Source : THE AGE NEWS
By Susie Coen
The road to El Zonte was, quite literally, paved by bitcoin.
Just a few years ago, surfers sniffing out the region’s world-class waves would have to drag their boards down dirt roads to reach this stretch of tropical shoreline.
El Zonte was transformed after Bukele announced in 2021 that El Salvador become the first country to make Bitcoin a legal tender,Credit: Bloomberg
But after Nayib Bukele, the self-described “world’s coolest dictator”, announced in 2021 that El Salvador would become the first country to make Bitcoin a legal tender, this small seaside town of 3,000 people was transformed.
The region had already been branded “Bitcoin Beach” – ground zero of the country’s cryptocurrency experiment – but Bukele’s controversial crypto-policies turned what had been a trickle of interest into a tsunami.
Roads were quickly laid to welcome the influx of crypto-enthusiasts descending on their decentralised fiscal mecca, with almost every sign lining the streets boasting some form of Bitcoin reference.
The letter “B” no longer exists in El Zonte – all over the town it has been usurped by the Bitcoin symbol – and everyone from the owners of tamale stands to street vendors selling jewellery are happy to accept it.
Hotels, restaurants, apartment complexes have all cropped up – with construction sites on every corner as builders struggle to keep up with demand.
But Bukele’s Bitcoin bubble now appears to have burst.
The populist Salvadorian leader, who has fashioned himself a Silicon Valley-style disrupter, signed a $US1.4 billion-deal with the International Monetary Fund (IMF), the bogeyman of Bitcoiners, in which he agreed to scale back the country’s Bitcoin policies.
As part of the agreement, Salvadorian merchants are no longer compelled to accept the cryptocurrency as payment and Bukele agreed on paper to stop buying Bitcoin with public cash – the country currently owns more than 6,000 Bitcoin – although he has since said their strategy is not stopping.
El Salvador president Nayib Bukele’s bitcoin bet is looking shaky.Credit: AP
So what will this gear-change mean for “Bitcoin Beach”?
“It’s gonna keep some people away, definitely,” says Ronny Avendano, who runs the Bitcoin Hardware Store, which sells all the Bitcoin bells and whistles including tech and books about the cryptocurrency.
“The IMF is definitely a governing body that you want to stay as far away from as possible… It might be detrimental to the business,” he adds.
While he does not think the IMF deal will impact life in El Zonte, where Bitcoin is already enmeshed in the community, he worries it could cause some Bitcoiners to get “cold feet”.
Avendano, whose parents fled El Salvador for Canada during the civil war, gave up his six-figure job in finance in Toronto to travel Latin America in response to Justin Trudeau’s vaccine mandates. His first stop was El Zonte in March 2021. He has been here ever since.
After learning about Bitcoin, he became a “Bitcoin maximalist”, investing all of his savings in the cryptocurrency. Right now, he says, he only has around $US9.
When Bukele announced Bitcoin would be a legal tender, he saw an “influx” of Bitcoiners from all over the world arrive.
Talking to The Telegraph after giving a short lesson on investing in the courtyard outside his shop, he adds: “From a tourist perspective, you know, I don’t feel that excitement anymore… It used to be ‘I can’t wait to come to El Salvador’ to now ‘tell you what’s going on with this deal’.”
He adds: “For me, nothing’s changed. People in town still accept Bitcoin, and I still love the Bitcoin farmers market. Yesterday, I went to buy food at the grocery store in Bitcoin.
“I don’t know what’s gonna happen over the next six months if it were to change… I’d have to close my business down.”
Mr Avendano believes it’s not just Bitcoin pulling foreigners to El Salvador, but the country’s safety.
To combat gang violence, Bukele enforced a “state of exception” in 2022, rounding up and imprisoning more than 80,000 people without due process. The streets are safer, but the Bukele administration has faced allegations of human rights abuses.
His administration also built the notorious Cecot mega-prison, where Donald Trump has since deported Venezuelan migrants the White House claims are gang members.
For locals in El Zonte, the sudden arrival of foreign Bitcoiners has been a blessing and a curse.Credit: Bloomberg
Walter Mena, a Salvadorian lawyer, was reluctant to open a business before Bukele, when even El Zonte was overrun by gangs and it was not uncommon for people to be shot dead on the beach.
