seemed like a good deal, as regulators paid for the transportation of the students and food in bitcoin.

“After that, we worked as marine lifeguards for 6 months and were paid in bitcoin,” she says.

Some businesses in the city say they have seen a 30 percent increase in trading as bitcoin tourists, spurred on by crypto lovers’ YouTube channels, are attracted to spend their crypto currency on vacation.

However, the adjustment to Bitcoin is still incomplete. My travels have led me to conclude that the further away from the bitcoin coast, the less likely you are to be able to buy things with digital currency.

At Bitcoin Beach, I accepted a little over half of the businesses I traded in Bitcoin, but when I drove 80 minutes north to the capital, San Salvador, that number dropped to about a quarter.

The government says it has no plans to force companies to accept bitcoin, although it must do so by law. The government has so far been limited to providing incentives.

Cash is still almost the norm here where more than half of Salvadorans do not have a bank account, but the president and his proxy have poured $ 200 million in public funds into a supported bitcoin wallet app called Chivo.

Anyone who downloads the application receives $ 30 in bitcoin to sign up, which may explain why 4 million people download the application in a country of 6.5 million people.

But many people use the application to do transactions in dollars and not bitcoins. It is often used in this way, for example by people working abroad and sending money to their families at home as there is no commission or transfer fee.

There are indications that after the initial interest coupled with increased use, people are now using Chivu less.

And late last February, another incentive to use it appeared with the opening of the most advanced veterinary hospital in the country.

Large queues are common with people and pets queuing for their appointments because animal care, including complex operations, costs only 25 cents as long as it is paid for using the Chevu application, preferably in bitcoin.

Employees say the center receives the fees through “bitcoin earnings,” but government officials have not responded to requests to explain how the earnings are generated.

The International Monetary Fund has urged El Salvador to reverse its decision to legalize bitcoin, arguing that it is too volatile, and local economists such as Tatiana Marroquin are increasingly concerned.

She says the government does not have enough money to help the weak, so it should not run the risk of pumping public money into cryptocurrencies.

She also adds that there is a lack of transparency.

“We do not know exactly when or with what money they bought bitcoins,” she said.

But Tourism Minister Morena Valdez is urging Salvadorans to trust the president in his agent, despite the decline in the value of Bitcoin.

“We know every decision of the president is made at the right time, and people have a lot of faith in his decisions and in how the country’s economy is doing,” she said.

Other countries are believed to have considered following El Salvador’s example before the latest collapse began last May, but only the Central African Republic did.

Central African President Faustin-Archange Touadera announced the move on his Twitter account, describing Bitcoin as a “global currency”.

(The BBC is not responsible for the content of external websites)

El Salvador now wants to move on. The president and his agent have announced plans to build a new city, Bitcoin City, at the foot of a volcano that will provide geothermal energy and power a giant Bitcoin mine.

He hopes to raise funds by selling $ 1 billion worth of volcanic bonds, which have not yet appeared, although they would be offered for sale in March.

El Salvador officials say they are confident they will be able to raise the money and pay the looming $ 800 million in foreign debt.

But the collapse of the crypto-currency is increasing the pressure on this government, which is still betting heavily on Bitcoin.