Before the tears start falling, the subject gripping the room is inflation. “We’re seeing [an] unprecedented amount of monetary expansion from central banks right now,” says Jack Mallers, pacing the stage like an evangelist stoking his audience. “It’s very scary.” The scene resembles a tropical TED Talk, one given by a crisply tanned, hoodie-clad 27-year-old who looks like he washed ashore from a night of clubbing. It’s Bitcoin 2021, a two-day confab in Miami in early June, where 12,000 techno-anarchists, Wall Street bankers, and the crypto-curious swarm to conspire about the future of Bitcoin.
Mallers, the founder of a Bitcoin money-transfer startup called Strike, swiftly maneuvers from inflation and the farce of the Federal Reserve to deliver the real subject at hand: financial injustice in the developing world. In El Salvador, he says, a country that two decades ago abandoned its own currency for the U.S. dollar, 70% of the population is unbanked and many get their income through remittances saddled with outrageous fees. Where, as he tells it, people are left with little choice but to flee their homeland, resorting to crime and violence. “But if you rewind those steps,” Mallers says, “if you can fix the money—you can fix the world.”
Now come the tears. Mallers, his voice cracking, explains that that’s why he moved to a little town in El Salvador for three months, to help these people while also launching his company there. “I talked to the kids,” he says, flashing photos of himself with young Salvadorans on the oversize screen. “I told them, ‘Man, we got this. Bitcoin’s here. We got this.’ ”
By the time he gets to the part about El Salvador’s president asking him to help write the bill that would turn Bitcoin into legal tender—teeing up a video from President Nayib Bukele making the announcement—Mallers is practically weeping. Then he rips off his hoodie to reveal a Salvadoran soccer jersey gifted to him by the politician himself. The crowd goes wild.
The Bitcoinification of El Salvador has been under way for a while now. Bukele had been tinkering with the cryptocurrency even before winning office in 2019. The millennial politician and members of his Nuevas Ideas political party have owned Bitcoin for years, according to two people in the government who didn’t want to be quoted commenting on the president’s finances. Bukele even hinted at his desire to adopt the cryptocurrency in 2017, when he was San Salvador’s mayor, tweeting, “we will use Bitcoin.”
The best place to see where El Salvador is going with all this is El Zonte, a surfing village on the country’s Pacific coast. In 2019, a small team of Salvadoran volunteers and an American expat started to transform the local economy to run on Bitcoin. Workers now receive their salaries and pay bills in Bitcoin, tourists can buy pupusas with a special Bitcoin payment app, and community projects are financed with Bitcoin donations. According to Jorge Valenzuela, an upbeat 32-year-old surfing aficionado who leads the volunteers, “it has changed my town.”
In early May, a month before Bukele made the announcement, I spent four days in El Zonte. To get there from the two-lane highway that snakes along El Salvador’s Pacific coast, you take a rutted-out road past corrugated-metal fencing and street dogs sleeping under mango trees. You’ll see the black, volcanic sand beach, rolling waves, and a point break that has turned this town of 3,000 into a destination for foreigners with surfboards. But the most striking thing these days is the orange “B”—the international symbol for Bitcoin—splashed on garbage cans, near the entrance of the dirt-floor pizza joint, and hanging on the wall near the surf shack at the beachfront hotel. The town has never had a bank. Now the lone ATM buys and sells Bitcoin.
On a breezy, warm evening, Mallers and an international crew of Bitcoin influentials gather over freshly caught red snapper on the deck of Garten, a swanky modern hotel with sweeping views. In 2019 an anonymous American donor started seeding El Zonte with Bitcoin. “Bitcoin Beach,” as the project organizers have since dubbed it, has at once become a controlled alt-currency experiment, a philanthropic endeavor, and a capitalist calling with a whiff of savior complex.
The crew of foreigners came to town either to witness the experiment firsthand or figure out how to export it elsewhere. Peter McCormack, a tattoo-covered Brit who hosts What Bitcoin Did, the world’s most popular Bitcoin podcast, is on an extended stopover before a trip to the U.S. Miles Suter, who helps run the Bitcoin business for Square Inc.’s Cash App, has lived intermittently in El Zonte since he came to check out the project last year. A guy who introduces himself only as “Dread” turns up, fresh from the airport, hoping to learn the secrets of Bitcoin Beach so he can replicate them in the outskirts of Kingston, Jamaica, he says.
Over dinner, they share stories of becoming disillusioned with the global economic system, the vitriol and polarization among Bitcoiners on Twitter, and “shitcoiners”—what Bitcoin monogamists call people who trade in other cryptocurrencies. It’s the contentious crypto debate common among those fortunate enough to be from a prosperous economy, where Bitcoin is as much about a belief system as it is about a financial one.
