In autumn 2021, El Salvador introduced Bitcoin as its national currency. The journalist Sandra Weiss knows where things stand now.
Journalist in Mexico
Born in Germany, she has been living and working as a journalist in Latin America since 1999. From there she reports for various German-language media.
SRF News: To what extent has Bitcoin arrived in everyday life in Salvador?
Sandra Weiss: In order to make Bitcoin popular, every citizen could open a virtual wallet with a $30 Bitcoin balance on it. About 60 percent of the population took part, but according to a survey, most of them only picked up the $30. Around 5 percent of all financial transactions in El Salvador now take place in Bitcoin.
President Nayib Bukele announced the world’s first “Bitcoin City” a few months ago. Where are you standing?
The plans for the very futuristic city are in place, and construction is to be financed by a Bitcoin bond. However, the publication of such was canceled for the time being by the recent Bitcoin crash. Therefore, the construction of the city is currently in the stars.
Are the price losses noticeable in the real economy? After all, Bitcoin has lost more than half of its value since it was introduced as a means of payment in El Salvador…
The problem is the lack of transparency in El Salvador. President Bukele controls all state powers and gags the press. That’s why nobody knows exactly how many bitcoins the country owns. The central bank is not responsible for their purchase, but the president himself – he buys them and announces this via Twitter.
President Bukele buys the Bitcoin himself and announces this via Twitter.
According to this, Bukele has invested around 400 million dollars in Bitcoin so far and has suffered correspondingly large losses. As a result, there is a big hole in the state budget and some areas, such as health care, have to make do with less money. The next Eurobonds are due to be repaid in January 2023 – and it is unclear how Bukele will do this. There is a risk of national bankruptcy.
The Bitcoin experiment was a risk from the start, and there were appropriate warnings. Is Bukele a player?
At first there was a real Bitcoin hype, especially in the surfing cities on the Pacific, where Americans live, who introduced Bitcoin there, which also benefited young locals. But the majority of the population is very skeptical about Bitcoin and many consider the experiment to be a whim of the president.
How is Bukele now received by the people?
He sells himself as a visionary and a doer, someone very different from traditional politicians. That goes down well with the population: 80 percent support him, even though he governs in an authoritarian manner.
And if the price decline continues, the country faces a financial crisis or even national bankruptcy.
However, Bitcoin is a topic that the population has not really followed. In the meantime there have also been several demonstrations against Bitcoin. And if the price decline continues, the country faces a financial crisis or even national bankruptcy – with the corresponding economic upheavals. In that case, Bukele’s re-election in 2024 would be threatened.
The dollar has been the official means of payment in El Salvador since 2001 – and Bitcoin since last fall. Could this soon become the only national currency?
Bukele’s plans are very unclear, one does not get the impression that he is planning for the long term. He, too, has probably noticed how high-risk the investment in Bitcoin is. It is therefore unlikely that Bitcoin will completely replace the dollar.
The conversation was conducted by Roger Brändlin.