It has been exactly one year since El Salvador's President Nayib Bukele declared the Bitcoin Act effective on September 7, 2021. It's been a long year for Bitcoin.
As of September 8, Bitcoin had fallen to near $19,000. Back in July, the Salvadoran government lost an estimated $59 million on its bitcoin purchases. As the country has held off selling, losses have continued to mount.
Last week, Nobel Prize-winning economist Steve Hanke said on social media, "As I predicted, El Salvador's BTC experiment has been a complete failure. Only 1.6 percent of remittances are made with BTC, 80 percent of Salvadoran businesses refuse to accept BTC, President Bukele's investment in BTC has plummeted 52 percent, and ELSL bonds have collapsed."
The much-questioned Bitcoin Act
In an article last year, the company explained El Salvador's Bitcoin law. The bill designates bitcoin as legal tender and makes it legal tender in the country alongside the U.S. dollar 39bet-xì dách-phỏm miền bắc-tiến lên miền bắc-xóc đĩa-game bắn cá. This means that, in principle, shops cannot refuse customers who wish to pay in bitcoin, while citizens of the country can also pay taxes in Bitcoin. For more details, see the Bitcoin Law, which took effect today. Will El Salvador be a hot potato or a hot potato?
However, the implementation of the law has been repeatedly questioned. Since its introduction, several co-founders in the crypto community, including Ethereum founder Vgod, have criticized Section 7 of the bill, saying it goes against the ideals of freedom. In a recent interview, Bukele clarified that the rule only applies to large companies and that small merchants can do whatever they want. The law has not even been enforced, nor is there any plan to do so any time soon.
According to a report published by El Salvador's Chamber of Commerce in March, only 14% of companies surveyed have accepted bitcoin payments since it became legal tender. A survey of 1,800 households by the National Bureau of Economic Research (NBER) found that only 5% used bitcoin to pay taxes. In terms of remittances, according to Bitcoin Magazine, citizens in El Salvador received $52 million in remittances through Chivo wallets between January and May. Bitcoin accounted for just 1.7 per cent of foreign remittances between January and July, according to El Salvador's central bank. Remember, data show that remittances from abroad in El Salvador account for about 20 percent of gross domestic product and up to $6 billion a year in international remittances.
The main reason is that although the Chivo wallet, which was highly recommended by the Salvadoran government, was initially introduced to 2.1 million people by "throwing money at them", it turns out that many people immediately converted their bitcoins into dollars and stopped using the App after receiving $30 in bitcoins.
Another major reason for skepticism is that the adoption of Bitcoin is frowned upon by international financial organizations. The International Monetary Fund has judged El Salvador's move to adopt bitcoin as legal tender to undermine financial stability. Negotiations on a new $1.3 billion loan for the country are also at an impasse. The IMF has been urging El Salvador to repeal the Bitcoin Act.
And El Salvador's original intention of adopting Bitcoin -- resisting the hegemony of the dollar -- has had little effect. El Salvador's total debt is now close to 90% of GDP, and an American credit rating agency has downgraded its credit rating to a very low level of default.
A Bitcoin bond that can't be conjured up
According to Fortune last month, Paolo Ardoino, chief technology officer of Bitfinex and Tether, said in an interview that El Salvador's Bitcoin bond will be further delayed until later this year. Paolo Ardoino said it was expected to take another two to three months to formally launch the bonds if the legislation necessary to issue the bonds can be passed in September.
Bukele first announced it would launch a Bitcoin bond in November 2021. The project raised $1 billion from investors, half of which was used to finance infrastructure projects and the other half to buy bitcoin, and Bitfinex was selected as the sole exchange platform provider. Although the bond's launch was originally scheduled for early 2022, El Salvador's finance minister pushed it back to mid-March, and the timing was pushed back indefinitely as bitcoin prices plunged.
Tourism has been the biggest beneficiary
But its implementation has not been without success.
Since El Salvador adopted bitcoin as legal tender, 59 cryptocurrency and blockchain companies have registered offices in the country, partly attracting tech start-ups in the crypto sector.
Also receiving positive feedback was travel. When it was announced in Bitcoin last November, it attracted a lot of attention from both coin and non-coin people. Late last month, Bukele said the government would spend a total of more than $203 million on infrastructure for El Zonte Bitcoin Beach, including new drainage systems, bridges and bike paths, among other things. The government will delineate 15,000 square meters for a shopping mall, parking lots, a beach club and a treatment plant to revitalize El Zonte.
In addition, Bukele attributes the country's tourism industry's return to pre-Covid-19 levels to three factors: fighting gangs, surfing and bitcoin. In April, Salvadoran Tourism Minister Morena Valdez said the adoption of bitcoin as legal tender had helped the industry grow by 30%.
In another important role, the little-known El Salvador, or Nayib Bukele, its president, has gained international fame.
Nayib Bukele's Twitter and Facebook followers are booming, especially in the crypto industry. For more details, see El Salvador's Bitcoin tax Haven? The president, who calls himself Alexander the Great, announces plans for Butte.