Is El Salvador’s Great Bitcoin Experiment Booming or Just Getting Started?

Bitcoin (CRYPTO: BTC) and El Salvador made global headlines in June 2021, when the Central American nation announced it would make the crypto legal tender.

It became the first country in the world to do so.

(The Central African Republic followed suit in May of this year, becoming the second nation to adopt BTC as a nationally recognized currency.)

Bitcoin adoption became official on September 7 last year. At the time, El Salvador’s flamboyant president Nayib Bukele stated that the symbol would change his nation for the better.

And in the first few months, the Bitcoin price continued to climb, trading at an all-time high of $68,790 on November 10.

But you’re probably aware of the crash that’s happened since. BTC is currently trading at $19,864, down 71% from its highs.

Is El Salvador’s Bitcoin Adoption Staggering?

The big price drops of the past 10 months certainly haven’t spurred Salvadorans to rush to embrace the crypto instead of the US dollar, which remains the currency of choice.

As for the future of the country’s grand crypto experiment, it depends on who you ask.

El Salvador’s former central bank governor Carlos Acevedo is decidedly on the exuberant side.

According to Acevedo (courtesy of Bloomberg):

Nobody really talks about Bitcoin here anymore. It has sort of been forgotten. I don’t know if you would call it a failure, but it certainly hasn’t been a success… In El Salvador we have a good payment network, so why transfer money with cryptocurrency?

Only around 2% of transfers have been sent from crypto wallets, according to the central bank.

A poll conducted by the Universidad Centroamericana also found less than stellar support for Bitcoin in everyday use.

“If you go to a market in El Salvador, you’re more likely to get an insult than to be able to buy something in Bitcoin. It’s not part of people’s daily routine,” said director of the university’s public opinion institute Laura Andrade.

On top of less-than-hoped-for adoption rates, the government’s introduction of Bitcoin as legal tender has also led the International Monetary Fund to delay approval of a $1.3 billion program.

Chief Operating Officer of Torino Capital Fabiano Borsato said (quoted by Bloomberg):

The Bitcoin experiment promoted by the Bukele administration has significantly raised the market’s risk perception of the country. It is being implemented in a context of fragile public finances, high and persistent fiscal deficits and doubts about the rule of law in the country.

In our opinion, this will prevent El Salvador from gaining access to financing in the international markets under favorable conditions in the short and medium term.

Or is BTC adoption just getting started?

Not everyone agrees that the great crypto experiment is a flop.

El Salvador’s digital wallet, Chivo, has more than four million users, according to Finance Minister Alejandro Zelaya. And he says it is fostering a rapid upswing in tourism and drawing in international blockchain companies.

And the government still intends to issue its Bitcoin-backed bond, the so-called “volcano token”.

Bitfinex chief technology officer Paolo Ardoino is also among the proponents of El Salvador’s crypto embrace.

“Assuming that cars were a failure because after the very first year Ford started production in 1896, no more than 2% of the population would have owned a car which would have been pretty nearsighted,” he said.

Ardoino added: “The government has a long-term vision. The crypto industry is high-tech, and it’s the kind of industry that everyone should want in their country.”

And Bank to the Future founder Simon Dixon disagrees that adoption levels are low after visiting the country last month.

According to Dixon (cited by Bloomberg):

I don’t see adoption as low. I see a country where everyone has a Bitcoin wallet and everyone knows what Bitcoin is. This is the first time I’ve ever encountered a government that has a president who has put together a team that really operates with the urgency and impact of a fast-growing company.

Shower or just take off?

Time will tell.