El Salvador’s President Nayib Bukele boasts on Twitter that he bought a cheap 420 Bitcoins for his country on 27 October. Meanwhile, the small Central American country is using Bitcoin profits to build 20 new schools as well as a pet clinic. But there are also developments from the country that your usual Bitcoin media prefer to keep to themselves …
Everything happens once for the first time. All it takes is one brave person who dares to do something that no one else has done before him.
For example, Nayib Bukele, president of El Salvador, not necessarily uncontroversial, but courageous in any case. When the bitcoin price fell a little on 27 October – to around $58,000 – he fired off a tweet:
It was a long wait, but worth it.
We just bought the dip!
420 new Bitcoin
– Nayib Bukele (@nayibbukele) October 27, 2021
“We waited a long time, but it was worth it. We bought the dip! 420 new bitcoins.” In this context, we are referring to the government of El Salvador. This has, Nayib Bukele explains shortly afterwards, a fund that is nominated in dollars but made up of both bitcoin and dollars, and now, with the purchase, has 1,120 bitcoins, equivalent to about $70 million. This fund is used by the government to exchange the bitcoins it collects for dollars free of charge to traders on request.
So El Salvador became the first country to buy a Bitcoin dip. And it paid off, too. Just one day later, Nayib Bukele tweeted that his country had already made a profit. But – how? If a Bitcoin is a Bitcoin, and if El Salvador has not sold any Bitcoins – how can it realise a profit? If the fund is nominated in dollars, but consists of bitcoin and dollars, Bukele explains, and the bitcoin part then increases in value relative to the rest – then the government can pull out dollars without reducing the overall value of the fund.
This is plausible, but one should ask if the mechanics don’t work the other way around – does El Salvador have to add dollars when the price of Bitcoin goes down? All of this already sounds like the president is betting on Bitcoin on behalf of his country if he puts in more than $20 million to “buy the dip. “
20 schools and a veterinary clinic
It was still worth it, and El Salvador is putting the Bitcoin profits to good use. For example, the country will fund 20 new schools through them. These schools are part of the “My New School Program” through which the government is establishing 400 schools in the country. Say what you will about Bukele, but this programme is another indication that “El Bitcoin Presidente” has meaningful approaches to lead his country into the future.
A school in El Salvador
In addition to schools, the government is also using Bitcoin profits to build the first veterinary hospital in El Salvador’s main city, San Salvador. This hospital has quite impressive key data for a veterinary hospital: According to the government, it will allow for 384 daily consultations, is set up for 128 daily emergencies, can handle 64 daily surgeries on dogs and cats, 64 veterinary grooming appointments, 32 X-ray examinations and 128 cures a day. Around 300 Salvadorans are expected to work in the clinic.
The first stone of the clinic has already been laid by Bukele. The president still emphasises in a slightly authoritarian manner that both the veterinary clinic and the future schools are only possible because he ignored the opposition to his Bitcoin strategy.
The projects are financed by profits from the fund, not by the sale of Bitcoins. The fund is expected to hold its value of now about $70 million. If the bitcoin price rises, the country can take dollars out. There is also speculation that the government will pay companies contracted to build clinics and schools in Bitcoin. But these speculations are unconfirmed and are also not based on any serious evidence.
Soon more bitcoin users and bank customers
Overall, El Salvador’s Bitcoin strategy is going surprisingly well. The country made Bitcoin an official means of payment with the “Ley Bitcoin” in September. This means that merchants MUST accept Bitcoin as a means of payment, even if the information on this is contradictory. To enable the population and businesses to do this, the government has developed the “Chivo Wallet”, which supports cheap payments thanks to Lightning and also manages to do so in a user-friendly way thanks to the trust.
