What could possibly go wrong?
At the base of the Conchagua volcano, located on El Salvador’s Southeastern Pacific coast lies a small village called La Union. Surrounding several playa’s or beaches, the American branded Comfort Inn recently opened to serve guests who travel from either the capital of Honduras (Tegucigalpa) or El Salvador (San Salvador).
Both can be reached by car, roughly four hours in either direction. The two-lane highways are modern, safe to travel through and afford an experience with lush landscape, yet one where extreme poverty is visible. The area surrounding the Conchagua volcano is breathtaking with views from every vantage point overlooking the Gulf of Fonseca. Multiple islands are shared between the two islands with transport available via passenger ferries.
A few miles from Conchagua in La Union lies the Guatemalan restaurant El Pollo Campero, a sort of fried chicken, locally-based restaurant chain that offers the usual assortment of chicken, fries and soft drinks. This is the comfort food known to many in the Northern Triangle countries that include Honduras, Guatemala and El Salvador. It is here in this village where El Salvador President Nayib Bukele announced that his government is planning to build an oceanside ‘Bitcoin City’ at the base of a volcano. Fortunately, this is not considered an active volcano and Conchagua appears to be dormant, although not prone to earthquakes. This is part of the very active Pacific Ring of Fire where tectonic plates collide and generate an abundance of geothermal energy.
In June of 2021, Bukele declared that El Salvador would be the first in the world to recognize crypto-currency mega hit “Bitcoin” as legal tender. Within weeks, local establishments including McDonalds and Starbucks began recognizing transactions which carries with it, no traceable financial paper trails or patterns.
And therein possibly, lies the problem.
Unlike highly regulated currencies in other established countries, bitcoin and most cryptocurrencies are presently in infancy stages and government, regulatory bodies are slow to understanding the mechanisms in how it works, let alone provide a sort of roadway buffers, much like those on the highways that run from San Salvador to La Union. Several protestors spoke out against the implementation of the concept and that was before Bukele made a second announcement in November of that same year.
Expanding on the geothermal potential in the area, Bukele announcement plans to build what would be the world’s first “Bitcoin City” at the base of the Conchagua Volcano. This would make El Salvador the first to make cryptocurrency legal tender, right alongside the US dollar. Recently, the El Salvadoran nation initiated a pilot bitcoin mining venture at a smaller geothermal plant next to the Tecapa volcano
The city theoretically could be built near the Conchagua volcano to take advantage of geothermal energy to power both the city and Bitcoin mining — the energy-intensive solving of complex mathematical calculations day and night to verify currency transactions.
The El Salvadoran government is presently experiencing some success with a pilot Bitcoin mining venture at a nearby geothermal power plant near the Tecapa volcano. This geothermal plant is about forty miles to the North from La Union. The newer Bitcoin city would be built in between Conchagua volcano and the town of La Union to take advantage of harvesting the geothermal energy to produce electricity. In doing so, electricity would be expanded to provide infrastructure development for the new city as well sa the ultra-energy intensive process required to solve complex mathematical calculations day and night. As a bonus, this would also be utilized to generate and verify monetary transactions.
Bukele could be commended for his desire to improve the lives of his citizens and pave a way forward that is clearly thinking outside the box…. if Bitcoin City comes into fruition. There’s no reason why El Salvador can’t create a future business banking model that can duplicate financial services on par with those in Panama City or the Grand Cayman Islands. Bukele has also said there would be no income, property or municipal taxes and the city would have zero carbon dioxide emissions. However, the citizens of El Salvador have a justifiably, healthy dose of skepticism. “Like all innovations, El Salvador’s bitcoin process has a learning curve,” Bukele said in a tweet. “Not everything will be achieved in a day, or in a month.”
Critics complain of the potential for additional layers of corruption since bitcoin transactions aren’t traceable back to the original source. In a world where transparency and democracy is increasingly fading, the rise of authoritarian and/or oligarchy is apparent. Although such isn’t the case with Bukele as he was voted in with a significant mandate, this youthful forty-year-old president has three years to make noticeable improvements. After that, citizens will now have an opportunity to reconsider him to a second term, something past presidents did not have).
What could go wrong?
The ideas and vision he has laid out are at times opaque, however past practices to move the needle economically for the citizens of El Salvador haven’t been generous. In a country where average monthly wages are measured in the hundreds of dollars (if one can find work), the bitcoin city concept can either grow in to a prosperous boomtown or die a withering electronic, geothermal death. Bukele’s administration did announce it will provide land and infrastructure to attract investors.
Time will be the best indicator with the volatile swings associated in Bitcoin cryptocurrency. Who knows, if success is measured by putting more currency (and supporting jobs) into the hands of the citizenry, that could provide them with additional spending power. Dare I say, it might even offer an opportunity to climb the economic ladder of success; something El Pollo Compero would gladly welcome.
What could possibly go wrong? Hard to say. What’s there to lose? The opposite is maybe goodness, something the people of El Salvador would welcome with open arms if Bukele turns out to be right.