Bitcoin Tourism in El Salvador – part 1

On September 7, 2021 El Salvador became the first country in the world to make Bitcoin legal tender, alongside the US Dollar. This means that all businesses are required to accept Bitcoin. Great news for Bitcoin tourists!!!

The Salvadoran government has created a wallet called Chivo (cool!) which runs over the Lightning Network. The wallet is only available to Salvadorans (government ID is required) who get $30 in Bitcoin as a bonus for signing up. However, the wallet can accept payments from any other Lightning wallet, so you can use your favorite wallet in El Salvador to send or receive Bitcoin.

As of this writing, the roll-out had just started, and it will take some time to get all businesses on board. But, chains like Starbucks, McDonalds and Pizza Hut already accept Bitcoin. To help with adoption, we encourage you to always ask in every business whether they accept Bitcoin – if enough people ask, the more likely it is that they will get their act together.

As opposed to most countries who have deemed Bitcoin an asset, El Salvador made it a currency. What this means is that there is no Capital Gains tax on the sale of Bitcoin if it has appreciated significantly since you bought it (of course, your own country rules apply, consult a tax professional). The government wants to encourage foreign investment and Bitcoiners to move there, so they will provide a path to permanent residency to anyone who invests 3 Bitcoins in the country. This can be an investment in a company, or a purchase of real estate (there is a lot of beautiful coastline in El Salvador).

The plan is also to make it easy for foreign crypto companies to establish themselves in El Salvador. The country has over 20 volcanoes, and part of their electricity comes from geothermal power plants. They aim to greatly expand their geothermal infrastructure, and make it available for Bitcoin mining. President Bukele sees crypto as the future, and wants to make El Salvador a crypto hub. Since the announcement, many other countries are now looking at how to do the same – a huge step for Bitcoin!

For users of the Chivo wallet, Bitcoin transactions are free, and they can be automatically converted to US Dollars if desired. A lot of FUD has been generated over the fact that businesses are required to accept Bitcoin. However, this objection has no real merit, since thanks to the automatic conversion, the business can get dollars seamlessly if they wish. All that is mandated is that the customers be allowed to pay with Bitcoin, which is what you would expect from any legal tender. Hopefully, businesses will save at least part of their Bitcoin, or they will miss out!

The government is rolling out a network of Chivo ATMs throughout the country, as well as more than 20 in the US (see Chivo map for locations!).

The ATMs can be used to buy or sell Bitcoin at competitive rates, and will dispense US Dollars as well as Bitcoin refills. About a third of Salvadorans live outside the country (most in the US) and send remittances regularly to their families, which account for 25% of the country’s GDP. Thanks to the fee-free ATMs and the Chivo wallet, they will be able to save the fees involved in these remittances, as well as getting near-instant transactions thanks to the Lightning Network. In contrast, traditional remittance services involve not only a trip to Western Union (or other similar service) for the sender, but a lengthy bus trip for the recipient, who then has to carry cash back. Chivo will be a huge improvement!

Besides Chivo, two other wallets are found: the Bitcoin Beach wallet and Strike. Strike allows you to send US Dollars to any other Strike wallet and can be refilled directly from your bank account. It can also be used to buy Bitcoin and send it to any Bitcoin or Lightning address.

The Bitcoin Beach project was started in 2019 when an anonymous donor contributed Bitcoins with the stipulation that they should be used to form a circular economy based on Bitcoin in the small village of El Zonte (a surfer’s paradise!). This was used to fund community projects and became especially crucial when the Covid pandemic hit in 2020. The project gave about 600 local families $40 a week in Bitcoin to help them survive. These Bitcoin could not be cashed out, but could be used to buy from the local merchants who started accepting the Bitcoin Beach payments. In El Zonte and other villages as well, you will see the Bitcoin Beach Accepted Here signs, and they can accept other Lightning payments as well. It can be said that Bitcoin Beach was the seed that eventually led to the whole country now accepting Bitcoin – no small feat! Congratulations Bitcoin Beach!


[Article continues in Part 2]