A Week of Failing To Pay With Bitcoin in El Salvador

The country claims to be a leader in crypto transactions. But you can't force people to take a currency they don't want.

When President Nayib Bukele promised that bitcoin would be accepted everywhere in El Salvador, it seemed like a glimpse into the future—a world where cryptocurrency would be woven into everyday life. But after a week there, I found a different reality. Not a single business accepted my bitcoin. 

In September 2021, El Salvador became the world's first country to adopt bitcoin as legal tender alongside the U.S. dollar. The vision was ambitious: According to Bukele, bitcoin would "improve the lives and the future of millions," making it easier to access financial services where traditional banking is often out of reach. 

To incentivize adoption, the government launched the Chivo wallet app, offering $30 in bitcoin to anyone who signed up. Bitcoin ATMs popped up nationwide and plans were announced for Bitcoin City, a tax-free, bitcoin-powered metropolis fueled by geothermal energy from a volcano. El Salvador was on its way to become a global crypto hub.

Yet my trip to El Salvador revealed a gap between the promise and the reality. At restaurants, hotels, and shops, my attempts to pay with bitcoin were met with confusion or outright rejection. Despite a 2021 law requiring businesses to accept bitcoin, every establishment I visited turned it down. Instead, I received puzzled looks from waiters, clerks, and cashiers who seemed more perplexed than prepared. 

A recent survey conducted by Francisco Gavidia University in San Salvador found that 92 percent of Salvadorans don't use bitcoin. This marks an increase from the 88 percent found in a similar study conducted by the Central American University, San Salvador last year.

Some locals shared their reasons for opting out. At Lake Coatepeque, one waiter told me he skipped downloading the app entirely because he "didn't want to give his personal information to the government." In Santa Ana, another waiter said he wasn't interested in bitcoin because he "didn't understand how it worked" and had "no intention of learning." Others admitted they were scared by the technical glitches in the Chivo wallet. 

In fact, only about 20 percent of citizens downloaded Chivo wallet and claimed the $30 in bitcoin bonus—a surprisingly low rate given the allure of free bitcoin. (As a Salvadoran citizen myself, I couldn't resist.)

Despite low adoption rates, Bukele remains committed to his vision, continually growing El Salvador's bitcoin holdings. Currently, the country holds around 6,000 bitcoin and has plans to buy more. 

Yet when the Francisco Gavidia University survey asked respondents "what should be the main focus for the future of the country," only 1.3 percent responded "bitcoin." 

Meanwhile, the International Monetary Fund has voiced concerns about the country's bitcoin experiment. "What [IMF] has recommended is a narrowing of the scope of the bitcoin law, strengthening the regulatory framework and oversight of the bitcoin ecosystem, and limiting the public sector exposure to bitcoin," said Julie Kozack, the IMF's director of the communications department.

Bitcoin usage might be more prevalent in the capital or in crypto hotspots like Bitcoin Beach, but elsewhere adoption remains limited. For now, Bukele's bitcoin revolution feels more like a distant vision than a daily reality for most Salvadorans. 

Comments

[Overt]

""What [IMF] has recommended is a narrowing of the scope of the bitcoin law, strengthening the regulatory framework and oversight of the bitcoin ecosystem, and limiting the public sector exposure to bitcoin," said Julie Kozack, the IMF's director of the communications department, "

Translated: The best thing for the public is for them to not use bitcoin. Please stay pegged to the dollar so that Americans can get the most purchasing power possible from their inflato-bucks.

[mad.casual]

Please stay pegged to the dollar so that American Feds can get the most purchasing power possible from their inflato-bucks.

FIFY

IDK what all the Kriegsgeld, Notgeld, and Reichsmarks are doing to the value of your Papierenmark, but it seems like Americans aren’t specifically or directly/exclusively enjoying all the spoils of “their” inflato-bucks.

