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Ask HN: Why El Salvador's Bitcoin experiment failed?
From a newsletter today and a section that was titled "The Spectacular Failure":
"It has been more than a year since El Salvador became the first country to make bitcoin legal tender under the Bitcoin Law came.
The one-year update on how the law fared:
- Adoption and use of Bitcoin has remained low as the currency has lost about 60% of its value since the experiment started.
- Very few businesses accept payment in cryptocurrency, and even fewer Salvadorans wish to pay in the digital token.
A survey by the El Instituto de Opinion Publica found that 76 out of 100 small and medium-size enterprises in El Salvador do not accept bitcoin payments. Another survey published in March by the Chamber of Commerce and Industry of El Salvador found that 86% of businesses have never made a sale in bitcoin, and only 20% of businesses take bitcoin, despite the Law’s mandate that all merchants accept the cryptocurrency.
In Short: $60 million lost, $375 million spent, and little to show for. The Bitcoin experiment was a spectacular failure."
What do you think? What was planned and why this happened?
- logicalmonster 4y ago1) I'd say that "failure" is an imprecise label for an on-going change. A better label is a "work-in-progress experiment" that hasn't panned out yet. 2) Changing the default way of doing business takes time. It took credit cards many years to replace cash and checks as the most common payment methods. There's smart technical people on HN who still barely understand the social and economic implications of crypto despite fully understanding the technology...and most people barely understand anything about crypto. It might take years to start to find traction among a general population. Declaring it done just 1 year into it is very premature. 3) Will it succeed? Who knows, but I'd argue that a country in El Salvador's position is 100% right for taking that approach to their economic development given how difficult it might be to bring industry and business to their country otherwise. 4) I don't follow El Salvador politics too closely, but it seems like their president isn't just a one-trick pony who is only doing the crypto stuff. There's big work there but he's also trying to do stuff to fix crime and corruption and other changes that could help. I've heard mixed results on him, but again I'm not an expert on the country.
- wmf 4y agoIf your country is broke, gambling away money on crypto is far from "100% right". There are many different ways besides crypto that El Salvador could attempt to improve their economy.
- logicalmonster 4y ago> If your country is broke, gambling away money on crypto is far from "100% right". I can understand the opposite viewpoint, but to me taking some risky bets makes perfect sense when you're already poor and in a bad position for any kind of realistic improvement in any reasonable timeframe. > There are many different ways besides crypto that El Salvador could attempt to improve their economy. Of course. And as far as I know they are doing some of those things: particularly working on the crime and corruption part of it.
- el-salvador 4y ago>> If your country is broke, gambling away money on crypto is far from "100% right". > I can understand the opposite viewpoint, but to me taking some risky bets makes perfect sense when you're already poor and in a bad position for any kind of realistic improvement in any reasonable timeframe. Taking risky bets would be OK, but very few public information is avaialble. If we had a dashboard that showed the results of the bet, Like what the Norway Investment Fund does, then it would be more transparent (https://www.nbim.no/ https://www.nbim.no/) > > There are many different ways besides crypto that El Salvador could attempt to improve their economy. > Of course. And as far as I know they are doing some of those things: particularly working on the crime and corruption part of it. They may say they are doing that, but in practice, they have hindered the tools citizens had to oversee government spending. Like some government purchases no longer going via the public tender law, or limiting the public information access law, and the head of congress "inviting" local investigative journalists to leave El Salvador and ask asylum in other countries.
- logicalmonster 4y ago
- dev_0 4y agoA few years later, the same media will praise El Salvador for using bitcoin
- yellowapple 4y agoThat's unlikely unless said media changes ownership away from those with a vested interest in preserving the legacy global financial system.
- ksaj 4y agoI bet switching to paper money took some time and effort. It'll be a while yet before Bitcoin and the masses are ready for each other.
- kasey_junk 4y agoI am not a crypto expert and I don’t have treasury operations experience in a company that has direct exposure to a developing countries issues. I do have experience doing treasury ops work though and I will say the 2 biggest things you look for in the currency you do treasury operations in is a) stability and b) access to normal financial rails. Nothing currently beats the usd on either count and that’s the currency of exchange in El Salvador. Because of that there is no incentive for businesses to change their currency of account. And if uptake on the consumer side is low there is no reason at all to accept a new currency. You might as well ask why the Japanese yen hasn’t had significant uptake. It’s the same problem as Bitcoin but at least it’s (relatively) stable and has well paved financial rails. Even the Chinese yuan hasn’t made a dent in currency of account. Why would Bitcoin?
- el-salvador 4y ago> Nothing currently beats the usd on either count and that’s the currency of exchange in El Salvador. Because of that there is no incentive for businesses to change their currency of account. And if uptake on the consumer side is low there is no reason at all to accept a new currency. My treasury experience is limited to what I have in my wallet, but I can say using the USD is definitely one of the advantages of El Salvador and Panama compared to the rest of Latin America. The coins I get as change in a fruit stall in El Salvador, can be used to pay a subway ticket vending machine in the U.S. The banknotes I get from an ATM in a small town in El Salvador, can be exchanged for local currency in another continent. Just some of the advantages of the local currency being the most traded currency in the world.
- deleted 4y ago[deleted]
- yellowapple 4y agoIt's only been a year, and per your own source there's already upwards of 20% adoption. Seems rather premature to declare it to be a failure.