Tales from the Crypto | Part II: How Bitcoin became legal tender in El Salvador

One year ago, El Salvador made Bitcoin legal tender — the first nation in the world to do so. But how did Bitcoin make its way into this Latin American country? It all started in the coastal town of El Zonte, which earned the nickname “Bitcoin Beach” after being flushed with the cryptocurrency thanks to a mysterious donor.

In the second part of our mini-series, Tales from the Crypto, we take a deep dive into the key players (and controversies) of El Salvador’s wild Bitcoin journey. We also hear from a Salvadoran economist who is a critic of the government’s handling of Bitcoin, especially in the midst of cryptocurrency’s crash in recent months.

Show notes

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Full Transcript:

This content was originally created for audio. The transcript has been edited from our original script for clarity. Heads up that some elements (i.e. music, sound effects, tone) are harder to translate to text. 

(Rooster calls.)

Megan Cattel: Ooh, I hear a rooster.

Ismael: What?

Megan: A rooster!

Ben Brock Johnson: Hey, Amory.

Amory Sivertson: Hi, Ben.

Ben: Who did we just hear? Apart from the roosters.

Amory: That’s one of our Endless Thread producers, Megan Cattel.

Ben: Who is not a rooster?

Amory: Nope.

Ben: Nope.

Amory: No. Unless…

Ben: Megan, are you a rooster?

Megan: No! But I did get some solid rooster sounds thanks to a video tour I recently took of this little town in El Salvador called El Zonte. My tour guide was this 19-year-old guy named Ismael. He’s tall, lanky, has fluffy brown hair and braces, which makes him seem younger than he is. He showed me around via a video call and he was very patient with our language barrier around roosters.

Ismael: What’s that?

Megan: (Yells.) The cock-a-doodle-doo!

Ismael: Oh, yeah, yeah, yeah, yeah. Here, there are a lot of them. (Laughs.)

Megan: (Laughs.)

Ismael: This is something common right here. Yes.

Megan: Ismael is a sophomore in college and lives at home with his sister, two brothers, and his parents. When he goes outside to get a better Wi-Fi connection, his laptop camera shows palm trees clustered around the yard and corrugated metal roofing on top of his house. The blue sky and palm trees really makes it look like the scenery looks like one of those tropical island default screensavers for computers.

Amory: It looks pretty dreamy.

Ben: Yeah, like Hawaii or something. It is apparent why this town attracts surfers from around the world. It is beautiful.

Megan: As a resident of Queens, New York, it made me jealous.

Ben: (Laughs.)

Megan: But Ismael himself wasn’t there for the scenery. He’s always dreamed of becoming a pro surfer and a surf instructor.

Ben: So, just get good at surfing right? That’s all you have to do?

Megan: Well, not exactly. Ismael says that in order to make his surf dreams a reality, he really needs some level of formal education. So he’s been trying to juggle three things. Surfing, taking classes, and taking on a part time job to pay the bills and help his family out financially. One issue? Making that job part-time.

Ismael: It’s not possible because people who give you a job, they want you to work all day.

Megan: But then he found something. A job that was part time and would let him stay in El Zonte. Ismael talked with a youth group leader at a nonprofit called Hope House.

Hope House organizes surf camps and beach cleanups, programs to keep young people from getting involved with gangs. A staff member suggested to Ismael…

Ismael: You can come and join us and you can work.

Ben: This sounds like the perfect set up. Go to school. Work for Hope House in his down time. What did he do?

Ismael: Clean the river, or go to the beach, clean the beach.

Megan: Ismael got paid in US Dollars at the end of each workday. But then in 2019, something changed. Hope House’s leader told Ismael and other employees about a change in their compensation.

Ismael: He said we are going to pay you in Bitcoin.

Megan: A paycheck in Bitcoin.

Over the next few months, Ismael’s hometown would transform. Shopkeepers and locals would be encouraged to adopt Bitcoin by local community leaders. El Zonte turned into Bitcoin Beach.

[News audio:

VICE: For the last 18 months or so, the tiny surf town of El Zonte has been running an experiment with Bitcoin.

BBC: Down on the south coast called El Zonte, and it’s a weird and mysterious origin story.]

Ben: A weird and mysterious origin story that in some ways typifies the real world ambitions of crypto evangelists and wannabe Bitcoin utopia architects. And in other ways, represents the failures of those ambitions.

