Our reporter Tuomas Laine traveled to El Salvador for two weeks. His report will tell you how Bitcoin is used in El Salvador, what do the locals think about the reform, and is it worth traveling to the world’s first Bitcoin country?
El Salvador is a country plagued by violence and poverty
El Salvador is a small country in Central America. It has suffered from violence and poverty throughout its history. The civil war, which lasted from 1979 to 1992, has left deep scars on the nation. The country’s development has stalled in all areas.
It is estimated that four out of ten Salvadorians live on a daily budget of just over a dollar. Many young people leave the country and search for a better standard of living elsewhere.
One of the pillars of El Salvador’s economy is the remittance market. These remittances are more than 20% of the country’s GDP.
Despite its dark history, El Salvador has developed in the right direction in recent years. Nayib Bukele, who has been president since 2019, has pushed for a number of reforms to improve the economy and fight the violence.
The photo below: president Bukele was interviewed in Peter McCormack’s Follow The Money documentary.
There is a sense of optimism in the comments of many locals. Jorge, a lawyer who drives a taxi as a side job, finally sees the light at the end of the tunnel.
– President Bukele has cleared the streets of many criminals. Crimes are now punishable by law in El Salvador.
The services sector is economically important for El Salvador, but so far there have been few tourists. The gang violence has given El Salvador a dark reputation. The country’s capital, San Salvador, has been at the top of the world’s murder statistics.
However, thanks to the reforms, tourism is growing and flight connections are improving. From Europe, the easiest route to San Salvador is via New York or Miami. Connections to the surrounding Latin American countries are also excellent.
Bitcoin is legal tender in El Salvador
Until 2021, El Salvador’s official currency was the U.S. dollar. In June 2021, El Salvador’s Congress approved a bill to adopt Bitcoin as the country’s second official currency. The law came into force in September 2021.
One of the reasons for the Bitcoin reform is the remittance market. A large proportion of Salvadorians don’t have a bank account, which is the reason why services like Western Union are used for remittances. These intermediaries charge up to tens of percent in fees for money transfers.
Bitcoin’s Lightning Network enables Bitcoin transfers in real-time and at almost zero cost. See examples in the video below.
Antonio, who runs a guesthouse in the village of El Zonte, says Bitcoin has made life much easier for locals.
– Bitcoin is digitizing the economy of many Salvadorians and making payments easier. Large purchases caused problems earlier since payment cards are not accepted everywhere. It is difficult to get large amounts of cash from a bank, and there are always risks involved in holding it.
In the same breath, Antonio points out that Bitcoin will mostly help the younger population. Older people may not have access to smartphones or the internet. They might not have the necessary skills either. So far, Bitcoin is only serving part of the population.
Bitcoin transfers are made using a variety of different wallets. The most popular apps are Chivo, Strike, Bitcoin Beach, and the Wallet of Satoshi. The taxi driver Jorge introduces seven different wallets on his phone.
El Zonte is the starting point of the Bitcoin revolution
The Bitcoin revolution started in the coastal village of El Zonte. Located about an hour’s drive from San Salvador, El Zonte is particularly attractive to surfers. In the few run-down streets of the lively village are advertised equipment rentals, courses, and competitions.
El Zonte is also known as Bitcoin Beach. Guesthouses, kiosks, and fruit stalls prominently advertise that they accept cryptocurrency payments.
To learn more about the background of the Bitcoin revolution, check out the video below.
Restaurateur Tico has been following El Zonte’s Bitcoin development with joy. Tico says that Bitcoin is attracting cryptocurrency enthusiasts from all over the world. Many tourists have plenty of bitcoins to use. From the point of view of a smiling restaurateur, the trend is clearly positive.
– El Zonte used to be just a coastal village among others. Now, Bitcoin Beach is known around the world. Many tourists want to see and experience the starting point of the Bitcoin revolution.
The village has benefited from the Bitcoin income stream. Accommodation is expensive compared to the general price level in the country, and restaurant food is close to Nordic prices. There are services that tourists crave, from massages to visits to nearby coffee plantations.
Bitcoin caps and shirts can be spotted on the sunny beaches of El Zonte. Tico says there are numerous bitcoiners living in and around the village. They have also been buying the surrounding land. Tico is not worried about the plots ending up in foreign hands. A poor country like El Salvador welcomes all foreign investments.
