Bitcoin as a Part of El Salvador’s Growth Strategy

El Salvador faces major economic challenges. Around 70% of the country’s population doesn’t have a bank account. Salvadorans heavily rely on money transfers sent by migrants. According to the World Bank, around 26% of the GDP (Gross Domestic Product) comes from remittances. High international transaction costs make the country dependent on the global economy, particularly on the US, where most of the migrants work. At the same time, El Salvador’s national currency is the US dollar, which means dependence on the US monetary policy and lack of control.

Nayib Bukele adopted Bitcoin as a potential solution to the described challenges. In 2021, he announced making Bitcoin a legal tender to increase El Salvador’s economic freedom, financial inclusion, and economic growth. Nayib Bukele wrote on X that Bitcoin’s use in the country would increase the GDP, and reduce remittance costs, which would improve the lives of millions. Now, while the US dollar remains the primary currency for official purposes and economic standards, El Salvador allows conversion and use of Bitcoin through an automatic system, as explained by PwC. The automatic conversion system allows businesses to instantly convert any Bitcoin payments to U.S. dollars reducing their exposure to Bitcoin's price fluctuations. The government also launched a digital wallet app, called Chivo, to allow citizens to manage their Bitcoins easily. In less than 3 weeks, Chivo was actively used by 2.1 million

Salvadorans.Bukele's Bitcoin strategy also includes investing in cryptocurrency for the national treasury. In November 2022 El Salvador started “The 1 Bitcoin a day” program, which suggests buying one Bitcoin every day until it becomes unaffordable with fiat currencies. In March 2024, Bukele said the country had stored over $400 million in Bitcoin in an offline cold wallet.

That’s not all. In 2023, El Salvador’s congress approved a citizenship program, based on which foreigners can gain Salvadoran citizenship in return for $1M in investments in Bitcoin or USDT, a stablecoin pegged to the US dollar. The initiative, named the “Adopting El Salvador Freedom Visa Program,” is limited to 1,000 participants a year, who can receive a Salvadoran passport with their spouse and children under the age of 18.

Bukele's Bitcoin strategy is often criticized by the mainstream media due to its risks related to Bitcoin's volatility. Especially when the price of Bitcoin falls, there are numerous articles saying that El Salvador's Bitcoin bet isn't paying off. Bukele’s response to critics is that price fluctuations don’t affect the country’s long-term strategy. He stated that reporting only the country’s losses while remaining silent about profits is not professional journalism.Bitcoin as a Part of El Salvador’s Growth Strategy.

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