In early June, a prerecorded video informed citizens of El Salvador that they were about to participate in a grand experiment. The speaker was Nayib Bukele, the country’s 40-year-old president, who declared that he had a plan for a better future: Bitcoin. The cryptocurrency would become legal tender in the country, he said—a global first that would elevate it to the same legal status as the US dollar, El Salvador’s national currency since 2001. This would help the jobless, he added, and those left behind by banks. But for a plan meant to help struggling Salvadorans, they were conspicuously absent; Bukele wasn’t even speaking Spanish. Instead, the message was played for a cheering crowd of international Bitcoin enthusiasts at a conference in Miami.
In the capital of San Salvador, Mario Gomez, a charismatic, 36-year-old software developer and founder of a “hacker space” for fellow coders, was skeptical. “I’m not completely convinced of everything that these people are selling,” he explained later. A fan of open source technology, he does not consider himself an enemy of Bitcoin, but he was troubled by how the government seemed to be foisting bitcoin on its people. So he took to Twitter. Over the subsequent weeks, his criticism of the plan grew in volume, as did his following.
On August 31, Gomez tweeted several leaked slides of an app called Chivo, the government’s upcoming Bitcoin wallet, along with critiques. The next morning, he was driving his mom to work, as usual, when he was pulled over by the national police. There was a problem with his car, the officers told him, though they wouldn’t tell him what the problem was. Gomez recalls feeling more confused than terrified. He quickly typed a message to his roughly 8,000 Twitter followers before the officers confiscated his phone. His mother took a photo of him loaded into the bed of a police truck, which took him to a nearby station and then to another, where he says he was denied access to a lawyer. Meanwhile, a protest grew on Twitter demanding his release. Six hours later, the authorities let him go.
The Salvadoran police have since said Gomez is being investigated for unspecified financial crimes, though no charges have been filed. Gomez and lawyers from Cristosal, a human rights group representing him, contend his detention is connected to the information he shared about Chivo and was an act of intimidation for speaking out. His phone was never returned, but he has since returned to Twitter, where he insists he’s still just a guy giving opinions related to his work. He finds it rather ironic. Bitcoin has long been held up as a beacon of freedom from banks and governments. And yet, somehow, by opposing his country’s embrace of Bitcoin, Gomez had become a reluctant political dissident. The national police did not respond to a request for comment.
Bukele’s June Bitcoin announcement came as he tightened his grip on power. The first sign of an up-and-coming strongman appeared a year earlier when, after losing a legislative vote, he entered the country’s Legislative Assembly flanked by armed police and soldiers. Seated in the chair reserved for the president of the legislature, Bukele prayed to God, who he later said told him to have patience. He did not need to wait long. In May, after securing a supermajority in the legislature, Bukele’s coalition voted to remove the attorney general and all five members of the country’s constitutional court and replace them with loyalists. Soon after, Bukele engineered an extension of his presidential term beyond the usual limits.
El Salvador’s authoritarian turn has brought warnings from the US, which has sanctioned close Bukele allies for corruption and said it will shift aid from the government to civil society groups. But within El Salvador, Bukele remains popular, with polls putting his approval rating at more than 80 percent. For a time he changed his Twitter bio to “World’s coolest dictator." (It now reads “CEO of El Salvador.”) “The cult of personality is particularly worrisome, I think, for many because it’s reminiscent of a lot of the Latin American caudillos of the past,” says Eduardo Gamarra, a political scientist at Florida International University.
Bukele has pitched Bitcoin as an opportunity for Salvadorans, especially as a way around high fees for people receiving US dollars from abroad, a flow that represents nearly a quarter of El Salvador’s economy. He has confidently predicted that Bitcoin’s value will soar, bringing the country riches. But despite Bukele’s popularity, ordinary Salvadorans appear uncertain about who stands to benefit. A September poll found that more than two-thirds of Salvadorans disapprove of the “Bitcoin Law,” and protests against using tax money to buy a volatile cryptocurrency have drawn thousands. Activists such as Gomez say the government has moved too fast and that the struggling people Bukele claims he wants to help are the most likely to sustain losses. In the poll, respondents’ biggest concerns about Bitcoin were its volatility and that they didn’t know how to use it.
