Two years ago, the Nayib Bukele administration made a bold move and enacted the Bitcoin Law, making Bitcoin legal tender in El Salvador. With it came a promise to bring a myriad of economic benefits, including zero-commission remittances and foreign direct investments. However, reality has failed to meet expectations.
He said that the Bitcoin Law was gonna bring in investments from all over the world. Well, that didn’t happen either. In the same period, the FDI (Foreign Direct Investment) dropped by 7.2% compared to the same period of 2019.
To incentivize the usage of Bitcoin, the Bukele Administration began an experiment involving a state-owned Bitcoin wallet, called Chivo Wallet, and an airdrop worth a total of USD $30 million. This resulted in an unprecedented surge in the number of Bitcoin users, but it soon dissipated as the wallet’s usage fell considerably. To date, the Bukele Administration has not released any updated figures on Chivo Wallet’s usage.
The experiment cost a whopping USD $1 billion, which was meant to be used for ongoing incentives for Bitcoin users. Unfortunately, it appears that the incentives have not been enough to convince Salvadorans to use the cryptocurrency. Remittances using Bitcoin continue to be at its lowest point since the Bitcoin Law was enacted, and foreign direct investment has dropped by 7.2% since then.
On top of that, Nayib Bukele promised that Salvadorans living abroad would save up to USD $100 million in fees each year. However, it is highly unlikely that this goal will be met anytime soon.
In conclusion, the experiment by the Bukele Administration to make Bitcoin legal tender in El Salvador has proven to be an expensive flop. Despite the hefty USD $1 billion experiment, Bitcoin usage has failed to take off in the nation. Remittances continue to be done with traditional methods, and foreign direct investment has actually dropped since the Bitcoin Law was enacted. The one thing that is certain is that the experiment has failed to deliver the promised economic benefits.