The bitcoin conference had boisterous, ebullient atmosphere, complete with droves of cryptocurrency fanatics, a busy bar, a raffled-off Lamborghini and a skateboard demonstration.
The leader, Nayib Bukele, 39, said in a prerecorded address to Bitcoin 2021 that he plans to send the Salvadoran legislature a bill that would give the cryptocurrency its formal status in the coming days.
“In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy,” Bukele said, eliciting a raucous standing ovation that nearly drowned out the rest of his remarks. “And in the medium and long term, we hope that this small decision can help us push humanity at least a tiny bit into the right direction.”
Bukele, who was elected in 2019, has broad public support but has drawn criticism for resisting U.S. anti-corruption efforts, and he was accused of an authoritarian power grab after his party ousted the country’s attorney general and its top judges. Human rights groups condemned those actions, and some have described him as a “millennial autocrat.”
The former mayor of the nation’s capital, San Salvador, Bukele deployed populist rhetoric and social media savvy to fuel his meteoric ascent. Critics have said his embrace of bitcoin is a political stunt meant to burnish his reputation — especially online — and distract from international protest of his conduct.
At the conference, Bukele framed the bitcoin move as forward-looking and utopian, saying El Salvador is “starting to design a country for the future” by looking for “the best examples of ideas from history and around the world.”
“I believe bitcoin could be one of these ideas,” he said.
Many details of the plan’s rollout are still unclear, but the proposal has a good chance to become law because Bukele’s party — Nuevas Ideas, or New Ideas — had landslide victories in recent legislative elections and now controls the Congress. Bitcoin, which traded at about $36,700 late Sunday night as the most valuable digital token, would then be used alongside the U.S. dollar, El Salvador’s official currency. Some analysts have questioned the move, cautioning against the reliance on a market that has fluctuated significantly, is unregulated and could be manipulated or used for fraud.
El Salvador is among a growing number of Latin American countries gravitating toward digital cryptocurrencies, viewed by some as a possible solution to the financial struggles and instability that strain the region’s economies. In Cuba, Mexico and Venezuela, residents are increasingly turning to cryptocurrencies, which are mostly unregulated and decentralized.
On Twitter, where he posts prolifically in English, Bukele said adopting bitcoin could benefit El Salvador by bringing economic investment from crypto acolytes and providing an accessible financial platform for Salvadorans who don’t have a bank account, about 70 percent of the population.
A large share of the country’s gross domestic product — more than 20 percent — comes from citizens living abroad, mostly in the United States, who send home remittances. The companies that facilitate those transactions charge fees and take “a big chunk” of the $6 billion of annual remittance payments, Bukele said.
But when using bitcoin, he added, “the amount received by more than a million low income families will increase in the equivalent of billions of dollars every year.” Bukele has also promised “immediate permanent residence for crypto entrepreneurs” and dangled the prospect of bitcoin without a capital-gains tax.
Jack Mallers, founder of the bitcoin payment platform Strike, said he helped write the Salvadoran legislation that would make bitcoin legal tender and he is working with the country to develop its cryptocurrency infrastructure.
“If you can fix the money, you can fix the world,” Mallers said in an obscenity-infused introduction for Bukele. Onstage, Mallers wore an El Salvador soccer jersey — a gift from Bukele, he said, that is “pretty sick.”
Cryptocurrency give widely underbanked societies the opportunity to participate in the global economy, part of their appeal and growing popularity in Latin America, said Tony Delgado, founder of the financial literacy platform Latino Wall Street.
“This opens up to everyone,” Delgado said in an interview. “No matter where you are from, what color is your passport, if you are a peasant in the mountains of Peru, or a student in Caracas, bitcoin does not discriminate like the traditional global banking system may.”
Online, bitcoin boosters celebrated. Avik Roy, a conservative commentator and founder of the nonprofit Foundation for Research on Equal Opportunity, called it “a major development in the history of monetary policy.” Because El Salvador uses the U.S. dollar, Roy said, the country is subject to Federal Reserve policies.
“El Salvador isn’t making #bitcoin legal tender in an attempt to be trendy” he tweeted. “This is an attempt to protect Salvadorans from inflationary U.S. policy. A number of other countries could follow SLV’s [El Salvador’s] lead.”
In Cuba, the arrival of mobile Internet in 2018 accelerated the adoption of bitcoin and digital transactions, with enthusiasts saying it helps avoid obstacles created by U.S. sanctions and a decades-old trade embargo, which has cut off the island from standardized international payment systems and financial markets.
Digital currencies have allowed some Cubans to make online purchases and investments. Reports suggest growing use among residents paying for utilities and cross-border transactions, along with expatriates sending money, especially during recent coronavirus pandemic shutdowns that have aggravated the economic crisis on the island.
In Venezuela, where an ongoing socioeconomic and political crisis has resulted in spiraling hyperinflation of the nation’s legal tender, the bolívar, the government in 2018 launched an oil-backed cryptocurrency, petro, hoping it would help circumvent U.S. financial sanctions and resurrect the country’s collapsing economy.
A second digital coin, reserve, debuted there this spring. Its creator, Gabriel Jimenez, wanted a way to skirt the country’s notorious inflation and provide exiled Venezuelans a simple and affordable way to send money home, Deutsche Welle reported.
In Mexico — where remittances, mostly from people in the United States, amounted to $4 billion in April, according to official data — the crypto market is also booming.
The country’s leading crypto exchange, Bitso, launched in 2014 and grew by 342 percent between September 2019 and May 2020, partly by processing remittance transactions, according to CoinDesk, a digital currency news site.
Mexico has stringent new banking laws, expensive financial services and — like El Salvador — a large unbanked population that is driving public interest in cryptocurrency, Eloisa Cadenas, head of the CryptoFinTech consulting firm, told CoinDesk.
On Reddit — where the crypto craze has flourished on boards such as r/CryptoCurrency — the reaction to Bukele’s declaration has received mixed reactions from posters who say they’re Salvadoran. “He’s heavy handed but he actually cares,” one Redditor wrote of the president.
“Hugely bad for us Salvadorans,” wrote another user. A third said Bukele is trying “to remain popular in social media” while dodging allegations of corruption.
In an interview with BBC News, Rohan Grey, with the Digital Currency Global Initiative, warned that any country accepting cryptocurrency as legal tender would hand over considerable influence “to a network that isn’t stable, doesn’t have accountable actors, and doesn’t have track record of providing the kind of price stability and liquidity that a currency is supposed to provide.”
Delgado, of Latino Wall Street, said that Bukele’s plan could create “massive” opportunities in El Salvador and elsewhere, and that cryptocurrencies democratize markets.
“Cryptocurrency is a liberator for a lot of people, especially in Latin America,” he said. “And my hope is that it continues to be used as a tool for freedom for the 400 million people who live in the region.”