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Today, we’re reliving the journey of Nayib Bukele, the laser-eyed president of El Salvador who made bitcoin legal tender in a world first.
It was one year ago today that El Salvador wisely moved its strategic bitcoin reserve into cold storage. Now, the country is sitting on over half a billion dollars in BTC.
Fix the money
The old adage goes, “do you wanna be right, or do you wanna make money?”
El Salvador president Nayib Bukele has proven it’s possible to do both.
Bitcoin was first and foremost freedom money to Bukele, as it was for activists like Alexei Navalny and Canada’s Freedom Convoy, among others.
In late 2017, as Bukele was preparing to run for president, electoral authorities had reportedly threatened to freeze his campaign funds. His new party, Nuevas Ideas (New Ideas), was initially labeled a “movimiento ciudadano,” or “citizen movement,” which sought to disrupt the two-party political machine that had been in power since El Salvador’s civil war in the 1980s.
But the government had pushed to ban donations to citizen movements for political purposes. Even after those efforts stalled, citizen movements were told to adhere to the same laws as political parties that required them to be formally approved before legally raising money.
Bukele had supposedly suggested that Nuevas Ideas would accept bitcoin instead. And when the central bank shared a notice on Twitter reiterating that bitcoin is not legal tender in El Salvador, and that unauthorized individuals or companies cannot legally collect funds from the public in cryptocurrency, Bukele replied:
“When they cannot stop a movement and they use all the state machinery to achieve it.”
One day later, Bukele tweeted, “well yes, it’s official, we will use Bitcoin,” and tagged the Salvadoran central bank’s official account.
Nuevas Ideas was successfully registered about six months before the election. It collected 200,000 supporting signatures in just three days, well above the required 50,000.
In February 2019, Bukele won with 54% of the vote and was inaugurated by June, becoming the youngest president in the nation’s nearly 200-year history.
Meanwhile, bitcoin was at the very bottom of a grueling bear market, having retreated from almost $20,000 to under $3,200 in 14 months.
It was around this time that the second domino was set up for Bukele.
Bitcoin for good
As California surfer and local volunteer Michael Peterson tells it, he was approached by an anonymous donor in early 2019 who was eager to spawn a Bitcoin-based circular economy in the Salvadoran beach town of El Zonte, where the overwhelming majority of citizens and small businesses were unbanked.
Over time, bitcoin was increasingly accepted as payment around town and El Zonte would become known as “Bitcoin Beach.”
Peterson helped distribute funds to support youth work programs which paid BTC to local youngsters for picking up trash, fixing damaged water systems and repairing roads.
Bitcoin Beach also funded educational grants, bus rides and snacks for commuting high school students and even universal basic income for 600 families during the pandemic, which had closed borders and forced unemployment to record highs.
In June of the following year, at Bitcoin Miami 2021, Bukele announced his radical plan for El Salvador to adopt bitcoin as legal tender alongside the US dollar, having been directly inspired by Bitcoin Beach.
The next day, Bukele donned laser eyes in his Twitter profile pic, capping off his evolution into full Bitcoiner. El Salvador’s legislative assembly approved the Bitcoin bill in that same week.
Three months later, the Bitcoin Law came into effect, making El Salvador the first country in the world to adopt BTC.
Despite a rocky rollout amid protests, more than 1.1 million users had still downloaded the official Chivo wallet in its first 11 days. Each one was eligible for $30 worth of bitcoin for free, Bukele’s way of helping onboard the nation.
Main character energy
All great protagonists need antagonists. For Bukele, on the world stage that’s the International Monetary Fund (IMF).
Less than five months after the Bitcoin Law passed, the IMF was urging El Salvador to drop bitcoin as legal tender — halting loan talks and warning that it would be difficult to secure financing in the future.
Those moves led to worries that El Salvador would default on its loans. Fitch even downgraded El Salvador’s debt following the one year anniversary of the Bitcoin Law.
Undeterred, Bukele soon announced El Salvador would start buying 1 BTC every day, indefinitely. El Salvador now holds 6,114 BTC worth $507 million and is ahead by 78%, according to NayibTracker.
El Salvador eventually repaid an $800 million bond as a sign of its financial strength.
Fitch bumped up El Salvador’s debt by three notches in response, stating that default “no longer appears likely,” and Bukele was re-elected in a landslide victory nine months later in February 2024.
Late last year, El Salvador bonds largely outperformed other emerging market debt as bitcoin rallied past $100,000. Bukele remarked it was the “first time in history that Bitcoin has driven sovereign bonds up in traditional markets.”
Bukele’s Bitcoin tale, as it stands, is then bittersweet. The IMF had been negotiating the terms of a $1.4 billion loan to El Salvador ever since it adopted bitcoin, with the deal finally coming to a head in February.
The IMF required El Salvador to drop bitcoin as legal tender, reverting it to an optional payment method for the private sector and forcing taxes to be once again paid only in US dollars. Arguably history’s biggest Bitcoin experiment to date had ended far too soon.
Bukele and El Salvador continue to buy bitcoin, on most days at least. The IMF apparently knows about it and doesn’t mind, which implies that it’s not being purchased with public funds, but we don’t know for sure.
All things considered, Bukele is actually not the main character of this story, something with which even he would surely agree.
Bitcoin is the real antagonist. Bukele simply understood that earlier than any other world leader.
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