Daniel García, 31, owner of Lagarza, checks on his phone how many bitcoin transactions he has received since El Salvador adopted it as legal tender alongside the US dollar in 2021; he could only count 15.
The voices of crypto-skeptics are getting louder
“The vast majority of customers still prefer to use a credit card or pay cash,” says García. He recalls that the only few foreigners who have paid like this, do so to “say, ‘I paid for my beer in bitcoin,’ and they’re pretty excited to see the transaction was approved.”
Like other countries in the Central American region, El Salvador is trying to become a bitcoin hub to attract tourism and reduce its poverty rate.
Last year, the country became the first to adopt bitcoin as legal tender, despite residents’ refusal. While cryptocurrency proponents say it will boost the economy, skeptics fear it could cause instability, inflation and money laundering in a country with a poverty rate that has reached 36.4% in 2020, one of the highest in Latin America and the Caribbean, according to the Organisation for Economic Co-operation and Development.
This crypto investment was supposed to be “stable”. It’s a crazy race.
According to the World Travel & Tourism Council, tourism accounted for around 6% of El Salvador’s gross domestic product in 2021.
Recent bitcoin losses have added to fears that El Salvador will default on its debt after President Nayib Bukele invested hundreds of millions in cryptocurrency.
About 20 minutes from Shalpa is El Zonte, a popular surf beach. The road to the waterfront is rural, with unfinished stone roads, small businesses and street vendors. Bitcoin is accepted everywhere; There’s a sign at the entrance that says “Welcome to Bitcoin Beach,” and there’s even a Bitcoin ATM in the area.
In 2019, two years before bitcoin was adopted as legal tender, Mike Peterson, a former investment adviser from the United States, moved to El Salvador with the aim of bringing crypto to El Zonte and renaming the region.
Central America struggles to bring back tourism
The Salvadoran government and Peterson hope this tourist beach will attract investment by finding a way to create a sustainable cryptocurrency community. However, he faces the same challenges as Shalpa.
People “really don’t use bitcoin because they don’t understand it and the minority who do are tourists,” said Ismael López, 32, one of El Zonte’s security guards.
“Bitcoin is still in what is called its discovery phase, and its value fundamentally depends on its level of adoption. Cryptocurrencies are the money of the future, but for them to be the money of the present …their value must be sufficiently stable,” said Enrique Dans, professor of information systems at IE Business School in Spain.
Locals who live below the poverty line and run cash-based businesses are unfamiliar with this type of technology and the risks of bitcoin. “These countries need to consider that the use of bitcoin requires people to have access to digital media, and this cannot be taken for granted in the region,” Dans said.
As in the case of “Bitcoin Beach” in El Salvador, Guatemala and Honduras are replicating the same idea by creating a cryptocurrency hub in tourist areas. Patrick Melder, 54, from Houston, recently started the “Bitcoin Lake” project near Atitlán, a volcanic lake in southwest Guatemala. Surrounded by small towns, it also attracts tourists who want to enjoy nature and outdoor adventures.
As the implementation of cryptocurrencies continues in these areas, experts say one potential solution to educating locals is to work on financial literacy, which means teaching people how to manage e-wallets, showing them how to make mobile payments and, above all, create awareness of the risks of cryptocurrency. “The literacy of a country’s population in the use of cryptocurrencies can have very positive effects on its competitiveness in the future,” says Dans.
In Honduras, Juan Mayén is the pioneer of bitcoin. The 28-year-old recently launched “La Bitconeira”, a company that installs Bitcoin ATMs throughout the country, including in La Ceiba, another tourist area that offers similar amenities to beaches in El Salvador and the Lake Atitlan in Guatemala. “We have taught over 100 Hondurans how to create a wallet, receive bitcoins and insert money into the ATM,” Mayén says. “We have people who come from rural areas, and we try to explain to them as well as possible that anyone with a smartphone can download an electronic wallet.”
But even if locals become more crypto literate, will visitors actually use it?
Back in El Zonte, Oscar Nevermann, 29, from Sweden, and Lauren Shekla, 26, from Germany waited for their check at the vegan restaurant Colocha Café. Excitedly, Shekla pulled out her phone and tried to send the transaction “as I pictured it in my mind,” she says.
“Honestly, we just want to pay with bitcoin because it’s the first country in Central America to accept it, so we just want to see out of curiosity, if it’s as easy to use as everyone claims” , says Nevermann.
Moments later they had to pay cash instead because although the business said they accepted bitcoin, the waitress couldn’t understand how to use it.