[Overt]

The Feds- well the banks- as the first blokes in line with new cash get the maximum purchasing power. The dollars then go to corporations that use this easy money to buy shit and pay staff. Of course if everything were made here in the United States, then when trying to buy new shit, inflation would happen quickly and so the prices of everything would go up much quicker.

So we buy all our shit from the developing world where those inflato-bucks haven’t quite filled their economy. And by the time THOSE people get the dollars, well, they are worth far less. Sucks if they want anything that the 1st World is producing because they were paid at last month’s purchasing power, which is…alas…less.

Without globalism, the average workers would be less tolerant of inflation because so much of what they consume would rise in price about the time they get their paycheck. But with the lag of the Cantillon Effect, workers get to benefit off the developing world's unadjusted labor, just as their employers get to benefit off THEIR unadjusted labor.

[shadydave]

I realize this will get me thrown out of the Libertarian Party, but I'm just not feeling it with crypto. I mean I get it as a means to make transactions while avoiding government snooping and intervention from global tyrants, but that's gonna be really hard to sustain (the IRS already is coming for bitcoin income) and it is otherwise not naturally very good as a form of currency.

Even with all of the nonsense that's been tried with gold and silver and the scams and the fraud and so on, the long term view of its track record in terms of its worth (IE, what things cost in gold in 1950 are roughly what they cost in gold now) is pretty darned good.

[Zeb]

I tend to agree that it's not a very good replacement for currency. The tech has a lot of potential for helping to do things both anonymously and securely, though. It could, for example, be applied to voting so that people could check that their votes were properly counted without allowing others to know how they voted.

[Overt]

For good or worse, things shouldn't cost "about the same" today as they did one hundred years ago. They SHOULD be less. That cup of coffee is orders of magnitude easier to produce today, than when it was sourced 100 years ago.

That aside, I have reservations about Bitcoin because:

1) It is a depreciating currency. I think that it is definitely better than an inflationary currency, but bitcoin maxis definitely understate the problems with deflationary currencies.

2) It in fact does NOT make it easier to avoid government snooping. The blockchain is fully public, and once the government has identified an owner, they can track their purchases relatively easily. There are ways to mitigate this however.

3) The government has waged a cold war on cryptocurrency by forcing Know Your Customer laws on exchanges, which also can mean that the government can confiscate that bitcoin (as long as it is held in a custodial exchange).

4) Much of the hype around crypto is driven by speculators. Good currencies should be poor speculation vehicles because a key desired feature of currency is stability. If Bitcoin were ever a stable currency that would be a disaster for the speculators and their message that HODLing should make you rich.

All that said, none of these are intrinsic deal-breakers. Every one of them is fixable with basic innovation and human action.

If you think about it fiat money is just paper, and bitcoin is just digits. They are ephemeral. The only reason people use the Dollar is that they trust the government can keep the currency stable, and that they will be able to easily spend it. These are both examples of human perception.

Now you might think that no one will ever trust crypto-currencies, but I would have never thought that more than 2/3rds of our country would support gay marriage- let alone that opinions would drastically change over a period of a couple years. That's the way preference cascades work, and since a currency's attractiveness also depends on others' using it, they are very susceptible to such cascades.

[JFree]

If you think about it fiat money is just paper, and bitcoin is just digits. They are ephemeral. The only reason people use the Dollar is that they trust the government can keep the currency stable, and that they will be able to easily spend it. These are both examples of human perception.

Fiat money is not just 'paper'. It (the FR version of it - whether paper or digital) is based on the value of outstanding loans in the banking system. The reason people use the FR dollar is because bank loans use that currency to pay off loans - meaning those lenders will always demand that specific currency.

The biggest flaw with bitcoin is that very few are ever going to be interested in borrowing it for any real world purpose. The volatility is way more extreme than anything that might happen in the real world so a borrower would incur all that risk for no real world value at all. Bitcoin is a model of money that is based on barter - which almost never existed as money.

[mad.casual]

All that said, none of these are intrinsic deal-breakers. Every one of them is fixable with basic innovation and human action.

