- September 10, 2021
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In June, the president of El Salvador made an announcement that shocked the nation: It would become the first country to adopt bitcoin as a national currency. As "B-day" approaches, WSJ's Santiago Perez headed to El Salvador to hear how Salvadorans are feeling about the change.
This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Kate Linebaugh: Next week, El Salvador will do something no country's ever done. It'll make Bitcoin an official currency.
Santiago Perez: Some people call September 7th B Day, because it will be the day when Bitcoin formally becomes a national currency.
Kate Linebaugh: Santiago Perez covers Latin America, and he's been tracking El Salvador's Bitcoin experiment. He says, when Salvadorans wake up on B Day, they'll be able to sign up for the country's official Bitcoin wallet.
Santiago Perez: The state run wallet, it's called Chivo, which, Chivo means "cool". That's jargon for cool in El Salvador. If you open the Chivo wallet, the government will give Salvadorans the equivalent of $30 so they can open the wallet and spend that money using the Bitcoin wallet.
Kate Linebaugh: The government is giving away Bitcoin.
Santiago Perez: Yeah. So you can buy coffee, or go to the beauty salon, or buy furniture. You can pay your taxes in Bitcoin if you want. You can pay loans, your home loan.
Kate Linebaugh: For years, Bitcoin's critics have said that as a currency, Bitcoin is impractical. You can't pay a bill with it or walk into a store and buy something. But in El Salvador, that won't be entirely true anymore. Merchants across the country will be required to accept Bitcoin. Was it surprising to you that El Salvador would be the first country in the world to try this?
Santiago Perez: It was a total surprise for me and for Salvadorans in general, they didn't expect this.
Kate Linebaugh: Welcome to The Journal, our show about money, business, and power. I'm Kate Linebaugh. It's Thursday, September 2nd. Coming up on the show, how El Salvador became the world's first national Bitcoin experiment. One reason El Salvador's Bitcoin plans caught most Salvadorans by surprise was how it was announced. The plan wasn't unveiled in El Salvador. It wasn't even unveiled in Spanish. It happened in June, at a Bitcoin conference in Miami.
Jack Mallers: All right, we ready?
Speaker 3: Woo.
Jack Mallers: Let's go.
Speaker 3: Go Jack.
Jack Mallers: Let's go.
Kate Linebaugh: That's one of the conference's presenters, a crypto entrepreneur named Jack Mallers. Mallers wore a baggy hoodie and a baseball cap, and the title of his talk was "One small step for Bitcoin, one giant leap for mankind."
Jack Mallers: Yo, you guys ready for this? Rhetorical question, there's no… way. There's no way, I promise you.
Santiago Perez: So this young guy, he's a 37 year old from Chicago. He gave this presentation in Miami and essentially made a surprise announcement.
Jack Mallers: Instead, I'd like to invite now someone I've spent some time with to share a message.
Santiago Perez: He said, well, I have a special guest here, and the special guest was President Nayib Bukele.
Nayib Bukele: My name is Nayib Bukele, I'm the President of El Salvador.
Santiago Perez: Who essentially shocked the nation by saying that his government was about to send legislation to Congress to make Bitcoin the national currency.
Nayib Bukele: That is why next week, I will send to Congress a bill that will make Bitcoin a legal tender in El Salvador.
Kate Linebaugh: Halfway through his video message, the Salvadorian president's words were drowned out by cheering crypto fans.
Santiago Perez: The crowd basically rose to a standing ovation and everyone went mad.
Kate Linebaugh: How would you describe Jack Mallers as he made this announcement?
Santiago Perez: Oh, Jack Mallers was very emotional.
Jack Mallers: So as of now, El Salvador is said to be the first Bitcoin country.
Santiago Perez: He was actually crying, and I can understand why. I mean, for the crypto community, this is quite a historic step. For the first time, a country will accept Bitcoin as national currency. So just imagine, it's really a giant leap.
Kate Linebaugh: Is this how everyone in El Salvador found out about the plan? This was the official announcement?
Santiago Perez: This was the official announcement. Can you believe it? It was a three minute video by Bukele at the presentation by Mallers. So for Salvadorans was, "What? We're going to adopt Bitcoin?" That was a bit of a surprise for most of Salvadorans.
Kate Linebaugh: Just days later, El Salvador's Bitcoin bill was passed into law, with little debate in Congress. Salvadorans hadn't seen it coming. The international community hadn't seen it coming. An entire country adopting Bitcoin as a national currency was a bold, out there idea. But it was exactly the kind of out there idea El Salvador's President, Nayib Bukele, ran on.