At the beginning of October, Bukele declared that the Chivo Wallet already has 3 million users – almost half of El Salvador’s 6.48 million inhabitants. That’s more than any single bank in El Salvador has customers, and probably more than all the banks in the country have customers combined. If there is one thing that demonstrates the power of Bitcoin, it is this: A single app can get more people an account in two months than an entire banking system can in decades! If the World Bank and all the organisations advocating “financial inclusion” don’t jump on Bitcoin now, it’s out of naked ideology.
The first taxes have also already been paid in Bitcoin. In mid-October, the Ministry of Finance announced that $30,000 in taxes had already been paid using the Chivo wallet. This makes El Salvador the first country to accept tax revenues in Bitcoin. Everything happens once for the first time. All it takes is one single brave person.
In order to get the population to also use his favourite currency without hard pressure, President Bukele pulls out one or two stops. For example, every citizen of the country who registers in the Chivo Wallet receives a one-time payment of 30 dollars. Recently, the state petrol stations have also started giving a discount of 20 dollar cents per gallon of petrol (that’s just under 3.8 litres) if you pay with the Chivo Wallet. This discount comes just in time with the global increase in the price of petrol and should be another encouragement for many Salvadorans to use Bitcoin.
At the same time, the government is continuing its strategy to make El Salvador a bitcoiners’ and residents’ crypto paradise. For example, the government recently decided that foreign investors do not have to pay taxes on Bitcoin profits. So if you live in El Salvador and make profits by buying cheap and selling expensive, you have to pay 0 per cent tax.
Technical problems and identity theft
Bitcoin Magazine reports so extensively on El Salvador’s Bitcoin strategy that even die-hard Bitcoiners are becoming suspicious. For example, Canadian hardliner Francis Pouliot asks whether Bitcoin Magazine has now become “the official state medium”.
NEW – El Salvador to use Bitcoin profits to build 20 schools pic.twitter.com/O2rEIho4mq
– Bitcoin Magazine (@BitcoinMagazine) November 2, 2021
You may now object that the magazine is just writing about Bitcoin, and that El Salvador is currently the focal point of global Bitcoin acceptance, so it stands to reason that the magazine keeps reporting on the country. It really can’t be blamed for that. But a little more neutrality would be desirable. For example, Bitcoin Magazine all too willingly adopts every narrative stick that Bukele throws at it, but turns a blind eye to what goes wrong.
For that, you have to look elsewhere. For example, the magazine pymnts.com. It repeatedly reports on problems with the Chivo app. Around the beginning, middle and end of October. Many users complain on social networks about technical problems with the wallet, for example when transactions don’t work, the app is down or even wrong amounts are sent in Bitcoin.
The 30 dollars that El Salvador residents receive when they use the Chivo wallet for the first time are causing numerous problems. Part of the complaint is that people sell it immediately, which goes against the spirit of the idea – but is their right. What is more annoying is that cases of identity theft are being reported in large numbers. Victims complain that their identity number was used by someone else to withdraw the $30. These complaints are now so widespread that even the much more benevolent Coindesk magazine is picking up on them. It suspects that hackers stole the identity numbers.
In some cases, there are also complaints that the government is charging high fees. “It is stealing our money,” complains one user on social media. But it is questionable whether the government is breaking its promise not to charge fees for exchanging coins. This could also refer to transaction fees on Lightning, which are small but do exist; or perhaps inconsistencies in the exchange rate between the government and various websites.
The adoption no one wants
Last but not least, there is a news item from El Salvador that particularly delights Bitcoin-haters: the ISSS, the “Salvadorian Institute of Social Security”, the country’s health department, so to speak, has been hacked. The hackers have introduced a ransomware and are demanding a ransom of $10 million in Bitcoin to decrypt the data and prevent its leak.
Bitcoin adoption going very well in El Salvador.
Salvadoran health service has been held ransom for $10 million in bitcoin. https://t.co/6DHOagKGTH
– Bitfinex’ed (@Bitfinexed) October 23, 2021
Bitcoin adoption in El Salvador, exults one Bitcoin sceptic, is going very well. By and large, and not because of the hack, he’s right about that.
