SAN SALVADOR — Bitcoiners — enthusiasts of the world’s most popular cryptocurrency — aren’t supposed to trust government. After all, one of Bitcoin’s premises is to separate money from the state.
But what happens when the enthusiast is the state? In El Salvador over the past year, many members of the global crypto community have cheered on President Nayib Bukele’s adoption of Bitcoin as legal tender while largely ignoring his dismantling of democratic institutions over the past three. Mr. Bukele has weaponized Bitcoin to whitewash his government’s growing authoritarianism on the world stage. By spreading his propaganda, Bitcoin believers are promoting a product — and lining their pockets — at the expense of our rights and livelihoods.
When Mr. Bukele spent substantially to adopt Bitcoin, the Salvadoran economy was already stretched. Total debt amounted to about 90 percent of G.D.P., a large chunk of which had been accumulated by prior administrations or spurred by pandemic-related expenses. Credit rating agencies were beginning to question the country’s debt sustainability. Mr. Bukele’s government was looking for a financing agreement with the International Monetary Fund for $1.3 billion.
It was in this economic climate that El Salvador — where the national currency is the U.S. dollar — became the first country to adopt Bitcoin as legal tender. To sell the project, Mr. Bukele assured Salvadorans that Bitcoin would promote financial inclusion (70 percent of Salvadorans don’t have a bank account), reduce fees on remittances and attract tourism and foreign investment. By as early as November 2021, Mr. Bukele had begun to float a strategy that would allow him to sell “bitcoin-backed bonds,” a new, untested system that he saw as an alternative means to finance the country without the involvement of multilateral institutions like the I.M.F.
To achieve Mr. Bukele’s promises, the government budgeted nearly $200 million (that’s three times what it spends each year on the leading public hospital in the country). Using those funds, the government provided a crypto wallet with a $30 bonus for any citizen who downloads it (the president has claimed that as many as four million Salvadorans have done so), set up a trust to back the operations and installed 200 Bitcoin A.T.M.s throughout the country.
Instead of investing in other needed projects in a country where roughly a quarter of the population lives in poverty, Mr. Bukele staked El Salvador’s future to gamble on Bitcoin. So far, it’s obvious that the sizable investment that he made in Bitcoin has not produced the clear returns he promised.
The minister of tourism said that after Bitcoin’s adoption, tourism increased 30 percent in the last months of 2021. At a recent panel of crypto leaders, another government official said that 50 new crypto companies had opened and that representatives of private companies claimed to have generated a measly 113 jobs. But it’s nearly impossible to determine whether those statements are true. The government has not yet published detailed data that would support those claims.
Remittances account for more than 20 percent of El Salvador’s G.D.P., because of a large diaspora mainly based in the United States. But, according to the Central Bank of El Salvador, only 1.5 percent of remittances went through digital wallets in April, which shows Salvadorans haven’t gotten onboard with Bitcoin despite the promise of needed savings. And Mr. Bukele’s plan for selling his Bitcoin bonds has stalled.
Just one year into Mr. Bukele’s Bitcoin experiment, average Salvadorans can tell that Bitcoin isn’t working for them. In May, a national poll showed that 71 percent of Salvadorans said they didn’t see any benefit from the law for their family economy. Another found that about two of every 10 Salvadorans support the decision to adopt Bitcoin. Those Salvadorans haven’t adopted the currency. A paper published in April by the National Bureau of Economic Research concludes that “despite the legal tender status of Bitcoin and the large incentives implemented by the government, the cryptocurrency is largely not an accepted medium of exchange in El Salvador.”
Bitcoin is the regime’s currency, primarily designed for foreign crypto enthusiasts. Some of them are V.I.P. attendants to the president’s private parties. They go out in helicopters or on surfing and fishing trips, often escorted by the police, and are taken on private tours to government facilities. They even give advice on public policy.
It’s obvious that their use of the currency was part of Mr. Bukele’s intentions. A large number of the president’s messages about Bitcoin are in English because they are designed for Bitcoin believers, not the Salvadoran people, even though the project is funded by taxpayer money. Salvadorans know this, too. A December national poll showed that only about 11 percent of respondents believed the main beneficiaries of the Bitcoin law are the people, while about 80 percent believed it’s either the rich, foreign investors, banks, businesspeople or the government.
When major players in the world crypto market — like Brock Pierce, a founder of Tether, and Jack Mallers, the C.E.O. of Strike — come to El Salvador and sing Mr. Bukele’s praises to the media, they’re acting as de facto ambassadors for the regime. Missives like theirs fill social media and crypto-friendly English outlets with propaganda about how great Bitcoin is for El Salvador, how nice living here is and how bold and audacious Mr. Bukele is as a leader. Some have suggested that it’s good for the country to have these crypto influencers reshaping the image of El Salvador before the world, that there’s some sort of invaluable rebranding happening by someone paying for a coconut in Bitcoin. It’s a mirage.