Santiago Perez: Nayib Bukele is a young entrepreneur. He was also an advertising executive. Very sharp, very smart, very well dressed. He loves baseball caps, black leather jackets, expensive suits. And he's also very articulate, and very young too. And in a way that represents a sea change in a country that has been used to old school elites, or former guerrilla fighters who in the end became a disappointment because they didn't deliver either.
Kate Linebaugh: As a candidate, Bukele promised new ideas. The name of his political party is literally New Ideas. He won his election, and in May, he and his new ideas party moved to consolidate power.
Santiago Perez: He got rid of the Constitutional Court, his legislator's fired the attorney general. So, the institutional strength of El Salvador is, in a way, under attack. That's what his opponents say.
Kate Linebaugh: International experts are also concerned about rising authoritarianism in El Salvador, but Bukele has said the moves were necessary to combat vested interests. And so far, his popularity has held steady.
Santiago Perez: He is trying to change the dynamics in El Salvador, for better or for worse. And so far, people, they are happy with a President that, in a way, is trying new things.
Kate Linebaugh: Salvadorans have reasons to want change. After a bloody civil war decades ago, the country's economy has stagnated, making El Salvador one of the poorest countries in the Western hemisphere. And the government lacks a key tool to fix that problem. El Salvador uses the U.S. dollar as its national currency, which means the government doesn't control its own monetary policy. It can't lower interest rates to stimulate economic growth, or print money like the U.S. FED can.
Santiago Perez: El Salvador adopted the U.S. dollar about two decades ago. Policy makers back then essentially wanted to foster economic stability. And economic stability is important, it's a condition for development, but El Salvador still has been unable to lower endemic violence, inequality, extreme poverty, and immigration. Those problems are still quite relevant.
Kate Linebaugh: Bukele's made the case that Bitcoin can help, and says that's why he pushed through the law so fast. He's argued that adopting Bitcoin will make El Salvador a center for crypto investment. Foreigners, like the ones at the Miami conference, will come to El Salvador to set up Bitcoin businesses. The country might even see growth in Bitcoin tourism. But the thing Bukele cited above all else is financial inclusion.
Santiago Perez: El Salvador has 6 million people, only 1 million has a tax ID number. That essentially shows that most of them work in a cash based economy, in street markets, food stands, that type of thing. It's essentially an informal economy. So, this could be a very effective tool to foster financial inclusion, to give people a chance to use means of payments other than cash, make El Salvador less reliant on U.S. dollars, and have a different currency, so to speak.
Kate Linebaugh: But Bukele's plan is meeting a lot of opposition. That's after the break. Late last month, Santiago traveled to El Salvador to talk to Salvadorans about the Bitcoin change. And while he was in the capital, he noticed a surprising scene in front of the finance ministry.
Speaker 4: (foreign language).
Kate Linebaugh: It was a protest. The crowd was mostly veterans; of El Salvador's military, but also of the guerrilla forces they'd fought against for more than a decade.
Santiago Perez: So you would see army veterans wearing their uniforms, chanting against the government.
Kate Linebaugh: And was there a sense that it was bringing together old foes?
Santiago Perez: Totally. It was quite surprising, and at the same time, fascinating. You have civil war veterans, former army officers and former guerrilla fighters, now they have a common goal, after a decade of bloody confrontation.
Kate Linebaugh: What was their message to the government?
Santiago Perez: Just three words, "No to Bitcoin."
José Alberto Amaya: (foreign language)
Santiago Perez: So I had a chance to talk to people like José Alberto Amaya. He's a special forces veteran. He served in Salvador's army in the '80s, and now he says…
José Alberto Amaya: (foreign language)
Speaker 5: We're against this virtual currency because as a country, we don't have the ability, as a people so poor, to sustain Bitcoin. That's for other kinds of countries, with more advanced technology and stronger economies, not a country as poor as El Salvador.
José Alberto Amaya: (foreign language)
Santiago Perez: People like José are really concerned about getting Bitcoin as payment, because they think that El Salvador is not really prepared for these type of experiment.
Kate Linebaugh: Kind of big picture, if you were to summarize all the Salvadorians you spoke with, how did they feel about Bitcoin becoming one of their national currencies?
