My overbearing president who only cares about buying currency, do you know that El Salvador is crying?

Demonstrators in San Salvador protest the country's Bitcoin law last September. Getty Images

Six days before El Salvador’s Bitcoin law came into effect, Mario Gómez was dragged from his car, handcuffed, and detained. The software developer, who had no arrest warrant, informed the Salvadoran public on his personal Twitter account about the cryptocurrency that was about to become the official tender of the Central American country, while questioning the government’s motives for adopting it. “There was no good reason for this arrest, which makes one suspect that the motive was quite political,” Gómez told Rolling Stone.

In September 2021, El Salvador enacted a Bitcoin law, becoming the first country in the world to adopt cryptocurrency as its national currency. While El Salvador's main currency remains the U.S. dollar - which people can use freely - critics warn that putting state funds into such a decentralized, unstable currency could be devastating for the country, which is still reeling from a civil war decades ago, and now, a year later, the authoritarian government continues to crack down on citizens who speak out against Bitcoin. These opponents say they see democracy destroyed, human rights suspended, and their economic prospects threatened, while their government elbows out to attract more wealthy crypto investors.

Today, despite efforts to mitigate financial disaster—including bitcoin-backed “Volcano bonds,” and plans for a tax-free crypto mining hub called “Bitcoin City”—the value of bitcoin has plummeted, and the country is on the brink of defaulting on its debts. The International Monetary Fund has repeatedly warned El Salvador to abandon bitcoin if it wants to save its economy. “Both the IMF and the World Bank said, ‘This is too risky,’ ” said Jorge Cuellar, who teaches Latin American, Latin American, and Caribbean studies at Dartmouth College. “We should not be involved in this.” But the crypto-president who came up with the law and put it into effect is not backing down.

President Nayib Bukele at the Latin Bitcoin Conference in November 2021, two months before he adopted bitcoin as the official currency of El Salvador. MARVIN RECINOS/AFP/GETTY IMAGES

Even before the law went into effect, there were problems. At a Bitcoin conference in Miami in May 2021, President Nayib Bukele, the country’s charismatic millennial leader, did not inform the Salvadoran public of his plans, tweeted about buying Bitcoin while naked or on the toilet, and said he would send a Bitcoin bill to Congress. Mariana Belloso, an independent journalist and a target of Bukele’s government, was shocked when she heard the news. “No one knew,” she recalled when her stockbroker brother in New York called to confirm the news. “[He asked], ‘ Is El Salvador really going to have Bitcoin?’ I told him, ‘No, you’re crazy.’”

As Belloso watched the event live, she said, “I called some sources inside the government and they told me they knew nothing.” Without any kind of public debate, the Bitcoin law was sent to Congress, where Bukele’s Nuevas Ideas party enjoys a majority. The law was passed just five days after it was announced, and came into full effect three months later on September 7, 2021.

According to Belloso, as the Bitcoin law was approved, Bukele boasted on Twitter Spaces that his constituents included Bitcoin enthusiasts living abroad. Notably, they spoke only English. “They talked about El Salvador and wanted to mine Bitcoin using geothermal energy. The [El Salvadorian] population has zero access to that,” Belloso said.

Before Bukele, politics in El Salvador was dominated by two parties with roots in the Cold War: one was the conservative ARENA party, the other the leftist FMLN party. They were pitted against each other during the country’s bloody civil war, which lasted from 1980 to 1992 and left more than 75,000 people dead. It was a polarizing and traumatic event in the country’s recent history, and critics say Bukele exploited it under the guise of unity. “He took advantage of this social discontent with the two parties,” Gomez explains, presenting himself as the new third choice. A 40-year-old former publicist, Bukele rose to power through his massive influence on Twitter. He campaigned in skinny jeans and a baseball cap, promised to fight corruption and vowed to move El Salvador into the future. The key to Bukele’s success was “presenting himself as a relatable figure, someone people could connect with, resonate with,”

But it wasn’t long before he earned the title of Latin America’s first millennial dictator. Bukele credited his closeness to Trump — “ We both use Twitter a lot, so we get along well, ” he argued — and began behaving in ways the former U.S. president could only dream of. In February 2020, he stormed Congress with armed soldiers and police officers to pressure lawmakers to approve a $109 million loan for more military and law enforcement equipment. The incident was swiftly and widely condemned internationally, and Bukele vowed not to do it again. But he laughed off the accusations against him, briefly changing his Twitter bio to “The Coolest Dictator in the World.” He also viciously hounded his critics in the U.S. government. Congresswoman Norma Torres (D-Calif.) told the Los Angeles Times that she had been threatened by Bukele’s followers and had to sleep at night clutching a handgun after she called him a “narcissistic dictator” on Twitter.