Amory: Failures that have reverberated way beyond Bitcoin Beach. And impacted the entire country of El Salvador.

[President Nayib Bukele: I will send a bill to Congress that will make Bitcoin a legal tender in El Salvador.] 

Alex Gladstein: You gotta think of all the jobs that this is bringing, I mean, it’s like a, a gentrification on steroids type of thing.

Ricardo Castaneda Ancheta: El Salvador lo que hizo fue salir a un casino a apostar con el dinero de la gente.

Darryl C. Murphy (English translation): What El Salvador did was going to a casino and betting with people’s money.

Mike Peterson: And so I think, you know, ten years from now, they’ll point back that this was kind of a transformational time in the country.

Amory: I’m Amory Sivertson…

Ben: And I’m Ben Brock Johnson, and you’re listening to Endless Thread.

Amory: We’re coming to you from WBUR, Boston’s NPR station.

Ben: And today, with Megan’s help, we’re gonna tell you the little story about Bitcoin Beach, and the big story about El Salvador.

Amory: El Salvador is the smallest country in Central America, nestled between Honduras and Guatemala and the Pacific Ocean.

[Documentary audio:

Narrator: El Salvador. Its primeval beauty is alluring but deceptive. Throughout this land of lakes and volcanoes, a civil war has been raging since 1980, claiming the lives of more than 40,000 people.]

Ben: For much of the 20th Century, the country has either been at war with its neighbors or with itself. A 12 year civil war in El Salvador ended in 1992, one of the most devastating conflicts in recent Latin American history.

[Now This: The junta quickly formed a military dictatorship, killing peaceful demonstrators, assassinating leaders who were trying to form socialist cooperatives among the poor people in the country.] 

Ben: Since then, El Salvador has enjoyed a succession of democratic elections, a period of relative peace for the country.

Amory: But there have been other problems to contend with in recent years, like gang violence in the country, which has spurred a migrant crisis for El Salvador’s neighbors.

[Newsreel audio:

Jouneyman Films: The capital of El Salvador is a battlefield, fought over by warring street gangs.

PBS: El Salvador is a daunting place to grow up. There are few job opportunities for young people. And the specter of gang violence is everywhere.

VICE: Not long ago the infamous MS 13 and 18th Street Gang made this country the deadliest outside of a warzone. But murders have plummeted and one man takes the credit.] 

Ben: In 2019, President Nayib Bukele took office. He is the country’s first leader in nearly 30 years who is not from the country’s two major political parties.

He ran on the promises to get rid of corruption, fight inequality, and crack down on the gangs. In 2019, he told the New York Times that the lack of economic opportunity and gang membership are intertwined.

Bukele: The real way to tackle gang violence is to correct the social dysfunction that we have in our country, with its social injustice, economical injustice, no opportunities.

Amory: Bitcoin Beach was a huge reason why President Bukele made Bitcoin legal tender last year.

Supporters of Bitcoin adoption were thrilled with this decision. 70% of people in El Salvador don’t have a bank account. And to receive Bitcoin, you don’t need an account or even a state issued ID. You just need internet access and a smartphone. This made it easy for people like Ismael to get on board. He’d never had a bank account before.

Ben: When Ismael first got paid in Bitcoin through the Blue Wallet app, he changed the currency to US dollars right away. The other kids in his group did the same thing.

Ismael: He paid us like $50, but we needed to use it for school, for parents to buy things we needed.

Amory: But then in 2020, well, you know what happened. The coronavirus shut down the world. And El Zonte was no exception.

Ben: The town was on lockdown. Meanwhile, Bitcoin advocates at Hope House had an idea. A stimulus plan for everyone to receive money — not in US Dollars — but in Bitcoin.

Ismael: Some of the sponsors support Bitcoin Beach, so they started giving us like $35 per each family.

Ben: Ismael said his youth group helped teach people in El Zonte how to download the Bitcoin wallet from the app store and access their stimulus money.

Amory: With a little bit of tech support, Ismael said people were excited to get their stimulus money, even if it was through a crypto wallet app.

Ben: Yeah, free money. That’ll get people pumped!

Amory: Yeah! So, El Zonte got really into Bitcoin in 2020. With Bitcoin in circulation, shopkeepers, street vendors, and gas stations started to post QR codes next to cash registers to receive payment in Bitcoin.

