Five points on El Salvador’s Bitcoin after five years

Five years ago this week, El Salvador made Bitcoin a legal currency. As usual on any El Salvador topic, Tim Muth has a great article as well; I recommend reading it.

The experiment failed to take off. Bukele’s announcement that Bitcoin would be an official currency set off a wave of foreign interest, including tourists, conference attendees, and expat tech entrepreneurs who traveled to the country to experience it. A promised $30 in Bitcoin for those who downloaded the government’s Chivo Wallet app also drove a brief surge of domestic use and interest. Businesses were required to accept Bitcoin for a time, though most never fully adopted the technology and those rules were rescinded.

Five years later, Bitcoin use in El Salvador remains similar to the rest of the world. Almost nobody uses it for day-to-day transactions. It amounts to less than one percent of the remittance market. Most of the foreign crypto-enthusiasts have soured on the Salvadoran Bitcoin dream.

The worst hypothetical consequences also never materialized. When El Salvador adopted Bitcoin, I was asked to think through a variety of crazy scenarios about how cryptocurrency could be abused in the country. Would MS-13 or the Sinaloa Cartel launder drug money through Bitcoin ATMs in San Salvador? Would Russian sanctions evasion be routed through Central America? Over the past five years, there have been a few crazy stories of criminal operations that have attempted schemes along those lines, but those were a small number of exceptionally weird events, not the general state of things.