But now Mena, 49, who returned to El Salvador in 2019 after living in France for 15 years, is in the midst of constructing apartments he hopes to rent to wealthy Bitcoiners
Mena, who accepts Bitcoin payment for his legal services, does not think the IMF deal will make any difference.
“Now people know what Bitcoin is and how to use it… Bukele is pretty smart, and the IMF is full of dinosaurs,” he said.
“People probably will turn back, but the people who understand, who are already here, they’re not leaving.”
For locals in El Zonte, the sudden arrival of foreign Bitcoiners has been a blessing and a curse. Wealthy foreigners have been investing in the area, buying land, building homes and starting businesses.
But prices have increased, and for each tale of one local making enough money to buy a new motorcycle with Bitcoin, there are stories of those who lost thousands in the volatile market.
El Salvador ‘like Wild West’
Surf teacher Isaac Reyes, 28, who is from El Zonte, says there have been more positive impacts than negative on the local community. He is sometimes paid in Bitcoin but he and most of the locals transfer it straight into dollars using an app on their phone.
He said he believes the novelty of Bitcoin Beach had already reached its “peak” and is now “going back down”.
“Now the difference is the people, not the currency… less people are coming,” he said.
From speaking to the Europeans who have already moved to El Salvador in search of Bitcoin freedom, there is no hesitation – they are here to stay.
M moved to El Salvador from London in 2021 after he broke up with his girlfriend and read about Bukele.
Talking to The Telegraph as he sips on a can of beer with a friend, purchased with Bitcoin, he says he did not know El Salvador existed before he read about the Salvadorian president.
M, 28, who did not want to give his full name, now lives in San Salvador. He first bought Bitcoin almost a decade ago when he was at university and now works for a hardware Bitcoin devices firm.
Asked what he likes most about the country, he said: “The fact that I can just easily use my Bitcoin everywhere.”
Danny, a retired Belgian housebuilder who also did not want to give his last name, made his fortune in Bitcoin before moving to El Zonte 20 months ago in search of a crypto haven to retire to.
You wouldn’t know it by looking at him, as he sits on a stool wearing a vest and flip flops, but Danny, 59, is a Bitcoin millionaire.
He invested his life savings in 2014, when one Bitcoin was worth around $US311. The value has since swelled to over $US108,000.
A sign advertising the acceptance of bitcoin at local businesses stands at one of the entrances to El Zonte.Credit: AP
He believes Europe is becoming a “police state” and part of the reason he has relocated to El Zonte is to provide a base for his nine grandchildren to escape to if they wish.
El Salvador, by contrast, he says is like the Wild West. “There are not many rules, or not many rules that you really need to follow… there is almost no control.”
James Bosworth, the founder of Hxagon, a firm which provides political risk analysis with a focus on Latin America, is also unconvinced the IMF deal will have much of an impact.
‘Bitcoin experiment has been a failure’
He puts the apparent dwindling numbers of people visiting Bitcoin Beach down to the town losing its sheen, rather than the IMF deal.
“It’s probably more a function of the initial hype cycle about El Salvador’s Bitcoin drawing down and global macro factors (likely recession hits all tourism),” he says.
He adds: “There are only so many people who might relocate and most of them jumped early. For anyone still considering it, the IMF agreement didn’t change much.”
Dr Peter Howson, an assistant professor at Northumbria University who has written books on cryptocurrency, thinks Bukele’s Bitcoin experiment has been a “failure”.
In 2023, eight out of 10 Salvadorians did not use cryptocurrency, according to a survey by the University Institute of Public Opinion (Iudop) at the José Simeón Cañas Central American University (UCA).
Meanwhile, only a fraction of remittances sent back to El Salvador from relatives abroad, which accounts for 25 per cent of the country’s GDP, were sent with Bitcoin.
“It might be popular with tourists that have come for the novelty of being able to do something useful with their Bitcoin, but other than that it was a failure,” Dr Howson says.
He adds: “I think just because there’s this IMF deal in place, I think there’s still going to be some fondness for Bitcoin and silly policies down the road.
“I don’t think this is the end of the line for Bitcoin in El Salvador, by any means.”
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