Ben: El Zonte is credited with creating the first successful circular economy for Bitcoin.

Amory: So, what does “circular economy” mean, you ask?

Ben: (Laughs.) Great question. Most people in the US who own Bitcoin keep it as an investment. You can’t go to your local Starbucks…

Amory: …Or your local Dunkies if you’re in Boston.

Ben: Yes. Some of us run on Dunkin’, that’s right. You can’t pay for your coffee with Bitcoin though. We don’t have the infrastructure or interest setup for that. Not yet anyway. But these people in El Zonte did it. And you can buy anything in the local shops with Bitcoin. A circular economy really means peer-to-peer transactions and trades, without third parties like banks or government involved. The currency is embedded in a community, so much so, you can even buy a fresh coconut?

[The Life of Jord YouTube video: Okay, that’s cool. It’s literally just a beach stall. Someone with a coconut. And I can just pay to their mobile phone with Bitcoin.]

Amory: It makes the nickname Bitcoin Beach very fitting. Local construction workers and laborers were also getting their salary in Bitcoin too. And experts say that’s a huge advantage to the residents of El Zonte, experts like Alex Gladstein.

Alex Gladstein: My name is Alex Gladstein. I work as the Chief Strategy Officer for the Human Rights Foundation.

Ben: We sat down and talked with Alex, who has written a lot about the benefits of cryptocurrency in nations around the world, particularly nations facing the threat of authoritarianism.

Alex: I’ve talked to people who’ve fled from Venezuela or or more recently, Ukraine, then Afghanistan, Syria. And it’s been able to give them that financial freedom and bring their wealth with them.

Amory: But we have to acknowledge Alex’s investment in the topic.

Ben: Are you invested in crypto in any way?

Alex: I own some Bitcoin, yes.

Ben: Alex visited El Zonte in 2021 and told us how Bitcoin is impacting the town.

Alex: Well, it’s a very hopeful effect. I mean, these people essentially live in a town where for generations they’ve been caretakers or fishermen. And, you know, through happenstance, they got this opportunity to build a community and then integrate Bitcoin into it. And you see a couple of things. You see people thinking about savings.

So I met this woman who was probably 75-years-old, and she had never owned really anything in her life. But because she started accepting Bitcoin in exchange for pupusas and in 2020 she was able to afford a truck and bought a truck for her family.

Amory: During our conversation with that young surfer Ismael, he talked a lot about this too. He says the possibility to save and grow wealth was not really feasible for people in his community before Bitcoin. In the past, people just spent what they had.

Ismael: In this community, even the country, our culture has been like working every day and spending the money you earn. And it’s crazy, but it is how it has been.

Ben: Ismael said educational programs at Hope House helped the community change their mindset.

Ismael: So he said that like, try to save. It was new for us, because even in the school, the kids from here, if they have $10, they spend it in one day.

Ben: He started to save his money. He bought a cart to sell ice around El Zonte and he gave surfing lessons to tourists who paid him in Bitcoin too.

Amory: The town was starting to attract crypto fans from all over. They wanted to support this new hub for digital currency. Since Bitcoin isn’t tied to any national bank, transfers can happen from anywhere without fees. There’s no need to exchange currency. Alex talked about this when told us about his visit to El Zonte.

Alex: Bitcoin’s not a liability. So for me to go down there without having to call a credit card company or call a bank or, you know, warn anybody, and I can just roll in there and just use neutral, open global money that’s not owned by any particular country to buy things was, was amazing. And I was able to use an ATM without ID, I thought that was really cool.

Ben: Sending money abroad without transfer fees is a big deal. Over 2.5 million Salvadorans living abroad send much needed money, called remittances, back home to family members. Remittances make up a quarter of El Salvador’s GDP.

Amory: To wire money through a bank or a service like Western Union, you have to pay a fee, a remittance fee.

Depending on how much you are sending, the exchange rate, and the bank’s flat rate for a transfer. This could be up to 45 US dollars per transfer. So sending remittances without a fee and without exchanging currency is super convenient. And Alex told us a story about a local barista really benefiting from this.

Alex: I went to Point Break Cafe, great cafe. One of the people who works there. Her name’s Karla. Karla makes an amazing cappuccino.