Even though most of the country’s citizens cannot afford to gamble big on cryptocurrency, the government requires all businesses to accept it.   Getty Images

El Salvador’s relationship with its national currency reflects its elusive relationship with its sovereignty. For much of the past 100 years, El Salvador’s main currency was the colón, named after the Spanish pronunciation of Christopher Columbus in honor of the country’s colonial past. In 2001, with the economy still reeling from a U.S.-backed civil war, El Salvador’s right-wing government adopted the U.S. dollar. Many felt that dollarization, like Bitcoin adoption today, was also an unnegotiated process. According to Gomez, “Bitcoin awakened people to the view [at the time] — that change should be achieved through force.”

At the heart of this chaotic cryptocurrency launch was the incredibly buggy Chivo Wallet, the government-approved official Bitcoin wallet named after the Salvadoran dialect, which was launched alongside Chivo ATMs. As a promotion, the government promised $30 to everyone who downloaded and registered the app, in a country where minimum wage for a full-time job is around $300 per month. The app was plagued by problems from the start and became a "catch-22" for fraud, with nearly a thousand cases of identity theft in its first three months.

On September 15, 2021, coinciding with the 200th anniversary of El Salvador’s independence from Spain, thousands of Salvadorans took to the streets to protest the introduction of the law. Many held signs reading “Bukele dictator” with the Bitcoin symbol crossed out, and some Chivo ATMs were reportedly vandalized. The main slogan and hashtag of the protest was “No to Bitcoin” (#NoAlBitcoin). Oscar Salguero, a Salvadoran software developer and entrepreneur, stressed that he, like most Salvadorans, “doesn’t have anything against technology or blockchain or anything like that, but the Bitcoin law in our country is illegal.” Salguero, a self-proclaimed cryptocurrency enthusiast, also took part in the march. “I actually also had a sign that said ‘No to the Bitcoin law,’” he said, with seven out of ten Salvadorans opposing the Bitcoin law, according to a 2021 poll conducted by the University of Central America. In the months since, these anti-government marches have become a recurring event, bringing out feminist organizations, unions, water defenders, and student groups. Salguero said Bitcoin Law is out of touch with society and provides “zero benefit to people who earn minimum wage.”

Critics say the Bitcoin City concept is an impractical use of limited resources. Nayib Bukele/Twitter

In November, Bukele announced a new project called Bitcoin City, which will be based on the Conchagua volcano in the country’s eastern La Union region. “Most of the towns and large cities in El Salvador actually grew up around volcanoes because of the fertility of the soil, and the volcano is very much a symbol of life for the Salvadorans,” explained Cuéllar, a professor at Dartmouth College. The volcano is a natural prime target for the country’s crypto-gentrification plans. In May, Bukele unveiled new 3D renderings and dioramas for Bitcoin City. He hopes these visuals will entice investors to fund its construction.

When Bukele announced plans for Bitcoin City, he was also evoking the legend of the fabled “Bitcoin Castle.” In 2013, reddit user Luka Magnotta published a post claiming to be a time traveler from the future. In this future, there is no central bank, and Bitcoin maximalists and early adopters live like kings in walled cities. Everyone else languishes on the margins of a crumbling society. What was supposed to be a cautionary tale about the future of cryptocurrencies has become an idealized vision for some crypto enthusiasts. For El Salvador, however, the juxtaposition of a small but powerful elite and a large disenfranchised population struggling to survive is a story you won’t find at any time in the country’s history.

