Bitcoin is the currency of El Salvador

(Editor’s Note: Three El Salvadorans in the area contacted by Fox News – two of whom were originally from the United States – are investing their savings into the cryptocurrency created by an American…

Bitcoin is the currency of El Salvador

(Editor’s Note: Three El Salvadorans in the area contacted by Fox News – two of whom were originally from the United States – are investing their savings into the cryptocurrency created by an American programmer in 2014.)

By Fabiola Gómez, Associate Producer

On the northern outskirts of San Salvador, people gather nightly to watch a video screen through which Bitcoin signposts give various Bitcoin rates. The excitement is clear as people exchange plastic bags for USB drives and try to figure out how to obtain bitcoins in El Salvador.

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By now, El Salvador is well known for housing the largest networks of bitcoin exchanges in the world. But bitcoin’s zenith of notoriety might be a passing phase. It’s business in El Salvador is something else entirely. The government is trying to clamp down on this loose joint, but its attempts at regulation are questionable, at best.

“Bitcoin isn’t like any other investment we can make,” said Paul Piquant, 38, who immigrated to Guatemala from New York three years ago. “It has lots of advantages but it also has advantages for our national economy as well.”

Greetings in El Salvador

Bitcoin works by concealing information in a series of algorithms. Bitcoins are generated by computers, which sell one digital currency for another. Bitcoins are held in complex chains of linked nodes, and can not be transferred by face-to-face exchanges. The secure nature of bitcoin appealed to El Salvadoran cryptocurrency trader Julieta Castellanos.

“You can solve them in two hours instead of days,” she said, referring to the technical underpinnings of the digital currency. “The price of bitcoins is now different, higher than when it was in shortage in 2017,” when prices skyrocketed to $3,000.

Venezuela and El Salvador are just two of the world’s countries whose national currencies are under pressures as its own economy spirals downward. Venezuela’s unregulated economy led to a run on the country’s currency, the bolivar, and dozens of financial institutions were shut down. Since the collapse of the Bolivar, bitcoin was the go-to currency in many parts of the country. But bitcoin can be used globally, so that it became a status symbol even for those not using it to steal.

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And while the El Salvadoran government appears to have known about this for a while, it could do little to rein it in.

The open race

In an attempt to stifle cryptocurrency speculation in El Salvador, authorities in January authorized their national financial services authority (UPF) to set up a cryptocurrency exchange, Mercado Prieto, within its walls in downtown San Salvador. Mercado Prieto was modeled after CoinSatacoin, a bitcoin exchange operated from Brazil, even though it was created years before the cryptocurrency was officially added to El Salvador’s stock exchange.

Mercado Prieto is scheduled to start operation this spring, when its 1.6-kilometer USB cables will be available for $3. Traders will be able to make transactions while on a bus. The more people trade, the more likely they are to win a birthday prize for their family.

Bitcoin is such a new thing for many people that it will take at least several months for the volumes of transactions to have a significant effect on the national economy.

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The excitement in March will be more in line with what happened with the flash crash that did occur in the middle of December. Investors panicked and sold off their entire Bitcoin investment in a matter of minutes, and the global exchange traded market for the digital currency went on a five-minute freefall that halted trading for 21 hours in the process. Bitcoin prices rebounded after the crash, but the markets were not convinced the flash crash was an isolated incident.

Back in El Salvador, people are ignoring those warnings and are not planning to stop their cryptocurrency trading anytime soon.

“Digital economy gives people a better understanding of markets,” Castellanos said. “Because we do not understand how markets work, you will see traders not sitting on this market,” and more people participating in the crypto market.

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Castellanos joked that she is a master of selling, regardless of the market.

“My mother sent me a coin,” she said. “And my grandmother sent me two.”

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