Bitcoin payments are effortless in El Zonte. When paying, the seller places an amount in their own Lightning wallet. The buyer uses his wallet to read the QR code and accepts the payment. The funds are transferred without delay. The process is as fast as it would be with payment cards.
A week in El Zonte is just perfect. Though, you could get used to the laid-back lifestyle for longer. The hanging hammocks and fresh mangoes ready to be eaten right from the tree. No wonder so many crypto-rich come to enjoy life in El Zonte.
Bitcoin is less visible in San Salvador
The capital San Salvador is the heart of El Salvador’s economy. San Salvador and its surrounding areas are home to about 1.5 million people. The exact number is difficult to estimate, as a large part of the population lives outside the system.
San Salvador’s reputation is marred by violent gangs. Mara Salvatrucha and Barrio 18 have kept a tight grip on the capital. Criminal gangs fight violently in the working-class neighborhoods. It’s customary that downtown merchants pay protection money to the gangs.
The image below is from Peter McCormack’s Follow The Money documentary.
Bitcoin is much less prominent here than in El Zonte. Bitcoin stickers can only be seen in the windows of a few cafés. Though, Bitcoin is widely used as a payment method in San Salvador too. The Crowne Plaza hotel chosen by the reporter is an exception, with only dollars accepted at the reception.
There is one thing that makes Bitcoin visible on the streets of San Salvador. There are Chivo kiosks on almost every corner. Chivo is El Salvador’s national Bitcoin wallet. These branches offer guidance on how to use the wallet and Bitcoin ATMs are located in the shelters of these branches.
With the introduction of the Bitcoin law, Salvadorians were offered a $30 reward for registering the national Chivo wallet. According to the locals, Chivo hasn’t become so popular the state would have hoped. Alternative Bitcoin wallets, such as Bitcoin Beach, are used more.
According to a reporter from The Block, who was staying in the same hotel, the Chivo wallet has gained popularity in an unexpected way. Many Salvadorians use Chivo to store dollars instead of bank accounts. The government has succeeded in digitizing the citizens’ economy, but in a different way than it was originally planned.
Locals have different opinions of the Bitcoin revolution
In general, the atmosphere towards Bitcoin is positive. Many Salvadorians believe that reform is a step in the right direction. El Salvador’s economy has so far mainly run on cash.
Restaurant owner Tico says that Bitcoin is good for business, but he also points out a major issue. Many Salvadorians don’t understand how Bitcoin really works.
– People buy Bitcoin for a hundred dollars and hope to find $150 in their wallet the next day.
The problem is common in the crypto world. Many novice investors are after astronomical profits. When a loss is incurred, the cryptocurrency is condemned as a scam.
– When you lose money, you quickly go back to cash and blame the state. In a bull market, Bitcoin was seen as a good thing by Salvadorians. Since the price has moved in the other direction, many have changed their minds.
Jorge, a taxi driver who professes to be a Bukele fan, declares that any change brought by President Bukele is welcomed. He cannot say whether he would be as enthusiastic about the Bitcoin law if it had come into force under another president.
Antonio owns a hostel in San Salvador. He thinks the Bitcoin law is just one change among others. Antonio thinks that Bitcoin should not be given too much attention by the government. Safety and stopping violence are the top priorities. Antonio is hardly alone with his view.
Is it worth traveling to El Salvador?
El Salvador is an unknown destination for the masses. Its violent history has kept most tourists away, even though El Salvador’s nature compares to any paradise.
When planning a trip to El Salvador, you should pay particular attention to safety. The best solution is to try to find a local contact to arrange rides, for example.
In the village of El Zonte, tourists can enjoy themselves in a rather carefree way. Crime is low and the locals are fiercely protective of the security of their area.
The situation is different in the capital. It is easy to attract attention in San Salvador, which is both positive and negative. In the parks and squares, the reporter attracted passers-by like a magnet. The two weeks stay also included a few uncomfortable situations.
The most memorable thing about El Salvador is the happy and helpful locals. El Salvador is living in an era of change. There is clearly enthusiasm in the air. Decades of war and violence are coming to an end. Recent drastic reforms have finally put El Salvador on the map and attracted international attention.
El Salvador is a destination for an experienced traveler. Spanish skills are essential, as English is spoken only occasionally. El Salvador is a destination worth exploring for a brave and curious traveler!
Follow Tuomas on his travels at @tuomaslainee on Instagram.