But the Bitcoin effort has only grown in scale and hype in recent months—much of it driven by Bukele’s personal Twitter account. The government is pushing measures to entice foreign investors, including a $1 billion Bitcoin-backed bond, economic zones with lax regulations, tax breaks, and permanent residency for high-dollar investors. Those policies have largely been crafted by a small group of presidential advisers, many of them foreign, according to people involved in the discussions.
“I think he’s betting on something bigger,” says Jose Luis Magaña, an El Salvador–based economist who teaches at Universidad Centroamericana. El Salvador has staggering public debt and has sought a $1.3 billion relief measure from the International Monetary Fund to cover it. Otherwise, it may default, putting at risk programs that are key to Bukele’s popularity. Magaña suspects that Bukele, faced with dwindling options for relief from abroad, may view Bitcoin as a last ditch effort to raise funds—even if it further alienates the US and the IMF, which has criticized the Bitcoin plans.
Bitcoin enthusiasts—some of them shaping Bukele’s policy behind the scenes—are left in an awkward position. Created in the wake of the global financial crisis, Bitcoin's fans have held it up as a symbol of freedom, an open financial technology free of government control that would give people more autonomy. Now, they are helping to prop up an increasingly autocratic regime, one that could offer a roadmap for others around the world.
On Reddit, Vitalik Buterin, cofounder of the cryptocurrency Ethereum, called Bukele’s moves “reckless” and “contrary to the ideals of freedom,” noting the risks of hacks and scams on people who were told little about Bitcoin by the government. “Shame on everyone (OK, fine, I'll call out the main people responsible: Shame on Bitcoin maximalists) who are uncritically praising him,” he wrote. For some Salvadorans, the hypocrisy is easy to spot. Bitcoin “should be a symbol of freedom and anarchy and independence from the state,” says Napoleon Cornejo, a Salvadoran computer engineer. “Instead, [Bukele] has turned it into a symbol of oppression.”
This spring, Jack Mallers, the 27-year-old creator of a Bitcoin payments app called Strike, was eating sushi with friends in a San Salvador restaurant when he received a Twitter message from Bukele’s brother Yusef. Strike is one of several Bitcoin wallets that use the Lightning Network, a technology that makes it easier for people to spend Bitcoin, ordinarily slow to use and involves high fees. Mallers had arrived in the country a few weeks earlier to surf and to observe an intriguing experiment in the coastal town of El Zonte, also known as Bitcoin Beach, where an anonymous donor had set up residents with Bitcoin wallets.
Yusef Bukele had heard about Strike’s inroads in the country, and he invited Mallers to a meeting. The government had been interested in blockchain technology, entertaining proposals from international consultants, according to reporting by the Salvadoran newspaper El Faro, for things like a digitized national currency and blockchain-based government services. But Mallers says he bonded with the brothers over a plan that would make Bitcoin a central part of daily Salvadoran life. He agreed to advise them on the project.
A few months later, Mallers found himself onstage at Bitcoin 2021 in Miami, wiping tears from his eyes as he unveiled Bukele’s video message about legal tender. For the Bitcoiners who convened with Bukele later that night in a Twitter Space to celebrate “El Jefe,” it was a major symbolic victory—a claim for Bitcoin’s legitimacy on the world stage. They also called it a practical victory for poor and working Salvadorans. Meanwhile, Salvadorans attending the Space complained via tweets that they weren’t being unmuted to ask their president questions. Three days later, the Bitcoin bill was passed by the Assembly, set to take effect in early September. The government also said it would launch the Bitcoin wallet Chivo—Salvadoran slang for “cool”—with a $30 credit for anyone who opened an account.
Within the crypto community, fissures quickly erupted. Many embraced the news—and the president—wholeheartedly; others described him as a necessary evil. “We need to separate Bitcoin and Bukele,” says Alex Gladstein, a Bitcoin advocate and chief strategy officer at the Human Rights Foundation, a libertarian nonprofit. It’s possible to celebrate El Salvador’s adoption of Bitcoin while also condemning Bukele’s human rights violations, he says, noting that authoritarians often spur financial innovations that end up helping people. “I view Bitcoin as a Trojan horse,” he says. “Bukele adopted Bitcoin out of self-interest, not out of altruism. I don’t believe he did it to help his people. But it doesn’t matter because it will help his people.”
