We take a look at cryptocurrency in Central America to see how various countries in the region are using it, adapting to it, and legislating for its wider use.
In September 2021, El Salvador became the first country in the world to make Bitcoin legal tender. This gave cryptocurrency the same status as fiat money and traditional commodities.
The decision required all businesses to accept bitcoin payments, and Salvadorans received incentives to download a state-sponsored crypto wallet. President Nayib Bukele, a crypto advocate, wants the world to see El Salvador as a pioneer and trailblazer in the crypto market.
El Salvador also revealed plans for volcano-powered mines and a crypto city. If these additions sound somewhat futuristic, that’s because they are.
The plan was for Salvadorans to use Bitcoin for day-to-day transactions and payments. But several agencies, including the International Monetary Fund, have issued warnings about Bitcoin’s instability and volatility.
So far, the investment has not paid off as expected, as a cyber-currency crash has lost as much as $60 million. However, many still believe there is still a chance for digital money in El Salvador and the region. Let’s see how the progress of cryptocurrency in Central America is going.
Cryptocurrency in El Salvador
As already mentioned, crypto has not performed as well as expected in El Salvador so far.
The adoption of Bitcoin as legal tender alongside the US dollar was first seen as a stellar plan. The idea was to attract foreign investment, create jobs and be a beacon of change visible to the world. And in all honesty, there has been some success with those goals.
That said, the experiment was not greeted with much enthusiasm by the Salvadorans themselves. Surveys have shown that only 20% of Salvadorans have used their cyber wallet to transact. Indeed, most of them have dropped the Chiva app, as it is called, from their phones.
As part of the app rollout, everyone who downloaded the app received $30 worth of Bitcoin. Most Salvadorans immediately changed that money to dollars and have never used Chiva since.
Although one particular demographic is very active on the app, namely young men, the truth is that the change was probably too sudden. Bukele is Latin America’s most popular president, but even with that popularity, bitcoin adoption is his policy that most Salvadorans disapprove of.
In theory, the move should have been a resounding success.
More than half of Salvadoran citizens rely on cash and do not have a bank account. As such, many are unfamiliar with using debit or credit cards. About 90% of households do not use mobile banking services. A digital payment platform could therefore contribute to a more inclusive and accessible economy.
While there are over 200 Bitcoin ATMs in El Salvador, the average number of withdrawals stands at 2.59. This suggests that only a small number of users are still active on the platform.
Despite the general apathy and downright unpopularity of the Bitcoin project in El Salvador, the country is not giving up. It still has confidence in its own potential to become a hub of crypto activity.
Last month, for example, El Salvador partnered with the Swiss city of Lugano in a joint effort to promote crypto adoption.
does it matter if no one uses it? https://t.co/LuNG8j6ily
— KorbinDallas368 (@KDallas368) November 13, 2022
Cryptocurrency in Panama
There is perhaps no other country that has scrutinized crypto legislation more thoroughly than Panama. Earlier this year, lawmakers passed a bill allowing the use of various cryptos, including Bitcoin, Ethereum, and Litecoin. President Cortizo partially vetoed the bill and sent it back to Congress for amendments. If successful, however, citizens and businesses should check the Ethereum price before making a transaction.
The use cases for cyber currencies would first relate to business-level processes and civil matters such as paying taxes. Eventually, the use could extend to daily payments. The legislation also contains references and provisions relating to tokens, the digital counterparts of physical assets.
Some have raised the possibility that money laundering activities could benefit from the introduction of digital currency in Panama (the reason why the president vetoed the bill), especially following the publication Panama Papers and Pandora Papers.
Lawmakers assured the public that crypto would be fully regulated and all transactions would be subject to Panama’s financial transparency laws.
Watch this place. If you’re looking for another haven for cryptocurrency in Central America, Panama is the next best bet after El Salvador, and the bill will surely pass over time.
A partial veto is a type of veto power that allows a chief executive to reject certain provisions of a bill without vetoing the entire bill.
Going through @Sebsinclair1989 https://t.co/gijGNyajE6
—Blockworks (@Blockworks_) June 17, 2022
Cryptocurrency in Honduras
According to a press release from the Central Bank of Honduras earlier this year, authorities know that citizens are trading and using crypto.
They have issued warnings to traders regarding potential issues with investing in cryptocurrencies. Price volatility is one such problem, as market values change at lightning speed. Officials also pointed out that digital assets, whether currencies or tokens, are not regulated by any central authority.
But Honduras is also home to the new “Bitcoin Valley” of Santa Lucia, a cryptocurrency-accepting community where businesses accept digital cash as payment.
Entrepreneurs and business owners are convinced that crypto will present the retail sector with an opportunity to modernize. They also believe that increased usage will attract more people to crypto.
Others also see it as an opportunity to catch up with neighboring countries that have already integrated crypto into their economies. Using this advanced technology seems like a surefire way forward in Honduras right now.
Honduras launches ‘Bitcoin Valley’ 🇭🇳
More than 60 companies have adopted #bitcoin in the small town of Santa Lucia. They will receive training on new technology and how to market their products and services.https://t.co/O8nh543ehG
— Documenting Bitcoin 📄 (@DocumentingBTC) July 29, 2022
Cryptocurrency in Costa Rica
Commentators have dubbed Costa Rica a veritable “crypto haven.”
It is one of the few places in the world where employees can be paid in cryptocurrency. This is the result of a law designating that workers can be paid in “commonly accepted assets,” of which digital money is one.
This ease of use comes from a solid online infrastructure, one of the best in Latin America.
There is also a new crypto bill in Costa Rica, introduced last month by Johana Obando, a liberal lawmaker. The bill aims to legalize and regulate cryptocurrencies and make Costa Rica attractive to fintech companies and foreign investment.
🇬🇧Costa Rican MP Johana Obando has proposed a crypto-friendly bill, titled “Crypto-Asset Market Law (MECA)”, to regulate and exempt #crypto tax benefits generated by mining activities.
Going through @chung_cynhttps://t.co/sJf04LDIDN
—CryptoSlate (@CryptoSlate) October 28, 2022
While cryptocurrencies are a new addition to the financial market, having entered the financial ecosystem only a little over a decade ago, the world has quickly embraced them.
Compared to more traditional holdings, their popularity has skyrocketed. Central America, in particular, has sought to integrate them faster than many other regions. But there is still some way to go until cryptocurrency in Central America is on par with fiat currency in the region.
