Why El Salvador’s Wild Bitcoin Experiment Just Might Work

Editor’s note: This piece first ran in Alex Kantrowitz’s newsletter Big Technology.

Right after I hopped out the back of a pickup in El Zonte, El Salvador, I recognized I wasn’t in an ordinary beach town.

El Zonte’s welcome sign had two Bitcoin logos, its cafes offered 75% discounts if you pay in Bitcoin, and its trash cans sported the Bitcoin emblem. I’d been hitchhiking my way through the country’s west coast, enjoying its world-class surf conditions last month, and wasn’t looking for its Bitcoin epicenter. But somehow, I’d stumbled right into it.

When El Salvador made Bitcoin legal tender last September, many — myself included — reacted skeptically. Nayib Bukele, El Salvador’s president, seemed to be YOLOing away the country’s treasury like a Reddit-addicted crypto trader.

Bukele has repeatedly bought millions of dollars worth of Bitcoin, complains when he “missed the f***ing bottom by 7 minutes,” and as Bitcoin’s price has tanked in 2022, it has appeared to cost his country dearly. It looks to many like a mess.

But the reality on the ground, I found, is more complicated than the narrative. There’s a good chance El Salvador’s Bitcoin experiment will work out, at least in some ways. 

The Bitcoin movement in El Salvador began in El Zonte when a California surfer named Mike Peterson received an anonymous $100,000 Bitcoin donation for the town’s residents. Peterson had been doing community work in El Zonte for years and accepted the money with a mandate to get it in people’s hands. “We formulated a plan to start injecting Bitcoin into the community,” he told me. “And it kind of just exploded from there.” 

Bitcoin took off in El Zonte for a reason: it was useful to people. The first, most immediate benefit was it helped Salvadorans avoid exploitative remittance feesspending 3 BTC (about $120,000 at current prices) locally to qualify for Bukele’s offer of permanent residency. But their exuberance could drive the controversial leader into risky decisions, such as the opening of a largely tax-free “Bitcoin city” and the issuing of $1 billion “volcano bonds.”

Bitcoin volatility, of course, will impact everyday Salvadorans who decide to invest in Bitcoin. But in today’s economy, people build wealth by taking risks. And if people living in the U.S., Europe, and the like have that ability, so should Salvadorans.

El Salvador’s Bitcoin experiment could implode, but there’s a chance it succeeds and builds wealth for locals—and that makes it worth trying.