In El Zonte, Bitcoin is a possible solution to an actual problem, as opposed to a solution in search of a problem, which is how critics describe its role in, say, the U.S. Emerging economies adopting new technologies before more established ones is nothing new. Brazilians were early users of mobile banking because it was a faster way to move around money, which during the days of hyperinflation was a rapidly wasting asset. Digital wallet apps have taken off in countries such as India and Kenya, where a large proportion of the population is unbanked. Latin America, a region long afflicted by wobbly currencies, is particularly fertile ground. Three years ago, Venezuela became the first nation to launch a central bank-backed digital currency, dubbed the petro.
“What’s different about what’s happening down here in El Zonte is the level of adoption and the circular nature,” Square’s Suter says. “You see it spreading from family to family and down the coast from town to town.” Suter is an Ivy League-educated former lacrosse player who was fired from his job as a Wall Street equities trader because he participated in the Occupy Wall Street protests. He found purpose in Bitcoin’s potential, especially in countries in distress, and visited El Zonte last year on his way to check out how Argentines were using it. He continues: “Bitcoiners around the world have found a country to be rooting for.” If anyone at the table knows that El Salvador will soon become the first country to deem Bitcoin as legal tender, nobody says so.
As the evening wears on, McCormack orders a bottle of red wine. Most of the hotel staff have packed up and gone. The group talks about Bitcoin Beach-type projects taking hold in other countries, perhaps Venezuela and Lebanon, where currency collapses robbed people of their savings. “What we need to do,” McCormack says, glancing at Michael Peterson, a 47-year-old California native and the improbable father of Bitcoin Beach, “is clone this guy.”
A day earlier, I visited Peterson’s office just down the hill from the bustling highway in a two-story, off-white building that Bitcoin Beach now shares with Mallers’s Strike. Peterson first came to El Zonte 17 years ago on a surfing trip, long before it was a tourist hot spot, and loved it. He was running a family food concession business in California. During the offseason, he and his wife, Brittney, and their children began splitting time between their home in San Diego and El Zonte. The Petersons supported missionaries they met through their evangelical Christian church in San Salvador and started funding small development projects, working with local churches and community groups.
Then, in early 2019, Peterson—who still uses an old-school EarthLink account—was introduced to an unidentified donor through a connection he made at the church. The proposition he heard seemed more like a scam: An anonymous donor in California had purchased a cache of Bitcoin that was presumably now worth a fortune. Through an adviser, the donor told Peterson he wanted to create a local economy that ran on Bitcoin, the only condition being that it wouldn’t be cashed out into a fiat currency. Peterson thought about it, grew intrigued, and decided to go for it. “It allows everybody from the poorest to the richest to participate on the same playing field,” he says. “I really felt like, ‘Man, this is something that can change El Zonte.’ ” He says he still doesn’t know the donor’s identity.
By mid-2019, Peterson had drafted a plan to create a Bitcoin economy and recruited a small staff of El Zonte residents that he and Brittney had worked with for years. After an inauspicious attempt to convince older adults, they targeted the town’s presumably least tech-resistant—paying its teenagers in the digital coins to pick up trash along the river. Then Valenzuela, the project’s coordinator, persuaded a single store in town to accept Bitcoin as payment.
But it was the pandemic that ultimately jump-started the project. When El Salvador’s tourism industry and El Zonte’s economy collapsed, Peterson started making monthly transfers of about $35 in Bitcoin to 500 families around town. He used Wallet of Satoshi, one of the many existing smartphone apps created for small transactions using Bitcoin, which is notoriously impractical—expensive and slow—for everyday purchases.
As more stores began asking how they could accept Bitcoin, Peterson decided El Zonte needed its own app. The Bitcoin Beach Wallet, which launched in September, similarly uses technology that allows for small transactions. It shows users how much they hold in Bitcoin and greenbacks and where they can spend it. Shops in town price everything in dollars, whether the underlying transaction is in Bitcoin or not. A cappuccino always costs $3.50, even if Bitcoin’s value has just jumped or dropped. In this way, it behaves more like a token than a currency.
The town’s embrace of Bitcoin is apparent just by looking at the app. Peterson slides his finger across his iPhone, the screen blooming with red dots, each one representing one of the roughly four dozen businesses that accept Bitcoin as payment. The dots look like a rash spreading from Peterson’s headquarters across town and up and down the coast. He says that 18 months after the project launched, roughly 90% of El Zonte’s households are interacting with the currency regularly. “It’s crazy how fast Bitcoin has caught on,” he says. Businesses are using it on their own to pay bills and accept payments. Residents use transfers to the Strike app, the ATM, and peer-to-peer transactions to move money back and forth between Bitcoin and cash. There’s also a local woman who has turned into a market maker. She buys Bitcoin from town residents when they need cash and then deals it to eager investors, many of whom come from San Salvador, where the digital currency has been next to impossible to purchase.
