El Salvador became the first country in the world to make bitcoin in 2021 legal tender, requiring all businesses to accept the cryptocurrency.
It has been promoted by Nayib Bukele, the president of El Salvador, who stated that it would develop the economy by making banking easier, and that it would encourage foreign investment. To popularize its use, the government gave citizens financial incentives to download a special cryptocurrency app.
El Salvador made bitcoin legal tender in September 2021. Since then, the country has seen mixed results: tourism has increased, but observations indicate that not many citizens use the cryptocurrency. The country holds 2,546 bitcoin.
In theory, developing nations like El Salvador are ideal candidates for cryptocurrency adoption. More than half its citizens rely on cash, rather than cards. 70 percent of housholds have no bank account and nearly 90 percent do not use mobile banking.
El Salvador introduced the Chivo Wallet, along with incentives to get housholds to download and use it. Residents didn’t need a bank account or a credit card to make transactions, only a mobile phone with internet access.
Although the law requires all firms to accept bitcoin, in reality only 20% do so. About 5 percent of all sales have been paid in bitcoin through Chivo Wallet, and just as most households using Chivo prefer to keep their money in cash rather than in bitcoin. 88 percent of firms convert their bitcoin into dollars.
El Salvador’s bonds, due in 2027, have risen by over 60 percent since the start of the year 2023. In parallel with a price surge for bitcoin by 80 percent. The country’s sovereign debt is delivering 60% returns, the best result in the world in 2023.
It should be noted that in September 2022, credit rating agency Fitch Ratings lowered El Salvador’s debt rating and predicted that a debt default would take place in January 2023. But not only did this not happen, but the country repaid a USD 800 million bond in January 2023.