On the coastline of El Salvador near Shalpa Beach, Lagarza is a small bohemian hostel ideal for surfers and backpackers who want to experience a budget vacation surrounded by nature.
Daniel García, who owns Lagarza, checked his phone to see how many transactions he had received in bitcoin since El Salvador adopted it as legal currency alongside the U.S. dollar last year. He could only count 15.
“The vast majority of guests still prefer to use a credit card or pay with cash,” García, 31, said. He recalled that the only few foreigners who have paid like this, do it to “say ‘I paid my beer in bitcoin,’ and they get pretty excited to see that the transaction was approved.”
Like other countries in the Central American region, El Salvador is trying to become a bitcoin hub to attract tourism and reduce its poverty rate. Last year, the country became the first to adopt bitcoin as a legal tender, despite pushback from residents.
While cryptocurrency supporters say it will boost the economy, skeptics fear it will cause inflation, instability and money laundering in a nation with a poverty rate that reached 36 percent in 2020, one of the highest in Latin America and the Caribbean, according to the Organisation for Economic Cooperation and Development.
According to the World Travel and Tourism Council, tourism made up about 6 percent of gross domestic product in El Salvador last year. Recent bitcoin losses have added to fears that El Salvador will default on its debt after President Nayib Bukele invested hundreds of millions of dollars into the cryptocurrency.
About 20 minutes from Shalpa, there is El Zonte, a popular surfer beach. The route to the waterfront is rural, with unfinished stone roads, small businesses and street vendors. Bitcoin is accepted everywhere. There is a sign at the entrance that reads, “Welcome to Bitcoin Beach,” and there is even a bitcoin ATM in the area.
In 2019, two years before bitcoin was adopted as a legal tender, Mike Peterson, a former investment adviser from the United States, moved to El Salvador with the objective of introducing cryptocurrency in El Zonte and renaming the area.
The Salvadoran government and Peterson are hoping that this tourist beach will attract investment by finding a way to build a sustainable cryptocurrency community. However, it faces the same challenges as Shalpa. People “really don’t use bitcoin because they don’t understand it and the minority who do are tourists,” said Ismael López, 32, one of the security guards at El Zonte.
“Bitcoin is still in what is called its discovery phase, and its value depends fundamentally on its level of adoption. Cryptocurrencies are the money of the future, but for them to be also the money of the present,” their value “has to be sufficiently stable,” said Enrique Dans, professor of information systems at IE Business School in Spain.
Locals who live below the poverty line and run cash businesses are not familiar with this type of technology and the risks of bitcoin, Dans said. “These countries should take into consideration that the use of bitcoin requires the population to have access to digital media, and this cannot be taken for granted in the region,” he said.
Like the case of “Bitcoin Beach” in El Salvador, Guatemala and Honduras are replicating the same idea by creating a cryptocurrency hub in tourist areas. Patrick Melder, 54, from Houston, recently launched the “Bitcoin Lake” project near Lake Atitlán, a volcanic body of water located in southwest Guatemala. Surrounded by small towns, it also attracts tourists who want to enjoy nature and outdoor adventures.
As the implementation of cryptocurrencies continues in these areas, experts note that a potential solution to educate locals is to work on financial literacy, which means teaching people how to manage digital wallets, showing them how to make mobile payments and, most importantly, creating public awareness of the risks of cryptocurrency.
“Making a country’s population literate in the use of cryptocurrency is something that can have very positive effects on its competitiveness in the future,” Dans said.
In Honduras, Juan Mayén is the bitcoin pioneer. He recently started “La Bitconeira,” a business that is installing bitcoin ATMs around the country, including in La Ceiba, another tourist zone that offers similar amenities to the beaches in El Salvador and Lake Atitlán in Guatemala.
“We have taught over 100 Hondurans how to create a wallet, receive bitcoin and insert cash in the ATM,” Mayén, 28, said. “We have people come from rural areas, and we try to explain to them to the best of our ability that whoever has a smartphone can download” a digital wallet.
But even if locals become more literate in cryptocurrency, will visitors actually use it?
Back in El Zonte, Oscar Nevermann, 29, from Sweden and Lauren Shekla, 26, from Germany waited for their check at vegan restaurant Colocha Café. Enthusiastically, Shekla pulled out her phone and tried to send the transaction “the way I pictured it in my mind,” she said.
“Honestly, we just want to pay with bitcoin because it is the first country in Central America that accepted it, so we just want to see out of curiosity if it is as simple to use as everyone claims,” Nevermann said.
Moments later, they had to pay with cash instead because, despite the business saying it accepted bitcoin, the waitress did not understand how to use it.