Skip to content

Is El Salvador's Bitcoin Fantasy a Nightmare?

El Salvador is the first country to use Bitcoin as its official currency under Bukele, the self-described "coolest dictator in the world," A former publicist who wears baseball caps backward. "Our plan is simple," he explained. "We will create a haven of freedom as the world falls into tyranny."

The country's huge losses in cryptocurrencies have undermined dreams of a Bitcoin City. Bitcoin is described as a frictionless and empowering form of money that liberates users from bank regulations and national governments. According to sceptics, cryptocurrencies are a tool of kleptocrats and gangsters, environmentally monstrous energy consumption, and a digital Ponzi scheme whose eventual crash will disproportionately affect the poor.

Nayib Bukele's unveiling of images of a Bitcoin-shaped city in El Salvador, funded with a Bitcoin bond, with the currency's logo embedded in the central plaza, may or may not have boosted confidence. El Salvador was to become a mining hub and the first sovereign nation to link with Bitcoin.

Nevertheless, Bukele failed. Citizens of El Salvador don't adopt Bitcoin as the main currency. Instead, they prefer traditional financial methods. In addition, rating agencies consider Bitcoin to be a money-laundering tool. Cryptocurrency experts believe that El Salvador will be a disaster if Bukele continues to push the Bitcoin project. "The government's financial problems are not because of Bitcoin, but they have gotten worse because of Bitcoin," said Ricardo Castaneda, senior economist and country coordinator for El Salvador and Honduras at think tank Central American Institute for Fiscal Studies

El Salvador is the first country to use Bitcoin as its official currency under Bukele, the self-described "coolest dictator in the world," A former publicist who wears baseball caps backward. "Our plan is simple," he explained. "We will create a haven of freedom as the world falls into tyranny."

Though there are plenty of things to worry about in the city's location, has the news that the country has lost 45% of its cryptocurrency investments, and that it scores a CCC from Fitch, taken some shine off the president's vision? Are its bonds perceived as risky as those of war-torn Ukraine? Despite Bukele's talk of freedom, Amnesty International claims that his current state of emergency has resulted in "a perfect storm of human rights violations." The police and military have been rounding up suspected gang members using emergency powers that have removed the need for arrest warrants. Families and rights groups have criticized the arrests of many, including minors with no connections to gangs.

This wave of detentions is unprecedented among the 6.5 million people living in the country, which has suffered decades of violent crime caused by powerful gangs like Mara Salvatrucha (MS-13) and Barrio 18. Thirty-one thousand five hundred suspected gangsters have been arrested so far.

The president himself isn't worried a bit about the recent crash. He says he knows the market and that El Salvador has not lost unless it sells. If you have computer-generated images of a fantasy city to distract you, then why worry about any of this?

Latest