Others see less upside for locals. While legal-tender status is clearly a watershed moment for Bitcoin, the practical benefits are less clear for Salvadorans, says Jill Gunter, an investor who has researched the use of cryptocurrency in struggling economies like Venezuela. Bitcoin is a volatile, speculative asset that requires time and education for people to use it responsibly, she says. And technologies like Lightning are new and not yet particularly suited for handling the needs of millions of users. None of that appears to have factored into the launch. “It’s not clear to me what they were trying to solve for besides a big press-release moment to get a lot of attention from one part of the technology industry—which they succeeded in doing,” she says.
On the eve of the September launch, Mallers, sitting in Chicago in a trucker hat and a tie-dye hoodie, was feeling optimistic about the prospects for Salvadorans. “They have not had a fair opportunity, and through the beauty of Bitcoin they’ll get it,” he says. But he, too, had grown wary of some aspects of the government’s approach. The law did not look like a draft he had seen. Gone was the highfalutin language he had suggested about enshrining financial freedoms. Instead, there was the now infamous Article 7, a provision that requires merchants to accept Bitcoin—a mandate. (Bukele has since said that there are no penalties for businesses that decline it.)
Mallers also feared the government was moving too quickly. Three months was not enough time to build an app that would handle people’s money smoothly and securely. There would be risks of hacks and bugs and privacy flaws. Other wallets, like Strike, were supposed to be able to connect with the government’s Chivo wallet through Lightning, but his app was being slowed by roadblocks. Strike was still applying for licenses and didn’t have a way to connect with Salvadoran bank accounts, so in the meantime users were receiving their balances in Tether—a so-called stablecoin that has come under scrutiny from law enforcement—rather than dollars. Strike’s terms indicate the situation is unchanged. The deck appeared stacked in favor of the government. To Mallers, that looked like a recipe for trouble.
On September 7, the Chivo launch was greeted with protests in the streets of San Salvador. Merchants worried about volatility and the requirement that they accept Bitcoin; others cited a lack of transparency about the origins of the law, the Chivo wallet, and the public money that would fund the effort. The government had pledged to create a $150 million fund to back bitcoins held in Chivo wallets, but offered few details about whether public funds would be held as bitcoins or dollars. If it were bitcoins, how would profits from that fund be used, and what would happen if the value fell suddenly? (Bukele has since tweeted that Bitcoin profits were being used to fund a variety of programs, including dental care and a veterinary hospital called Chivo Pets.) The price of Bitcoin plummeted nearly 10 percent on launch day; by early January, it remained at roughly the same level.
Bukele has called the launch a success, with more than 2 million downloads, and his supporters say Bitcoin is already helping low-income Salvadorans. “Believe me, poor people aren’t dumb. If there’s something that allows them to make an extra buck here or there it’s a great thing for them,” says Damian Merlo, a US-based consultant and registered lobbyist for the Bukele administration in Washington. On the day the law went into effect, an organizer behind Bitcoin Beach held a live Twitter Space to mark the historic occasion—dubbed Bitcoin Day—with a toast. Salvadoran supporters living in the US joined to share their excitement. “It’s so nice to see we’re making the news for something other than gang violence for once,” one speaker said. The government's finance ministry said in October that roughly 2.5 percent of total payments from the US to El Salvador were being sent through Chivo.
Some in El Salvador have suggested those numbers may be inflated. Some people may have used the app just to claim the $30 credit and then dropped it. “A lot of businesses use Bitcoin here, but I don’t know if it will ultimately be the application that the government made. I honestly still haven’t used it, but I have the application ready in case anyone wants to pay with bitcoins,” says the owner of a small clothing shop in San Salvador who asked to not be named out of fear of retaliation.
Salvadoran users say basic functions, like using the Lightning network to process payments, have been unreliable, which makes moving money from Chivo to other apps, like Strike, especially bumpy. Sometimes transactions simply won’t appear in the recipient’s wallet, making it a risky way to send money from abroad. Strike declines to comment on Chivo or the Bukele administration, and says that it remains one of the most downloaded apps in El Salvador. When two WIRED reporters visited a Chivo ATM inside a Salvadoran restaurant in Oakland, California, they were greeted with an onscreen error message. A man at the register said the machine didn’t seem to be working very often.
In the weeks after the launch, hundreds of people have also said their identities were used to create fake accounts to claim their $30 incentive, according to complaints collected by Cristosal, the human rights group. The Bukele administration did not respond to WIRED’s request for comment.
