Weeks ago, El Salvador became the first country in the world to declare Bitcoin a form of legal tender, spending $308 million and increasing its government stockpile to 550 Bitcoins as part of a rollout designed to cement the country as a world leader in cryptocurrency. On Friday, president and right-wing populist Nayib Bukele tweeted that the Bitcoin mining operation run by state-owned energy company LaGeo SA de CV has generated a plum total of $370 in Bitcoin using geothermal power from volcanoes.
Bukele tweeted early Friday morning that the government was still “testing and installing,” but what he called the “#volcanode” was officially operating. That follows on a video the president tweeted earlier this week of government-branded shipping containers carrying ASIC miners to an energy facility in a jungle for installation by LaGeo technicians.
— Nayib Bukele ???????? (@nayibbukele) September 28, 2021
— Nayib Bukele ???????? (@nayibbukele) October 1, 2021
As CNBC noted, using geothermal energy to fuel cryptocurrency creation is hardly new, but the announcement comes as international attention has turned to the massive amounts of electricity that Bitcoin and other cryptocurrencies suck up to power their blockchains. (Bitcoin alone is estimated to consume 91 terawatt-hours of electricity annually, according to the New York Times, which amounts to just shy of half a per cent of total world generation.) Around a quarter of El Salvador’s energy is already generated by geothermal plants, and Bukele’s initiative is designed to capitalise on the cryptocurrency boom while maintaining an eco-friendly image.
The El Salvadoran government has created its own Bitcoin wallet called Chivo which is available for all citizens with a national ID card to register for, upon which point they will receive 30 bucks’ worth of Bitcoin. That’s a lot, given that the national gross income per capita in El Salvador was estimated to be around $4,938 in 2020.
A sign of the times, we suppose. Many El Salvadorans, however, are extremely sceptical that jumping on the Bitcoin train is actually a wise decision, as it pegs the country’s economy to the cryptocurrency’s wildly fluctuating prices and could make it vulnerable to speculation in the world markets. CNBC previously reported that a Central American University poll showed 70% of respondents in the country did not support making Bitcoin legal tender, with many of those polled having little confidence in Bitcoin itself or saying they have a limited understanding of how to actually use it.
According to the Associated Press, protests broke out in the capital city of San Salvador on Wednesday, with demonstrators speaking out against what they see as the Bukele administration’s undemocratic concentration of power. Many in the crowd were particularly displeased with his Bitcoin policies, with the AP noting some marchers wore “NO To Bitcoin” shirts. A handful of attendees vandalised some of the 200 government-run cryptocurrency ATMs that have recently been set up throughout El Salvador, although the AP noted that the network was already largely non-functional throughout the week after Chivo was overwhelmed by the sheer number of new registrants and glitches with its government-created app.
“The government is betting more than $275 million in a virtual casino, and that’s taxpayer money,” Central American Institute for Fiscal Studies senior economist Ricardo Castañeda told the Wall Street Journal.
Jorge Hasbún, who owns chains of clothing stores and is the head of El Salvador’s Chamber of Commerce and Industry, told the paper the three-month rollout under Bukele’s government was rushed and did not give businesses adequate time to prepare to accept the new tender. He also said that the government had failed to set up a proper regulatory regime before pushing cryptocurrency legislation out the door.
“If a client comes to pay with bitcoin, I’m not ready,” Hasbún told the Journal. “We could have ridden the wave in a positive way, but the way the law was imposed wasn’t positive.”
Bitcoin prices, and that of many other cryptocurrencies, surged on Friday. As of shortly after 8:00 p.m. AEDT, the price of Bitcoin stood at over $66,171, up over $5,916 from the day prior.
Other politicians have similar ambitions stateside. On Friday, Miami’s Republican Mayor Francis Suarez told the Washington Post a city-run initiative called MiamiCoin has already netted the municipal government $10 million since an August rollout. Suarez suggested that in the future, MiamiCoin could turn the city into a tax-free libertarian paradise of sorts.
“When you think about the possibility of being able to run a government without the citizens having to pay taxes. That’s incredible,” Suarez told the paper.