Economy El Salvador wants to be the world’s leading Bitcoin state – We called a Finn living in the country and asked what a miracle was happening there.

El Salvador wants to be the world’s leading Bitcoin state. We called a Finn living in the country and asked what kind of miracle was happening there.

First the change was reflected in the beach bar.

A couple of years ago a Finn Juuso Knight found that shopping on the local beach was allowed with bitcoins.

El Salvador in Central America was used to seeing everything, but the advent of cryptocurrencies was something new.

Now the same beach is known as Bitcoin Beach. And there are no changes left in it.

Seven El Salvador, with a population of one million, was probably the most talked about small country in the world last year when the country’s president Nayib Bukele took a number of initiatives related to bitcoin.

From the citizens ’point of view, the most concrete initiative was for El Salvador to convert cryptocurrency into the country’s official means of payment for bitcoin alongside the dollar. Businesses in the country must offer consumers the opportunity to pay for their purchases with bitcoins.

But what does the new currency system mean in practice?

The economic difficulties of El Salvador have been well known to economists. However, not many people can tell what the Bitcoin economy looks and feels like in everyday life.

Instead, Finnish companies have some idea of ​​how a state like El Salvador works.

Engineering company Wärtsilä is building a liquefied petroleum gas plant in El Salvador, the contract for which is nearing completion.

Construction site Ritari, 34, who works as a construction manager, has lived in the country for two years. As a Finn, he has a rare knowledge of what it is like to live in the world’s first Bitcoin state.

Is everything different now than before?

When the phone rings at eight o’clock in the morning, the heat has risen in the city of Acajutla already close to thirty degrees.

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The Finn who answers the phone first tells the information, which may not surprise you very much: the local Bitcoin drug is rarely seen in everyday life.

More of the phenomenon comes to the fore in advertisements and the media – and, of course, in places like Bitcoin Beach. According to the knight, the end of the local beach as the first place to use cryptocurrencies was largely a coincidence.

“Apparently an American had liked a coastal community and gave them seed funding to provide Bitcoin payments. There, those kiosks sold soda and beer from woodland shacks against bitcoins.”

This happened even before President Bukele raised the cryptocurrency to its number one agenda. Bitcoin only began to appear in El Salvador last year.

Bitcoins can now be paid for in many other places than Bitcoin Beach. Especially the largest international chains and shopping malls offer the Bitcoin payment option.

According to the World Bank, up to a quarter of a country’s GDP comes from foreign remittances.

The knight himself has not attempted to pay Bitcoin. The biggest reason is that cash in particular is a reliable method of payment, and you can also pay with cards in many places.

However, he says some of his friends use Bitcoin payments in stores. So the system seems to be working really well.

In practice, Bitcoin payments are made using the Chivo app provided by the State of El Salvador.

Juuso Ritari at a Mexican airport in August 2020. Ritari resorted to a private plane because scheduled flights to El Salvador were momentarily interrupted during the pandemic.

About bitcoin despite El Salvador’s economy still revolving mainly in U.S. dollars.

One reason for the dollar-driven economy is large-scale remittances. According to the World Bank, up to a quarter of a country’s GDP comes from foreign remittances.

“I know some locals who say they receive remittances from relatives as bitcoins. Of course, Bitcoin’s exchange rate fluctuation is high, but it does not require the commission of money brokers such as Western Union. “

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Another Bitcoin project in El Salvador is ATMs set up across the country from which citizens can withdraw bitcoins. The knight confirms that Bitcoin vending machines have appeared in the street scene.

The state of El Salvador has tied its funding to bitcoin in a number of ways. The country’s government has been buying bitcoins since the fall. The state also plans to issue bonds during the spring, the proceeds of which will be partly invested in bitcoin.

Nayib Bukele is the president of El Salvador.

One one of El Salvador’s most special Bitcoin projects is a plan for an entire bitcoin-focused city, Bitcoin City. Bukele has promised that the city to be built next to the volcano would operate on geothermal energy. City residents would only pay VAT. Both income, capital and real estate taxes would be set at zero.

President Bukele launched the idea for Bitcoin City last November at a Bitcoin conference in the country.

The knight happened to drive past the beach club that served as the conference venue. The occasion was not your typical El Salvadoran beach party.

Bukele calls himself “CEO of El Salvador” on Twitter.

Traffic near the party was completely congested, and the Knight watched the festival atmosphere from the car for a couple of hours.

“It was yes was going on, a bit similar to Burning Man. Big parties, handsome lights, foreign guests in special outfits. That kind of hard-class startup buzz. A really interesting sight. ”

Some insight into the atmosphere of the conference can be obtained from President Bukelen on Instagram from the video.

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Nayib Bukele has gained wide visibility on social media with his Bitcoin initiatives. His Twitter and Instagram accounts have millions of followers. On Twitter, he calls himself “CEO of El Salvador”.

The knight thinks that with his raptures, Bukele strives to gain visibility as much abroad as at home. One reason for the initiatives may simply be the branding of El Salvador, the attraction of foreign money and tourists to the country.

The knight has not yet detected a large-scale landing of Bitcoin tourists.

“With one foreigner who really believed in bitcoin, I happened to have the same breakfast table at a beach restaurant.”

According to the knight, criticism of bitcoin is heard from locals from time to time.

“Some wonder why the country is investing little of its resources in bitcoin, whose price development is so unpredictable.”

However, many locals follow the presidential rapture with interest. According to surveys, Bukele’s popularity is high.

“Bukele is a making guy. The guy says he bought bitcoins from the course dip and will soon be reported on local television. After all, this is good entertainment, if nothing else. ”

World Bank according to El Salvador is one of the poorest countries in the world by many measures. Only 30% of the country’s citizens have a bank account. The knight thinks Bitcoin payments and other cryptocurrency-related projects are remote for many El Salvadorans.

The International Monetary Fund (IMF) is critical of El Salvador’s Bitcoin projects. According to the organization, a bitcoin-based payment system and Bitcoin bonds will significantly increase the risks to El Salvador’s economy.

International investors have reservations about El Salvador’s economic outlook. Based on market prices, it seems quite likely that the country will plunge into a financial crisis next year.


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