In 2021, El Salvador became the first country to adopt Bitcoin as currency. NPR’s Adrian Florido asks business professor Julio Sevilla how the latest crypto crash has impacted the country.
ADRIAN FLORIDO, HOST:
The recent collapse in the value of cryptocurrencies has left a lot of investors in those digital assets in a lot of pain. The collapse is also causing trouble in El Salvador, whose president, Nayib Bukele, last year adopted bitcoin as one of the country’s legal tenders alongside the U.S. dollar and has invested more than $100 million in bitcoin. To help us better understand what this could mean for El Salvador’s economy, we’re joined by Julio Sevilla. He’s an associate professor at the Terry College of Business at the University of Georgia. Julio Sevilla, welcome to ALL THINGS CONSIDERED.
JULIO SEVILLA: How are you, Adrian? Thanks for inviting me.
FLORIDO: Thanks for joining us. El Salvador was the first country to adopt bitcoin as an official currency. Can you remind us why President Nayib Bukele thought this was a good idea?
SEVILLA: Yes. So there were two reasons that the president provided often for this endeavor. One of them was that he wanted the people of El Salvador to have more access to technology and financing because many of them don’t have bank accounts, and he didn’t want them to only rely on cash. However, what has been seen is that these people are less likely to be using bitcoin. The other reason is that he thought it was an excellent investment for El Salvador because at the moment that he started with this plan last year, bitcoin and other cryptos were really booming, so he thought he was creating economic opportunities for El Salvador.
FLORIDO: Well, the president has invested more than $100 million in bitcoin. How much money does that represent for a country as small as El Salvador?
SEVILLA: So even for a country that is small for El Salvador, it’s not necessarily a large amount. The president took out $150 million from the reserves of the country to invest in these projects of bitcoin, and that represents around 4% of the reserves. So it is obviously not an amount that they can take for granted, but it’s not an amount that will necessarily, you know, bankrupt the country. The GDP is $25 billion right now. The debt of the country is more than $20 billion – so a very small amount. But still, you cannot really afford to make bad investments when your finances are precarious to start with.
FLORIDO: Do you have a sense of how everyday Salvadorans are feeling about the president’s investment in bitcoin?
SEVILLA: So it doesn’t seem to be a popular idea, but the plan of really popularizing bitcoin in the country hasn’t been successful. Just around two-thirds of the population downloaded the app. And even though they were offered $30 just for signing up – and based on some measures, just around 20% of those that signed up to the app are currently using it. So the idea of bitcoin doesn’t seem to be very popular among the majority of the people of El Salvador.
FLORIDO: Has Bukele faced any resistance from within his government to his decisions on bitcoin?
SEVILLA: The reality is that currently, the president doesn’t have a lot of checks in government. Interestingly, his popularity, at least until recently, continued to go up to a level of the 70s, 80%. So in Congress, basically, he can do anything he wants because, you know, his party has the qualified majority, and his legislators are very loyal to him. He actually swept the Supreme Court, the justices that were there before, you know, he was elected – he removed them with loyalists. So at this point, he controls the executive, the legislative and also the judicial power. So unfortunately, there’s no checks there. And that’s why he’s able to, you know, take these eccentric initiatives without much pushback.
FLORIDO: It sounds like the country’s economy is not going to collapse if bitcoin were totally to implode. But El Salvador has had a struggling economy for years. And I wonder if President Bukele’s devotion to bitcoin might have other consequences for the economy.
SEVILLA: It definitely does. But there are other repercussions from these decisions. For example, El Salvador is heavily in debt, and the president has been trying to negotiate with the International Monetary Fund to get this financing. But they have expressed that they are concerned with, in general, how the country is being managed with the fact that the president, you know, has no checks in the Supreme Court and that he is implementing these outlandish initiatives. But El Salvador has inflicted this damage on its own.
FLORIDO: I’ve been speaking with Julio Sevilla. He’s an associate professor at the University of Georgia’s Terry College of Business. Thank you so much for joining us.
SEVILLA: Thank you.
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