Bitcoin adoption in El Salvador rejected by the population

Following the adoption of the Bitcoin cryptocurrency in El Salvador as legal tender last month, the Centro de Estudios Ciudadanos (CEC) of the Francisco Gavidia University (UFG) has conducted a survey that reveals that 24% of Salvadorans consider the decision as not very wise and 53.5% as not at all wise, while 12.9% say it is wise and 6.5% very wise.

On 8 June, El Salvador became the first country in the world to adopt Bitcoin as legal tender parallel to the dollar, the bill was proposed by President Nayib Bukele. It was decided to adopt this law because of the potential to help Salvadorans living abroad to send remittances home. According to the President, this law can help generate jobs in the short term and will favour the financial inclusion of thousands of people who are outside the formal economy.

The approved regulation establishes that all prices may be expressed in Bitcoin and that all tax contributions may be paid in the cryptocurrency but that, for accounting purposes, the dollar will remain the reference currency. The new legislation gives people the freedom to use either currency. On the other hand, it does oblige all economic agents to accept Bitcoin as a form of payment. The main criticism of the project is undoubtedly the high volatility that characterises the cryptocurrency.

The results of the survey, conducted among 1,233 people across El Salvador, indicate that Salvadorans are mostly not in favour of the adoption of cryptocurrency in the country. Overall, less than 20% approved of the cryptocurrency scheme. The survey also showed that 46% of respondents knew "nothing" about Bitcoin. Finally, almost 65% said they would not be open to cashing in with the cryptocurrency.

In late June, a group of citizens, led by opposition politician Jaime Guevara of the Farabundo Martí National Liberation Front (FMLN), filed a lawsuit against the country. They claimed that the adoption of the cryptocurrency as legal tender has no "legal basis". A member of the group alleged that it was "a decree lacking legality, without foundation, without considering the transcendence and harmful effects that such a law will cause in this country".

On the other hand, the environmental footprint of Bitcoin, which involves huge energy consumption, cannot be ignored. But how can a digital currency affect the environment? Everything is online, so there are no physical coins or banknotes. The action that damages the environment is what is often called 'mining'. The world of cryptocurrencies is based on a decentralised computer network. The large expenditure of energy comes with the infrastructure needed to carry out the mining process, using supercomputers that require a powerful cooling system to solve complex calculations.

According to the Centre for Alternative Finance at the University of Cambridge (UK), if Bitcoin were a state instead of a resource, its electricity consumption would rank it 27th in the world in 2019, ahead of countries such as Sweden and Ukraine. For this reason, Bitcoins are perceived as a highly polluting payment method. 

The possibility that the energy needed for the cryptocurrency mining process could come from renewable sources is currently being studied. One of the possibilities being considered by the Bukele government is the use of geothermal energy for this purpose, which is highly developed in El Salvador. Geothermal energy is one of the country's most traditional energy sources, supplying around 23% of the total electricity consumed in the Salvadoran domestic market.

The main problem with this energy is mobility, as much of this energy is lost in transport from the source to the cities. The advantage of Bitcoin and cryptocurrency mining is that a factory can be set up anywhere in the world, making El Salvador a great candidate not only for Bitcoin adoption but also for the cryptocurrency mining industry. 

Latin America Coordinator: José Antonio Sierra.