Ben: Alex filmed a video of paying in Bitcoin at the cafe and posted it to Twitter. The tweet says in part: “Flawless experience. If you visit, make sure to stop by for a coffee with Karla, an excellent barista. You can tip her instantly from anywhere in the world.”

He added the QR code for Karla’s tip page on his post. And his tweet blew up.

Alex: So this, my video got them intrigued and they went and they went ahead and they sent a dollar, $5, $10.50, a cent through Lightning, which is like a way to spend Bitcoin cheaply and quickly. You can send any amount, it doesn’t really matter. But she just received hundreds and hundreds of these things. And I just thought that was a beautiful moment. That was really cool. It showed what’s possible when humans aren’t restricted by national borders.

Amory: So Bitcoin is making a difference to a number of people in El Zonte. But how did this community get flushed with Bitcoin in the first place?

Ben: This all goes back to the guy who first hired Ismael to work at Hope House. That guy’s name is Jorge Valenzuela. Ismael says it was Jorge who first got him access to Bitcoin. Jorge was working with a fellow teammate from America, an investor in this economy, named Mike Peterson.

Megan: So, you ok if I hit the record button?

Mike Peterson: Okay. Let’s go.

Ben: Mike started visiting El Zonte for its surf scene 18 years ago.

Mike: You know, the waves are great, the water’s warm, but most of all, the people were just super friendly. And so I felt like I had a real connection there. And so I told my wife, “Hey, we need to buy a place here.”

My name is Mike Peterson and I’m the director of Bitcoin Beach and currently living in El Zonte in El Salvador. I’m part of the team that was behind the Bitcoin Beach Initiative that spurred the adoption of Bitcoin in El Salvador. And we’re kind of in the midst of that craziness right now.

Ben: Mike’s saying craziness like it’s a good thing. And a few months back when we spoke with him he had good reason. Bitcoin was way up. But now, some people would say, with plenty of evidence that things are bad crazy.

Amory: More on the bad crazy, in a minute.

[SPONSOR BREAK]

Amory: Mike Peterson, whose business card describes him as director of Bitcoin Beach, used to be a crypto skeptic.

Mike: When I first read about it, I thought this sounds like some type of scam or some type of Ponzi scheme. You know, how how could this actually work? But then I started digging into it and, and really starting to understand what Bitcoin was trying to do, that it was a type of money that wasn’t dependent on government and the state couldn’t get in between you and being able to use it and then also couldn’t just print more of so you didn’t have to worry about your your money being inflated away. 

Amory: Mike first tried to buy Bitcoin in those “early days” about 10 years ago. He was not successful.

Mike: It was a super complicated process. So I didn’t really buy any Bitcoin until probably, I think 2016 when it was, you know, much easier.

Ben: So Bitcoin was an interest Mike had on the side. Until one fateful day in 2019, Mike was hosting a conference for his NGO. The leader of another organization came up to speak with him about a mysterious Bitcoin donor.

Mike: And the head of that organization knew that I was into Bitcoin and he asked me, “Hey, we had Bitcoin donated to us, how can we use it?” And so I talked them through different scenarios of what they could do with it and didn’t think anything else of it.

Amory: Mike says three months later, that same person called him up again and asked…

Mike: “Hey, do you want me to connect you to this donor and see if they want to support what you guys are doing in El Zonte?”

Ben: There’s very little information on who this donor is, an anonymous philanthropist, who purchased Bitcoin back when the currency was worth 5 to 10 cents a piece.

Mike: I didn’t even meet the donor. I still don’t know who the donor is. Even the donor’s name. I met a representative of the donor and I thought I was meeting the donor, but I went to this meeting. There was somebody the donor had hired to work with organizations like ours.

Ben: Can we just pause for a second and acknowledge that this is nuts? That a completely anonymous donor is having a huge impact on this tiny town?

Amory: It is in keeping with the history of Bitcoin and crypto. The jury’s still out on who the inventor of Bitcoin is.

Ben: True. Satoshi Nakamoto if you’re an Endless Thread listener, be in touch.

Amory: Our sources told us on background that they couldn’t comment on any terms the donor agreed upon, to you know, maintain their anonymity. We do know that Jorge and a “select few” at Bitcoin Beach know about the donor’s identity. But Jorge, Mike, and our other sources say the donor’s identity is not relevant.

Ben: We tend to think of anonymous donors as being neutral or something.

Amory: They’re so generous that they want to give away their money without getting credit!