This is the most retarded aspect of everything you said. “With enough innovation and human action you can overcome how far you set yourself back technologically. Sure, it only fires on half the cylinders and it’s only got three wheels, but with a lot of elbow grease and some gumption, you could get it running nearly, mostly as well as anything you’d buy off someone else’s lot for a few percentages more!”

Get a load of the ad-guy totally not acting like a fiat telling me what is and isn’t deal breakers about his currency!

Now you might think that no one will ever trust crypto-currencies, but I would have never thought that more than 2/3rds of our country would support gay marriage- let alone that opinions would drastically change over a period of a couple years.

Talk about desperation and idiotic lack of awareness or foresight. You’re shooting yourself in the dick here. Have you not gotten the new scripts yet? Hitching your revolutionary political cause to the LGBTQIA+ diversity parade is out. Until the new script comes out, just go back to telling men that crypto attracts women and makes their junk look big and telling women that crypto makes them seem more independent and self-empowered and that, with the security of crypto, they wouldn’t need men in their lives.

If you move enough crypto via the Reason forums, do you get a free toaster?

[Don't look at me!]

This is surprising. El Salvador is on the top of the list when you think of high tech countries, no?

[JFree]

bitcoin will never be a currency. maybe a store of value for tech bros but that's it. ethereum at least has the basis of currency at its core - a contract - so it can be the basis for a loan which is the origin of money. But the entire blockchain space is basically kind of a scam. No one in it has had any interest in use cases - not for at least the last decade - only in day trading and technical analysis and other Wall St shit.

[Rick James]

It is useful in moving money across borders outside the purview of governments. What I don't know is what exchange will allow you to cash out large amounts. I've tried to research this, but everything I find indicates that if you're moving a few thousand bucks, most mainstream exchanges can handle that. If you get into the large denominations, like 100s of thousands, or millions, most won't handle transactions that large. I don't know how the cartels do it, because apparently they're heavy users of bitcoin and other crypto.

[MWAocdoc]

If the US government offered me a bitcoin app and free bitcoin tomorrow, I would not download it either. The main reason anyone uses bitcoin now is to AVOID government tracking of their transactions. Also, there is a big difference between official digital currency and blockchain unofficial currency, which does not fool those savvy enough to understand digital currency in the first place. Cash transactions are still favored by a lot of people who aren’t particularly trying to keep their trades private. Having a piece of paper with a number on it that almost everyone accepts for trade is reassuring to a large number of us. And there is zero transactional overheard when cash changes hands, unlike the 3% typical for credit cards.

[Rick James]

Yet my trip to El Salvador revealed a gap between the promise and the reality.

This sentence sums up bitcoin writ large.

[But SkyNet is a Private Company]

Go to a foreign country and try to pay on baseball cards or beanie babies next time

[Medulla Oblongata]

But Kamalla has "a plan come up with rules for cryptocurrency and other digital assets; more than 20% of Black Americans own or have owned cryptocurrency assets", according to the campaign

[Vesicant]

Oh noes! The end of the world as we know it! Honey, cancel the cruise to El Salvador! We'll go to Haiti instead!

[diver64]

If the IMF is recommending against it then I can't think of a stronger argument for it.

[SIV]

I'm confused here. Does the Bitcoin ATM allow you to withdraw cash, or just load bitcoin onto the app? If Ms. Hall could easily exchange Bitcoin for cash at the ATM this article is like whining about businesses and individuals not accepting credit cards or processing transactions through payment apps. Cash Only, Katarina.

[jonnysage]

The opposite. The ATM lets you give your cash to the govt for bitcoin.

[jonnysage]

"Currently, the country holds around 6,000 bitcoin and has plans to buy more. "

And then suddenly no one could find the flash drive they were on, nor President Nayib Bukele...

[JonFrum]

I see a single commenter who seems to have a modicum of knowledge about bitcoin. That's one more than usual in these spaces.