For some in El Zonte, the benefits of Bitcoin have been incremental at best. Many business owners say it makes up just a small fraction of sales. Although some 85% of families have access to smartphones, many still live in cramped houses with dirt floors and tin roofs. But for others, it’s clearly been life-altering. A construction crew chief pays his dozen or so employees in Bitcoin. He was sick of losing them for a half-day every month so they could travel to the nearest bank, an hourlong bus ride away, on payday. Adrian Torres, 62, one of the crew, tells me he fixed his teeth with the money he saved in Bitcoin, and now he’s saving up to buy a cow.
Maria del Carmen, a mother of six, says she was skeptical about storing money on her phone. She reluctantly started accepting payments for her tiny eatery, run out of a kitchen in front of her home. Bitcoin now accounts for as much as half of her roughly $45 a day in sales. Four of her children have migrated to the U.S., where approximately 2.5 million Salvadorans live and send home $4.5 billion a year in remittances. Now, instead of receiving money from her daughter in California, del Carmen sent her $2,000 from Bitcoin savings, she says. She still has almost $2,000 in the account.
At the Point Break Café, owner Enzo Rubio says his strategy with all the Bitcoin payments that come in is to treat them as a savings account he doesn’t plan to touch. The first order he accepted in Bitcoin was worth $10 back in November. When I was there, that value went up to $30, and it’s now just above $22. He’s ridden these bouts of volatility by paying close attention to Bitcoin’s moving average, he says, already describing his strategy in crypto parlance: he’s HODL, Bitcoiner language for “buy and hold.”
El Zonte is among the longest-running experiments of its kind, but it’s still largely untested. “I’d be very interested in seeing what happens if we enter a bear market,” says McCormack, the British podcaster. “If you’re a shop owner and you have $50 a day in Bitcoin sales and all the sudden that goes up to $60, that’s cool. But what happens when it starts going down to $40 or $30?”
On May 12, Elon Musk tweeted that Tesla Inc. wouldn’t take payment in Bitcoin over concerns about the environmental impact of mining the digital currency, which ignited a Bitcoin selloff. His tweet came as a surprise, given that just a few months earlier he said the carmaker would take Bitcoin, which sent the price soaring. The price eventually touched a low of $30,000, causing a commotion, to put it mildly. It has since rebounded to around $40,000 as of June 14—this time prompted by Musk changing course once again.
Volatility is only one of many risks Bitcoin poses to a place like Bitcoin Beach, and, soon, the rest of El Salvador. After Bukele’s June 5 announcement about turning it into legal tender, the 39-year-old went on Twitter Spaces to explain how El Zonte influenced his decision: “You guys demonstrated that a community can actually benefit from Bitcoin. Now we’re going to demonstrate it on a countrywide scale.” Two days after El Salvador passed a bill adopting it as a parallel currency, the International Monetary Fund was already pushing back, warning, “crypto assets can pose significant risks.”
Since the bill passed, Peterson says he’s been inundated with requests by banks, phone companies, and other businesses all asking for information about the project and Bitcoin in general. Downloads of Bitcoin Beach and Strike are now among the top three finance iPhone apps in El Salvador, and the number of transactions on the Bitcoin Beach app grew tenfold, to about 8,000 a day, Peterson says.
Peterson’s plans have changed, too. He was eventually going to wind down the amount of Bitcoin he was sending to some small-scale projects—$5,000 for a lifeguard training program, $1,000 a month for a student scholarship program—letting the government take over some and seeing if others can operate on their own. Now he sees himself helping roll out the model to towns across the country. The idea is to help them build up capacity using a locally controlled version of the Bitcoin Beach model—kind of an online community Bitcoin bank. “There’s been a crazy amount of interest in Bitcoin these last few days,” Peterson says by phone, a few days after the bill was passed. “We want to help build up capacity, bring in Bitcoin jobs to El Salvador. That’s really been our goal all along.” Of course, the more the experiment grows, the less controlled it becomes.
Residents have experienced their share of panic, especially during the first dips in price, says Peterson, who’s tried to reassure them by explaining the ups and downs of the market. His team is preparing residents for an extended down cycle by moving some holdings into U.S. dollars or making large purchases now, while prices are high.
Some locals are already a few beats ahead. An hour after sunrise on my last day in El Zonte, I walk to the beach entrance next to a community skate park. About a dozen surfers have paddled out to the break point to catch decent-size waves. Hugo Conteras, a shirtless twentysomething, stands on the shore with a long lens, photographing them. Later, he offers to sell them a series of the best shots for about $20. He tells me surfers sometimes ask if he’ll take Bitcoin. He’s taken it on a few occasions, but the dips in price burned him. “Now I tell them it’s $25 if they want to pay in Bitcoin,” he tells me. “You don’t know when it’s going to go down.” Read next: Dreams of Working From a Beach Risk Turning Into a Tax Nightmare
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