Ben: But just because someone doesn’t have an identity in the transaction does not mean they don’t have an agenda in the transaction.

Amory: Mhm. And Mike says the mystery donor’s representative told him that he was willing to give away a lot of money in Bitcoin to the NGOs in El Zonte, the equivalent of a 100k. But on one condition.

Mike: We have the stipulation that we want them not to just cash out the Bitcoin we want to see be used in real ways and the more it circulates the better from their perspective. And so that was yeah, that was kind of how that planted a seed in my head. And I started thinking through all the different ways we could integrate it into what we were already doing, but then also take it a step further and really create a circular economy.

Ben: If you look online, you’ll find a lot of success stories in El Zonte, similar to what happened with Karla and Ismael.

Mike: So I think, you know, ten years from now, they’ll point back that this was kind of a transformational time in the country that they went from, you know, people just barely eking by to, you know, moving into more of a middle income country.

Amory: But Mike and Alex Gladstein of the Human Rights Foundation said Bitcoin’s success in El Zonte only happened because of the close knit community and Bitcoin educational programs that spread the word.

Programs like the one at Hope House, where Ismael first received a salary and education in Bitcoin.

Mike: I think it’s important to kind of stipulate we don’t think Bitcoin is some magic bullet. And even the changes we’ve seen are Bitcoin being used in conjunction with some amazing social programs that we’ve rolled out and that our team is really investing and mentoring and the lives of the young people in El Zonte.

Alex: It works in El Zonte because it’s a small community and people trust each other and they’re, they’re willing to learn and spend time learning about it. And they want to learn about it because they’re like, why are all these foreigners coming here? What’s going on with this thing?

Ben: Mike told us no one in El Salvador expected El Zonte’s circular economy to be replicated in other parts of the country even as President Bukele also said Bitcoin would create job growth, take away reliance on the US dollar, and stimulate investment in the economy.

Bukele: In the short term this will generate jobs and help provide financial inclusion to thousands outside the formal economy.

Ben: But a national, top down adoption is very different from a community centered approach.

In one poll by Central American University, over two-thirds of respondents said they disagreed or strongly disagreed with the decision to make Bitcoin an official currency. When Bitcoin was implemented, over a thousand people protested in the capital of San Salvador.

[Protest audio

Amory: And members of parliament wore t-shirts during hearings to oppose the Bitcoin law from being passed. The shirts had that red circle with a slash running through it. It looked like a “No Smoking” sign but it had the Bitcoin logo in the middle. One parliament member, Claudia Ortíz, told Bukele no one wants Bitcoin!

[Claudia Ortíz: Se los dijimos, nadie quiere Bitcoin.(English translation: We told you, nobody wants Bitcoin.)]

Amory: People are worried about crypto’s volatility, and how the value of Bitcoin can fluctuate dramatically. Ismael says this was confusing, especially when El Zonte was first getting into Bitcoin back in 2020.

Ismael: I tell you, we, we never understood that, at that time and then and then with Bitcoin less like, like decreasing or increasing and it was crazy like how, how you can see that if you, if you had $50, maybe next day, $49 and it was crazy. And we said like, how can I be like losing money?

Ben: Bitcoin can feel like a gamble because of this volatility. And currency isn’t supposed to be volatile. Like a dollar is supposed to represent a dollar and it’s supposed to buy whatever you can buy for a dollar. This is why most Salvadorans around the country do not use Bitcoin even one year after the law passed to make it legal tender.

Amory: In one survey published in April 2022, the vast majority of Salvadorans are not using Bitcoin for day to day transactions or transfers. Only about 3% of those surveyed said they receive remittances through Bitcoin.

That means Western Union and other familiar methods of sending remittances are reigning supreme.

When Bitcoin was made the official currency, a number of academics and Bukele’s political opponents spoke out against the decision. Critics say taxpayer money that funded Bitcoin’s rollout will only benefit wealthy elites and private companies, not the average Salvadoran. Alex Gladstein of the Human Rights Foundation talked about how locals are already being pushed out of El Zonte.

Alex: You got to think of all the jobs that this is bringing, I mean, it’s like a gentrification on steroids type thing. Like there’s all kinds of foreign money coming in to build things.

Ben: When the law was passed to make Bitcoin legal tender last summer, a group of eighty Salvadoran academics issued a statement asking the government to repeal the law.

