Bitcoin’s core philosophy is to build a fairer and more accessible monetary system for the billions of people around the world who do not have access to traditional banking services.
Here in El Salvador, most unbanked people live hand-to-hand and use only cash. As soon as they receive the money they earn, they spend it on food and housing. Bitcoin long-term savings benefits. (BTC) does not move the needle for them, and the further complexities in using the Bitcoin network and self-management create significant educational barriers to mass adoption.
Jonathan Martin is an alumnus of Stanford University, Georgetown University and currently a Wharton School student on a leave of absence immersed in the world of Bitcoin in El Salvador.
Several Salvadoran citizens are working to resolve this issue. DitoBanx CEO Guillermo Contreras is developing a Bitcoin-based savings and lending product for the 70% of unbanked Salvadorans. I met Contreras at a fine dining restaurant in San Benito, San Salvador’s equivalent of Beverly Hills.
He explained how the launch of Chivo, a government cryptocurrency wallet, gave every citizen $30 in bitcoin. Transaction volumes surged initially, but quickly declined as most people converted bitcoin to fiat currency. He said most unbanked citizens do not use ATMs and do not have access to loan products. The average education level is from 6th grade to 9th grade for him and the average daily income is $15 for him.
Contreras devised a way to slowly educate non-bitcoiners on how to save money with the new digital currency, first by giving them access to Mastercard debit cards. Users receive lightning or on-chain Bitcoin transactions and seamlessly convert them to USDC (a USD-pegged stablecoin issued by US-based company Circle) to address concerns about Bitcoin price volatility. can be relieved. You can also receive USDC directly using Ethereum.
As Contreras puts it, a 10% price volatility is a big deal when you only have $15 in your account and you need it for dinner. DitoBanx provides an easy-to-use solution.
Similarly, through an agreement with Mastercard, users can deposit money into ATMs with a 1% fee and receive USDC in their wallets. His next goal is to roll out a microfinance program to increase users’ access to credit and promote economic development. The goal is to slowly educate people about the benefits of saving with Satoshi, Bitcoin’s smallest economic unit. With SATSIS, you get all the benefits while enjoying immediate benefits like access to loans, ATMs, and the ability to pay bills with the DitoBanx app. Direct exposure to Bitcoin.
With their smartphones acting as bank accounts, he expects Bitcoin usage to grow over time. Contreras estimates that it will take him three years before Lightning is in regular use.
In addition, Contreras’ goal is to build a “circular Bitcoin ecosystem” by encouraging merchants without bank accounts to use DitoBanx, which offers the same loans and savings benefits as individual users. is. Today, the company partners with over 400 companies in El Salvador.
Currently, the world’s banking system does not support Bitcoin. For Bitcoin to succeed in El Salvador, the network must be able to integrate into the existing services that Salvadoran banks offer to their customers. At this time, we do not sell Bitcoin OTC due to integration with US counterpart banks such as JP Morgan and the broader SWIFT system.
I spoke about this with Carlos Alfaro of Koibanx, a company that builds non-Bitcoin blockchain integrations for banking systems. He said there is interest in Bitcoin among bankers, but he is concerned about the impact on international partners if bankers unilaterally adopt digital currencies. Remittances account for 25% of the domestic economy, most of which is sent from Western Union in the United States to El Salvador’s domestic bank accounts via conventional railroads. No local bank is currently willing to risk 25% of its business, especially since El Salvador’s banks are small and do not have much influence on Wall Street.
In many ways, when Wall Street sneezes, the rest of the world’s banking system catches a cold. Powerful forces outside El Salvador are playing a role in blocking the spread of Bitcoin in the country.
I traveled south to El Zonte Beach (known as Bitcoin Beach) to see firsthand the center of Bitcoin adoption in El Salvador. In 2019, an anonymous philanthropist offered: donate his bitcoin wealth For sleepy beach communities, it stipulates that the money must be used commercially and not converted into dollars.
From this arrangement, the Bitcoin Beach Initiative was born. San Diego, Calif. native Michael Peterson also participated and focused on building a circular Bitcoin economy that includes remittances, tourism, public services, and small businesses.
Perhaps the most promising of these efforts is Hope House, a community center that supports local youth in bitcoin education and provides opportunities that have never existed before. Most of El Zonte’s population of about 3,000 do not have bank accounts and live on the edge of the poverty line.
When we arrived in El Zonte, it was much hotter than San Salvador, an hour inland. To buy some water, avoiding a few chickens and a friendly dog along the way, I approached a tin-roofed building that I believe was both a restaurant and my parents’ home. The facility owner said it accepted Bitcoin. He took out his smartphone, opened his Lightning-enabled Blink wallet, and I almost instantly sent him $2 worth of his SATOSHI. Similarly, the restaurant where I had lunch also used his Blink wallet for payment.
Today, El Zonte is less developed than El Tunco, a popular surf spot nearby. There are some newer tourist destinations, but there are no paved roads and street vendors are more common than brick-and-mortar stores. I tried to use bitcoin two more times and both times the vendor said “it works”, i.e. use cash only. Not everyone wants Bitcoin, even in the heart of Bitcoin Beach.
For Bitcoin to thrive, we need to see it as a new unit of account, a means of measuring value itself, rather than constantly comparing it to the current market value of Bitcoin and fiat currencies. The catalyst for this change is likely not to be a political decree, but inevitably a hyperinflation of the US dollar.
Only time will tell if this currency technology will succeed outside of a small pocket of dedicated Bitcoiners.