The narratives Bitcoiners spin about our country are often blatantly false. In February, Stacy Herbert, a Bitcoin and Bukele promoter, said that “mass emigration out of El Salvador has stopped” even as the United States Customs and Border Protection detained, on average, 255 Salvadorans daily at the United States’ southern border that month. The Bitcoin Beach project, run by Mike Peterson, a California surfer, tweeted that El Salvador is a “kid’s paradise,” even though it’s a country where 90 percent of rapes against minors go unpunished. President Bukele retweeted it, adding “We’re building a place where your kids can live the life you lived when you were a kid.”
The life that Mr. Bukele is building looks markedly different for Salvadorans. Over the past three months, the government has used a state of emergency to imprison almost 40,000 people, often without defense. Mr. Bukele has begun to crack down on press freedom, through a gag law that prohibits reproducing messages from gangs and his government hasn’t investigated the illegal use of Pegasus spyware to monitor dozens of journalists who cover El Salvador, including me, from independent news outlets between 2020 and 2021. Reporters have already fled the country, fearing reprisal for doing their jobs.
Mr. Bukele has used his notorious crypto-bro persona to distract the public eye from other damning scandals. On the campaign trail, he had promised to fight corruption by cooperating in an international commission against impunity facilitated by the Organization of American States. After his election, he pulled out of the agreement. The next day, he announced his Bitcoin Law, presumably to distract from outrage against his withdrawal. In May, another scandal emerged. My investigative outlet, El Faro, published details about covert negotiations between the Bukele administration and MS-13 to reduce homicides. When the deal fell through, 87 people were killed in reprisal. Instead of addressing the issue or even denying claims that he was aware of the negotiations, Mr. Bukele tweeted about Bitcoin. His government has yet to comment on the investigation, which has been read widely.
By using his Bitcoin antics to distract from the truth, Mr. Bukele dodges culpability for his regime’s actions. The Bukele-appointed Constitutional Court has cleared the way for the president to run for re-election in 2024, even though our Constitution prohibits a consecutive re-election. By reducing checks on his power from Salvadoran institutions, he can operate with greater impunity.
Even as he has cemented his power at home, Mr. Bukele’s administration has become isolated from important international forums and governments that are essential to El Salvador’s economic future. Right now, Mr. Bukele is at odds with the Biden administration and the Organization of American States. Most notably, his Bitcoin gamble has hurt his chances to strike a much needed deal with the I.M.F. As Bitcoin has dropped more than 50 percent of its value this year, there have been suggestions that El Salvador’s investment has pushed the country to the brink of bankruptcy. However, implying that the country’s risk of default derives from the crypto-enthusiasm is wrong: The economic turmoil preceded and is bigger than that.
The paradox between Bitcoin’s idealistic roots and the way it works isn’t starker anywhere else in the world. Bitcoin grew out of the cypherpunk movement and the experiences of privacy advocates who were prosecuted by the state. Its ethos is supposed to hinge on libertarian ideas like distrusting the banks and the government, creating a grass-roots movement that counters the economic establishment and avoiding censorship from overreaching authorities.
But the relationship between Mr. Bukele’s regime and Bitcoiners has been symbiotic instead of adversarial. The vocal online influencers of Bitcoin became international ambassadors for the president by spreading messages like “Protect Nayib Bukele at all costs,” in a time when leaders of other countries and of civil organizations started seeing him with wariness or directly criticized him. Meanwhile, Mr. Bukele used his status as a head of state to validate and promote a product that becomes more valuable when more people start to use it. This falls right in line with the Bitcoiners’ game theory that serves as an evangelizing strategy. Now even small countries use this as a currency, they say, and if you don’t buy into it, you’re missing out.
It’s pretty obvious to anyone who visits any place in El Salvador other than its beaches that Mr. Bukele is not building a techno-utopia; he’s building a run-of-the-mill authoritarian state in a tech disguise. Bitcoiners would do well to remember that when they cheer for Mr. Bukele, they’re not ushering in the technology of the future; they’re enabling a regime that’s violating the human rights of its citizens. After all, the economic freedom Bitcoin promises is worth nothing to Salvadorans if it’s the only freedom we can hope to have.
Nelson Rauda Zablah (@raudaz_) is a Salvadoran journalist who works for the investigative site El Faro, covering politics and human rights violations. Since 2021, he has covered the implementation of the Bitcoin Law in El Salvador.
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