Amory: We talked to one professor who signed the statement and is a critic of Bukele: Ricardo Castaneda Ancheta. He is an economist and works for the Central American Institute for Fiscal Studies. When the Bitcoin law was in deliberation, he tweeted, “Making economic policy is not a game of Monopoly.”

Ricardo Castaneda Ancheta: Lo que pasa es que acá no estamos hablando de el dinero de una persona y la decisión que alguien puede tomar de manera individual.

Darryl C. Murphy: The situation’s critical since we are not talking only about the income of one person.

Ben: Looking at the big picture, other places in El Salvador do not have coordinators like at Hope House in El Zonte to provide the education and Bitcoin infrastructure to locals.

Ricardo: Adicionalmente, en El Salvador, muchas personas ni siquiera tienen acceso a la electricidad y tampoco tienen acceso a Internet. Es decir, que desde el principio imaginémonos que hubiera habido una adopción masiva del bitcoin. Estas personas se hubieran quedado por afuera.

Darryl: And it’s important to take into account that more than half of the population is not able to have access stable internet. Therefore, if Bitcoin was accepted as a currency, they wouldn’t be able to even have access to it on a daily basis.

Amory: Ricardo said that he is not necessarily against cryptocurrency as a whole. But he’s against how the government rolled out Bitcoin. For one thing President Bukele is using funds from other federal programs to invest into Bitcoin.

Ricardo: Los 225.3 millones de dólares que se han utilizado del presupuesto representa 1/5 del presupuesto del Ministerio de Educación. Representa casi tres veces el presupuesto de la Universidad de El Salvador, que es la única universidad pública del país. Es decir, que el costo de oportunidad es muy alto.

Darryl: 225.3 million dollars is one-fifth of the budget for the Ministry of Education Fund is being used for this implementation of Bitcoin. It’s one-third of the budget for the only public university in El Salvador. This opportunity cost is very high.

Ben: Ricardo also pointed out that for a currency that is meant to be decentralized, making it a national currency kind of goes against crypto’s basic principles.

He also pointed out we only know how much Bitcoin the country is purchasing if the president tweets about it. This information is not publicly available.

Ricardo: Sobre todo porque la idea del bitcoin es alejarte de la supervisión, incluso que hacen los propios gobiernos. Pero resulta que la paradoja en El Salvador es que quien está implementando lo completamente es el gobierno. De hecho, la wallet que más se utiliza porque el gobierno así está utilizando todas las herramientas, es la Chivo Wallet, en la cual tiene el control. La llave es el gobierno. Nadie, por ejemplo, tiene acceso para saber en realidad cuántos Bitcoin ha comprado. El gobierno tampoco tiene acceso para saber si realmente el gobierno ha tenido ganancia o pérdidas. Lo que los números indican a partir de cuándo el presidente tuitea que se han comprado bitcoins es que el país ha perdido. Pero eso no existe, esa información pública.

Darryl: The idea behind Bitcoin is to get away from supervision, even by government’s themselves. But the paradox in El Salvador is that the entity completely implementing it is the government. Nobody has access to know how much Bitcoin they have bought. The numbers indicate from when the president tweets that the Bitcoin purchased by the government has decreased in value. But that does not exist, that public information.

Amory: Nayib Bukele prides himself on being a millennial president. At 41-years-old, he is one of the youngest heads of state in the world. He tweets a lot. Alex Gladstein, who studies the intersection of crypto and politics says…

Alex: He plays the media extremely well. He’s probably the most social media savvy leader I’ve ever seen. A lot of people say Trump was very good. But Bukele is, is different. Bukele is, like, cool. Like, he’s hip. But he really masterfully plays the international audience like, like, like a musical instrument.

Bukele: Believe it or not we have an opposition. And they’re all full of b*******! They’re still allowed to be full of b******* so.

Ben: He’s also very controversial and he knows it. He calls himself “The World’s Coolest Dictator”.

Amory: Woof.

Ben: I know. Since taking office in 2019, Bukele removed all 5 judges from the Supreme Court and the Attorney General. He also held legislative sessions with an entourage of armed police and soldiers.

Amory: Bukele also made headlines by announcing plans for a Bitcoin city, not just a beach but a city, to be built at the base of a volcano, which will mine Bitcoin and power the city using geothermal energy.

