The Bitcoin Road in El Salvador

El Salvador, a country with a 6.8 million population in Central America, has long faced economic challenges. The country is mainly agricultural, mainly producing coffee, cotton and sugar products. In 2001, El Salvador made the U.S. dollar its official currency in an attempt to stabilize the economy. However, this dollarization policy makes El Salvador more affected by the U.S. monetary policy and cannot effectively solve the problems of high domestic remittance costs and low financial inclusion.

To address these long-standing issues, President Booker has proposed the adoption of Bitcoin as a tool to promote innovation, enhance financial independence and attract international investment. On June 5, 2021, Buker announced plans to make Bitcoin legal tender, and just three months later, the Bitcoin Act officially went into effect, requiring businesses to accept Bitcoin as a payment method in parallel with the U.S. dollar. The move has made El Salvador a pioneer in global cryptocurrency adoption, while also bringing widespread controversy.

Buker Government's Policy to Promote Bitcoin Adoption

The Buker administration has taken a number of steps to encourage the use of Bitcoin in a number of economic sectors. These include government investment, legislative support, and innovative projects to integrate Bitcoin into the nation's infrastructure.

1. Buy Bitcoin daily

In November 2022, Buker announced a bold strategy: the government to buy 1 bitcoin a day to increase reserves. As of December 2024, El Salvador has accumulated more than 6,000 bitcoins and profited from the price increase. This strategy exemplifies the government's commitment to cryptocurrencies as an important part of its long-term financial strategy.

2. Bitcoin Bonds

In 2023, El Salvador issued a $1 billion "volcano bond" based on Bitcoin. The purpose of these bonds is to finance Bitcoin-related projects, including the construction of mining infrastructure and the development of "Bitcoin cities. The move has attracted international investors who want to reach out to sovereign cryptocurrencies.

3. Bitcoin City

El Salvador plans to build a smart city, the Bitcoin City, in La Unión. The city, which will be entirely powered by tekapa's renewable energy, is envisioned as a tax-free zone, attracting tech companies and investors, and becoming a center of innovation and a model for sustainability.

4. Investment immigration policy

El Salvador has introduced a policy of obtaining residency through investment, allowing foreigners to obtain citizenship by investing $1 million in Bitcoin or its equivalent in government projects. The move aims to attract high net worth individuals and boost economic growth through cryptocurrency-driven projects.

5. Bitcoin mining using volcanic geothermal

Thanks to its geographical advantage, El Salvador is rich in geothermal energy, a renewable resource used for Bitcoin mining. In 2021, the government set up a mining facility near the Tekapa volcano and installed 300 mining machines. So far, the project has successfully mined more than 470 bitcoins. By promoting sustainable development, El Salvador has established an image as a leader in green technology in the cryptocurrency space.

Cryptocurrency Businesses Enter El Salvador

El Salvador's Bitcoin-centric policy has attracted a number of cryptocurrency companies and start-ups to operate in the country, further cementing its position as a hub of crypto innovation.

Bitfinex: In 2023, El Salvador Digital Asset Service Provider (DASP) license.

Binance: In the same year, it received full licenses for Bitcoin Service Provider (BSP) and DASP to provide comprehensive encryption services.

Bitso: Support for Chivo Wallet since its entry in El Salvador in 2021, facilitating cross-border transactions and domestic payments

Bitget:Bitget will receive a BSP license in 2024 to provide services such as bitcoin exchanges and custody, while investing in local infrastructure to expand its business.

The Future and Impact of the Salvadoran Experiment

Bitcoin adoption in El Salvador has sparked a global discussion about the role of cryptocurrencies in the modern economy. While its initiatives are unique, they also raise many important questions about the future of money, technology and governance.

1. Can Bitcoin be used as legal tender?

The experience of El Salvador shows the opportunities and challenges of using Bitcoin as a national currency. On the one hand, it has the potential to improve financial inclusion and reduce dependence on traditional banking systems; on the other hand, its price volatility and technological barriers pose significant risks to developing countries.

Sustainability and Innovation

By mining with geothermal energy, El Salvador shows how renewable resources can drive technological progress. If this model succeeds, it could inspire other countries with abundant clean energy sources to explore similar initiatives that could reshape the global energy and financial system.

3. Global replication potential

While Bitcoin-powered cities may seem futuristic, the concept is replicable in areas with clean energy. Countries in Africa, South America and Asia are likely to follow El Salvador's lead in integrating cryptocurrencies with sustainability into their economic strategies.

4. Role of regulation

El Salvador has proven that a clear and innovation-supportive regulatory framework is essential to promote technological and economic stability. Other countries considering similar initiatives might learn from El Salvador's balanced approach in public and private sector cooperation.

The Future of Cryptocurrency in El Salvador

The Bitcoin experiment in El Salvador is not over yet. The country has made some progress in building a crypto-friendly ecosystem, but major challenges such as public skepticism, inadequate infrastructure and global financial pressures still need to be addressed.

Nevertheless, its potential transformational significance is remarkable. By embracing cryptocurrencies and renewable energy, El Salvador is at the forefront of global digital innovation and sustainability. If it can effectively meet the challenges, the country could become a model for small countries to use technology to achieve economic independence and attract global investment.

The next few years will be a critical period. Whether serving as a blueprint for other countries to follow or as a cautionary example, El Salvador's bold experiment is shaping the rapidly evolving picture of the global monetary future.

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