To finance the walled crypto-city of the future, the Salvadoran government is hoping to attract investors with its $1 billion Bitcoin-backed “Volcano Bonds.” Half a million will go toward building infrastructure, and another half a million will go toward buying more Bitcoin. Foreign investors will even be offered fast-track citizenship. “El Salvador is in the middle of a debt crisis, and the Volcano Bonds are the government’s way of trying to ‘pay off some of the debt so the country doesn’t default,’” Cuéllar said. The International Monetary Fund estimates that the country’s public debt could exceed 95% of its GDP by 2026. (Recently, Bukele announced that the country would buy back dollar-backed bonds due between 2023 and 2025, though experts say it’s too early to tell.)

Geothermal facilities, such as the Las Palmas geothermal plant, provide 27 percent of the country's energy, but the country still imports 25 percent of its electricity to meet demand. Alex Peña/Getty Images

Someone has created a website specifically for this: Is El Salvador standing up? iselsalvadorup.com

Track and monitor the time, number, average price, and loss of bitcoin purchased by the country...

As of July 1, the country last bought 80 bitcoins, and the total number of bitcoins it owns is 2,360, with an average price of $44,060.11.

To date, Bukele claims to have purchased 2,400 Bitcoin tokens for more than $100 million. The government’s Bitcoin holdings have lost 60% of their value due to market volatility. The issuance of Bitcoin-backed volcano bonds, which are intended to save the country from default, may reportedly be delayed due to a lack of investors. Meanwhile, El Salvador’s national debt is $23 billion, of which $800 million needs to be paid to the International Monetary Fund starting in 2023.

There are also environmental considerations to consider when building Bitcoin City. Bukele has been promoting the use of geothermal energy from the country’s volcanoes to harness clean energy for bitcoin mining. However, geothermal energy only supplies about 27% of El Salvador’s energy, and the country still has to import 25% of its electricity to meet demand. It remains a very expensive energy source, Cuéllar said: “Building infrastructure requires a lot of capital investment. So the cheap resources are still fossil fuels.” Building another geothermal plant could strain the country’s resources because it would require large amounts of groundwater in a country that already faces water shortages. “Salvadorans need water because in this country, in one or two generations, it’s going to be very low and most of it will be imported,” Cuéllar said. More than 600,000 Salvadorans do not have access to clean water, and it’s predicted that El Salvador could run out of water in 80 years. Addressing the population’s urgent need for water has taken a backseat to promoting the country’s cryptocurrency.

Bitcoin remains an impractical solution for the average person in El Salvador, and using it right now is like gambling when you don’t have enough food to eat. Economist Carmen Tatiana Marroquín explains that in order to invest in Bitcoin, “one has to have an income above what is needed to survive, which is not the case for most Salvadorans.” If the price of Bitcoin drops, as it did in January, when it fell 50%, and then again in May, when it dropped 19%, people with little disposable income can’t afford to lose anything. Even the drop in Bitcoin’s value didn’t stop Bukele from gleefully tweeting that he was “buying the dip,” or buying more Bitcoin when the price drops. Marroquín believes Bukele’s government is gambling with people’s money.

“Not only does [bitcoin] not bring benefits to the people, but it seems to me that we are not important even in the discussion that is taking place outside of El Salvador about bitcoin,” Marroquín said, with the conversation centered on first-world people who have the ability to get rich, rather than the people in El Salvador who are most directly affected by these changes. “The debate that we in Salvador are having is not about bitcoin versus the dollar,” she added. “This is how our government closed its eyes and got us involved in this bad situation.”

So far, the rollout of Bitcoin in El Salvador has been like a slow-motion car crash. El Salvador has also been embroiled in a war against gangs that has seen at least 50,000 arrests since March 2022, prompting more reports of widespread human rights violations. Every day it gets harder for Bukele’s government to beat charges of authoritarianism. At least six people in his cabinet have been sanctioned by the U.S. government for crimes ranging from money laundering to drug trafficking and undermining democracy. As sources of funding dry up in El Salvador, the implementation of Bitcoin has nearly plunged a country into a deeper political and economic crisis. Mario Gómez, a formerly jailed and now exiled critic, believes the Salvadoran government may have illicit motives: “Why so insistent on pushing something that is clearly not to the liking of the majority? The conclusion is that there may be other interests that we still don’t understand, but I have no doubt that we will discover them over time.”