Ben: Just to say that again: a city at the base of a volcano which will use the geothermal energy that will mine the Bitcoin. If this doesn’t sound like a supervillain scheme of epic proportions…I don’t know what is. I just. Wow.

Amory: Yeah. I’m with you. And experts are not really enthused about this.

Alex: It’s absurd.

Amory: (Laughs.)

Ben: It’s pretty absurd right?

Alex: Yeah, I agree!

Amory: Even hardcore crypto supporters we spoke to on background said Bitcoin City was just an aspirational goal for the president.

Ben: Most definitely.

Amory: Most notably, Bukele swore to crack down on gang violence in El Salvador. In 2015, an article in The Guardian called it “the homicide capital of the world.”

Earlier this year, Bukele came under fire for enacting mass arrests. Nearly 40,000 Salvadorans have been arrested for suspected gang affiliation.

Human rights advocates and foreign leaders have criticized Bukele for issuing a state of emergency, suspending the right to legal counsel, and giving police special permission to arrest anyone who might be a suspected gang member.

Ben: What’s striking to us is that many Bitcoin advocates don’t really care about these valid criticisms from the international community, or from local experts like Ricardo Ancheta. Mike Peterson — who, remember, has a business card that says Director of Bitcoin Beach — praised Bukele during his interview with us, which non-rooster-producer Megan Cattel did for us.

Mike: When people say that Bukele is a dictator, what they leave out is the fact that he has over an 85% approval rating in the country. So he is extremely popular. There is a vocal minority that don’t like him and because of that, don’t like Bitcoin and have tried to make that more of a political issue. And so I think one thing we have to be careful of as Americans is thinking that we know what is best for other governments and let people in other countries choose the type of governments that they want to have. We have a history here of trying to impose our will on other countries, and usually it hasn’t worked out very well.

Amory: It’s a pretty weird thing to say from an American who tried to impose his will on another country?

Ben: Mike isn’t necessarily wrong about Bukele’s popularity. NBC News reported that the president’s approval rating is at 90%. And murder rates dropped by 15% during Bukele’s first three years of his presidency. But mass arrests have yet to be seen as helpful in curbing the amount of violence Salvadorans are facing from gangs.

We brought this up when talking with Alex Gladstein.

Alex: You have groups that are pushing against what they see as a strongman in the making, kind of dismantling democratic institutions and checks on his power. But they’re having a hard time, maybe understanding how to grapple with this seeming paradox, that while he’s doing those things, he’s also introducing a new, a new technology into the country that empowers individuals.

Amory: Alex and Ricardo both told us that Bukele used Bitcoin first and foremost as a marketing tool for himself, not to help the average citizen improve their way of life.

Alex: What he bargained on was that it would make him more prominent. And it did. And I think that he’s the most recognizable Central American leader right now, probably for a lot of people, and barely anyone knew who he was like literally a year ago. So, so it worked. I don’t know where it goes from here. The reality is if Bitcoin continues to grow and expand around the world as it has been, he will be seen as a visionary, you know. But his record could be quite tarnished by his political legacy unless he stops with the authoritarianism stuff.

Ben: It’s been about a year since Bitcoin was made legal tender in El Salvador. Many, many outlets have reported that Bitcoin in the Central American country is benefiting only a few elite players: stockholders in companies and government officials. Ricardo Ancheta, the economist from El Salvador, talked about how this Bitcoin experiment has dire consequences.

Ricardo: En El Salvador lo que hizo fue salir a un casino a apostar con el dinero de la gente. Pero ese dinero de la gente en realidad representa el bienestar de la y el bienestar de ellos mismos y la posibilidad de que el país pueda avanzar hacia una senda de desarrollo. Seguramente el futuro pasa por mayor uso de tecnologías como el blockchain, pero cada una de estas tecnologías deben asegurar que los beneficios sean mayores que los costos para la población, pero especialmente para las personas más pobres.

Darryl: What El Salvador did was going to a casino and betting with people’s money. Money that actually means a lot to them. It means their stability, their well-being, and the possibility of the country ‘s path to develop. Surely the future will go through greater use of technologies such as blockchain, but they must ensure that the benefits are greater than the cost for the population, especially the poorest.

Amory: The Bitcoin market crashed in May of 2022. The market lost 1 trillion dollars in value, according to the New York Times.