Santiago Perez: Well, there's a lot of uncertainty and concerns. Polls show that most Salvadorans are against this idea, and there's one key element, they don't want their payrolls to be the denominated in Bitcoin.
Kate Linebaugh: That's because Bitcoin is famously volatile, with huge booms and busts in value.
Santiago Perez: For people who make $300 a month, it could be quite damaging if things go south, and that's by far the main concern of Salvadorans.
Kate Linebaugh: And economists say the government's finances would be vulnerable to that volatility, too.
Santiago Perez: Essentially, you are putting El Salvador's tiny economy at the mercy of these fluctuations. So, imagine if you're getting tax payments in Bitcoin, your revenue can evaporate. It's hard to have any solid planning when it comes to budget spending if you have a currency that's so volatile. Another thing that has been raised by the international community is the risk of El Salvador becoming a hub for illicit activities. Organized crime likes crypto-assets, and so this is also another challenge that Salvadorans will be facing.
Kate Linebaugh: While you were in El Salvador, what did you hear from the business owners who are going to have to start accepting Bitcoin next week?
Santiago Perez: It was a mixed bag, in a way. Some of them were really excited. I had a chat with a coffee shop owner who claims to have their first coffee shop in the world to accept Bitcoin. He said, "Well, this is quite efficient for me. It's cost efficient because I'm saving on banking fees. It also saves me a lot of time because I don't need to go to the bank branch to deposit cash," for example. But then you have other sectors who essentially say, "I don't really know anything about Bitcoin. I don't know what's happening. We don't really have any info from the government." So what's going on, and why are we going to be required to accept these type of payment?
Kate Linebaugh: One person who's been hearing a lot of these kinds of questions is Jorge Hasbún. Hasbún is the president of El Salvador's Chamber of Commerce, which represents over 2,500 Salvadoran businesses. He told Santiago that in a recent survey of the chambers members, 95% were against businesses being required to accept Bitcoin. That's a big change from where things stood in June, when Bukele first made his announcement at that Bitcoin conference in Miami.
Jorge Hasbún: It was a great surprise for El Salvadorians, which we did not know this was going to be announced. And there was a huge positive wave of publicity, internationally, regarding this innovation.
Santiago Perez: At first they were receptive and they say, "Hey, this is great. Let's ride the wave." But the problem was that they were never consulted.
Jorge Hasbún: I think that it is important to take in consideration every opinion of the different sectors that are involved when a new law comes around, and this inclusiveness was not the case with the Bitcoin law.
Santiago Perez: There was no discussion about it, so they felt excluded, and up to this day, they also need guidelines and regulations about how this is going to work.
Kate Linebaugh: What will you be watching for as this goes into effect next week?
Santiago Perez: Well, we need to monitor government accounts. We need to monitor foreign investment. We also need to see whether financial institutions, and authorities in general, are making sure that El Salvador won't become a haven for illicit activities. Over the short-term, that's really important. Over the longterm, we need to see whether these can be a tool to foster, not only financial inclusion, but prosperity. It becomes a very relevant experiment as to whether Bitcoin can work or not in a real economy, and succeed.
Kate Linebaugh: That's all for today, Thursday, September 2nd. The Journal is a co-production of Gimlet and The Wall Street Journal. Thanks to Caitlin Ostroff for her reporting on this story, and to Enrique Pérez de la Rosa for voiceover. Thanks for listening, see you tomorrow.
Kate Linebaugh is the co-host of The Journal. She has worked at The Wall Street Journal for 15 years, most recently as the deputy U.S. news coverage chief. Kate started at the Journal in Hong Kong, stopping in Detroit and coming to New York in 2011. As a reporter, she covered everything from post-9/11 Afghanistan to the 2004 Asian tsunami, from Toyota’s sudden acceleration recall to General Electric. She holds a bachelor degree from the University of Michigan in Ann Arbor and went back to campus in 2007 for a Knight-Wallace fellowship.
Ryan Knutson is the co-host of The Journal. Previously, he spent more than four years in the newsroom covering the wireless industry, and was responsible for a string of scoops including Verizon’s $130 billion buyout of Vodafone’s stake in their joint venture, Sprint and T-Mobile’s never ending courtship and a hack of the 911 emergency system that spread virally on Twitter. He was also a regular author of A-heds, including one about millennials discovering TV antennas. Previously, he reported for ProPublica, PBS Frontline and OPB, the NPR affiliate station in Portland, Ore. He grew up in Beaverton, Ore. and graduated from the University of Oregon.