“Lack of transparency is a government policy,” says Ruth Lopez, an anticorruption attorney at Cristosal, which represents 235 victims of identity theft. “The bitcoin system and the Chivo wallet system are part of that opacity.” The company that runs the wallet—Chivo SA de CV—is private but 99-percent-owned by a state-owned company. According to reports from El Faro, the company has outsourced development of the app to contractors, and the company's legal representatives include an official under sanctions by the US government for corruption. Lopez and others want to see the company’s financial information, but the government says Chivo SA, as a private entity, is not required to share it.
Bitcoin remained a top concern at pro-democracy protests in San Salvador in October and December. To critics like Gomez, widespread adoption of a digital currency isn’t feasible in a country with a per capita income of $3,650, among the lowest in the western hemisphere—at least not quickly. He thinks bitcoin is risky for people who live day to day, especially in El Salvador, where 68 percent of the workforce is in the informal economy. “Sometimes it's not a problem of lacking the technology but [lacking] the education,” he says.
In late August, the minister of finance moved $75 million of public funds from the Development Bank of El Salvador to a “Bitcoin Fund,” which the government says will serve as backing to funds held in the Chivo wallet. The government also said it had purchased $60 million in bitcoins. Since then, Bukele has announced more bitcoin purchases, bragging on Twitter that El Salvador is “buying the dip”—a reference to the times when the price falls. The source of these funds is also shrouded in mystery; Lopez says the government has provided no evidence that it has actually bought bitcoins. The lack of transparency “goes precisely against the principles of cryptocurrency management,” she says.
In late November, Bukele, dressed in a white, untucked shirt and backward baseball cap, stood onstage in front of a flashing neon screen that displayed the words “FEEL THE BIT” in English. It was the end of another Bitcoin conference, this time in San Salvador, and Chivo hadn’t been on its best behavior; during the weeklong event, #FixChivo trended on Twitter because so many English-speaking visitors saw their funds disappear when they tried to send them to other wallets. But Bukele was pressing forward with other ventures. After citing progress with the Chivo Pet hospital, he moved on to the big announcement: Bitcoin City. The city would be built on the edge of the Conchagua volcano, he said, giving easy access to geothermal energy to mine bitcoins, and would have no taxes (except for sales tax). But the more important aspect was how he would pay for it: a $1 billion bond, backed in bitcoins.
Standing beside him onstage was Samson Mow, chief strategy officer of Blockstream, a company that develops Bitcoin products. The plan had been in the works since the summer, Mow says, after Mallers introduced him to the president and he pitched the bond idea as a way to fund bitcoin mining infrastructure. Blockstream would issue the bond along with Bitfinex, a cryptocurrency exchange that issues Tether. The Bitcoin bond structure is not yet legal in El Salvador, so Bukele said the owners of Bitfinex had been invited to help rewrite the country’s securities law and would be given the first license.
The mining idea had been dropped in favor of a city, but Mow was unbothered. He compares it to the idea behind Hong Kong or Dubai: Bring international investment, create a safe regulatory environment, and watch the benefits flow to locals. The Bitcoin bond’s success is far from assured. Some analysts have noted that financial firms are unlikely to take on the risk, and that Bitcoin fans would be better off buying the coins directly. But Mow says that he has seen interest—primarily from large Bitfinex investors known as “whales”— and expects a flood of support from Bitcoiners around the world. Investors who spend big on the offering will receive Salvadoran permanent residency.
Multiple people familiar with the discussions say the administration sees the Bitcoin bond as a potential solution for its lack of dollars. The country has a junk-bond rating and a dwindling number of friends abroad. “It's a huge gamble,” says Gamarra, the political scientist. “That’s why I think it leads to great speculation about how this is personally benefiting [Bukele] or benefiting his family.”
Bukele’s fate could be determined by something as simple as the price of one bitcoin, Gladstein suggests. “If the price goes up, he’s a visionary; if the price goes down, it withers, and he’s a failure,” he says. “Really nothing else matters.” For the rest of the country, the journey is sure to be more complicated. If Bukele succeeds in his experiment to marry libertarian Bitcoin with authoritarianism, it won’t be the last time it happens. “Life is full of contradictions, right?” Gamarra says.
Gian Volpicelli contributed reporting.
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