[Al Jazeera: Bitcoin butchery. Cryptocurrency’s struggle to regain ground after losses not seen in years.]

Amory: But that hasn’t stopped Bitcoin evangelists from keeping the faith. Bitcoin supporters say the volatility is temporary. If people keep their currency in Bitcoin, they won’t lose any money if the value will eventually go back up. Nayib Bukele tweeted in June for the country to stay patient, to “stop looking at the graph and enjoy life.”

Ben: But many people do not keep their Bitcoin saved as an asset. 88% of merchants who accept Bitcoin convert it to US dollars right away. That means the volatility of the currency is impacting people in real ways.

Ricardo: Si tú tienes 1 millón de dólares y decides invertir 100.000 $ y tú los pierdes, pues el día de mañana no pasa absolutamente nada. Tú seguirás comiendo, seguirás comprándote ropa cara, seguirás viajando. Pero en el caso de El Salvador, cuando 25 centavos hacen la diferencia entre comer o no comer, entre tomar el bus o caminar decenas de kilómetros, pues la volatilidad sí que les ha pasado factura.

Darryl: If you, for example, have $1,000,000 and invest 100,000 and you lose them because of how volatile the market is, you’re going to be okay. You’re going to be able to have food, have access to luxury items. But, if 20 cents makes a difference between eating or not eating, between taking the bus or walking tens of kilometers, well, that’s where volatility has taken its toll.

Ben: According to multiple news outlets, the Bitcoin El Salvador bought with public funds is worth 50% now than what it was back in September. Financial analysts say it’s a steep cost to pay. But the country’s Finance Minister says the bet will pay off in the long term saying: “We aren’t going to have results overnight. We can’t go to bed poor and wake up millionaires.”

Alex: Here you have the first government in the whole world making Bitcoin an official currency of the nation. And I think that that’s potentially something that will spread. It will take time. It’s going to take many years. But I do think Bitcoin ends up being a digital currency in many different nations.

Amory: When we first talked to Ismael, he had some internet trouble. The connection fizzled out, and when we asked to reschedule, we never heard back.

In late August, we saw a tweet from Jorge Valenzuela with photos including Ismael. He was standing outside Hope House with other members, at an event welcoming President Bukele, who was visiting El Zonte.

Ben: We tried getting in contact through Hope House, Bitcoin Beach advocates, and other surf groups in El Zonte. But we have not heard back.
Whatever or however we feel about Bitcoin, it’s here to stay as a polarizing topic around the world.

In April 2022, the Central African Republic followed in El Salvador’s footsteps and made Bitcoin legal tender.

Meanwhile, the Afghanistan Central Bank outlaws crypto just last month. Other nations who have restricted or banned cryptocurrency include Bolivia, China, Nepal, just to name a few.

Amory: But that hasn’t stopped crypto evangelists from heading to places like South Africa and Venezuela, looking to create a Bitcoin Beach of their own.
From El Zonte to Bitcoin Ekasi in South Africa, crypto evangelists know that recruiting the next generation to their cause to help spread the crypto gospel is key.

Ben: So, next and last in the series, we’re going to look into a whole other aspect of the crypto-verse, connected to that next generation.

Ben: How much money do you make right now mining crypto?

Ishaan Thakur: It’s, it’s a lot less than before, I would say around $15,000 a month.

[CREDITS]

Amory: Endless Thread is a production of WBUR in Boston.

Ben: Want early tickets to events, swag, bonus content? The recipe for my Bitcoin Beach cocktail, Amory’s surfing instructional video? Join our email list! You’ll find it at wbur.org/endlessthread.

Amory: This episode was written, produced, and web produced by Megan Cattel. And co-hosted by us, Amory Sivertson…

Ben: And Ben Brock Johnson. Mix and sound design by Matt Reed. Editing help from the rest of the team: Dean Russell, Nora Saks, Quincy Walters, and Grace Tatter. Special thanks to Sofia Alonso and Jessica Alpert for their help with translation and interpretation, and to our colleague Darryl C. Murphy for voicing Ricardo Ancheta’s contributions to this episode.

Amory: Endless Thread is a show about the blurred lines between digital communities and buying a latte with two ten-thousandths of a Bitcoin. If you’ve got an untold history, an unsolved mystery, or a wild story from the internet that you want us to tell, hit us up. Email Endless Thread at WBUR dot ORG.

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