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There’s Trouble in El Salvador’s Bitcoin Paradise

Between the growing authoritarianism of his government and the massive popular pushback to his absurd new Bitcoin law, the honeymoon for El Salvador’s young, self-styled “disrupter” president Nayib Bukele is over.

President Nayib Bukele speaking during a press conference in San Salvador, 2020. (Fred Ramos / Bloomberg via Getty Images)

At forty years old, El Salvador’s millennial millionaire president has projected an international image as a youthful and irreverent Silicon Valley–style disrupter. Nayib Bukele made headlines by snapping a selfie during his first address at the United Nations, then made his country the only in the world to adopt Bitcoin as legal tender.

But beneath this vacuous techbro veneer, Bukele’s government has a deeply authoritarian character. The president, who has enjoyed persistently high approval ratings despite his unconstitutional consolidation of executive power, now faces a growing opposition movement amid deepening economic and political crises.

Techbro Authoritarianism

Bukele campaigned as a post-ideological anti-corruption crusader against a decadent political class. His youthful and irreverent image, together with a formidable family war chest and digital media savvy, helped him unseat the leftist Farabundo Martí National Liberation Front (FMLN), the party of the post-Salvadoran civil war demobilized insurgency, which governed for two terms from 2009–19. Bukele, who rose to prominence as an FMLN mayor, soon turned on his former party, weaponizing the oligarchic right’s relentless destabilization campaign against the governing left for his own benefit.

Despite casting both traditional right and left parties as his enemies, Bukele compiled a coalition of the most loathsome opportunists from across the Salvadoran political spectrum. In office, he converted the Salvadoran government into an advertising agency, abandoning the remains of FMLN social programs to the neglect and corruption of his cabinet as the country’s finances spiral out of control.

In order to consolidate and retain power, Bukele has demolished the gains of the 1992 Peace Accords that brought a negotiated close to El Salvador’s twelve-year US-backed civil war, fomenting the remilitarization of Salvadoran politics and, by extension, the re-politization of the Armed Forces, effectively abolishing the separation of powers and criminalizing dissent.

The dramatic events of February 9, 2020, when the president invaded the legislature with the army to demand the approval of a security loan, turned out to be a mere prelude to the “self-coups” to come. On May 1, 2021, hours after Bukele’s New Ideas party took its seats as the new parliamentary super majority, the legislators dismissed the attorney general and all five magistrates of the Supreme Court’s Constitutional Chamber, replacing them with Bukele loyalists.

The new attorney general shuttered the nascent Organization of American States (OAS)–backed anti-corruption body — installed by Bukele himself as a campaign promise — and launched an operation of political persecution that has so far seen five former FMLN cabinet members imprisoned on trumped-up charges.

On September 1, Bukele’s new Constitutional Chamber ordered a purge of the lower judicial orders, forcing all judges over the age of sixty into retirement. Days later, they defied the constitution’s prohibition and authorized the president’s reelection.

Coming on the heels of these attacks against the nation’s fragile but hard-fought democratic order, the deeply unpopular Bitcoin Law was the straw on the camel’s back, triggering mass protests that threatened the popular foundations that lend legitimacy to Bukele’s presidency.

Bukele’s Bitcoin Gamble

Bukele’s Bitcoin proposition was immediately rejected in El Salvador, where the traumas of the deeply unpopular dollarization of the country’s economy in 2001 are still fresh in public memory. The three-page law was presented and approved by the ruling party’s legislative majority in a matter of hours, only days after the president surprised the country with the announcement in English at a Miami conference in June.

Polls have confirmed broad disapproval of the measure, as well as generalized confusion and ignorance about the cryptocurrency’s mechanics. As public anxieties rose ahead of the law’s implementation, negatively impacting Bukele’s much-coveted approval ratings, the president assured the nation that Bitcoin’s usage would not be mandatory. The legislation itself, however, includes mandates that “all economic agents” accept Bitcoin transactions and that preexisting obligations expressed in dollars may be settled with Bitcoin.

The initiative has puzzled observers both inside and outside of El Salvador. In the most generous interpretation, “bitcoinization” is a misguided attempt at a techno-fix for the Salvadoran economy’s deep structural problems. Bukele’s reckless, improvised governance amid the already unfavorable context of the pandemic has brought the country to its most serious economic crisis in decades. Desperate for financing but refusing to undertake progressive fiscal reform, Bukele’s legislators have raised national debt to well above 90 percent of the country’s GDP. But the Bitcoin announcement has only triggered further instability, imperiling International Monetary Fund negotiations and tanking the country’s credit ratings.

The bid has also been framed as a means of attracting international investment, an escalation of Bukele’s “Surf City” branding exercise for the country’s western beaches. At best, however, it threatens to flood El Salvador’s shores with an insufferable tide of digital grifters and influencers. More seriously, Bitcoin’s adoption promises a massive influx of criminal organizations looking to launder their illicit earnings into El Salvador.

Bukele’s Bitcoin Law also represents a dangerous ecological hazard. In 2017, after a decade-long battle that cost the lives of several water defenders, El Salvador’s became the first and only nation in the world to ban metallic mining. Now, the president has offered to channel the country’s limited geothermal resources into Bitcoin mining, which would quickly force El Salvador to resort to importing carbon-based energy to meet its domestic needs.

Demonstrators holding placards in protest against Nayib Bukele’s Bitcoin Law. (Camilo Freedman / SOPA Images / LightRocket via Getty Images)

The government’s pitch to the Salvadoran public, however, centers on remittances — salary transfers from working-class migrants in the United States to their families in El Salvador. As the Salvadoran economy spirals downward, remittances have come to represent the country’s main source of dollars, representing nearly 25 percent of GDP in 2020. Bukele is calling on migrants to send their remittances through the government-commissioned wallet application, “Chivo,” and circumvent the abusive transfer fees of services like Western Union.

The trouble, however, is that Bitcoin lacks the stability of the US dollar. Indeed, economists have pointed out that the highly volatile cryptocurrency is better conceived as a crypto-asset: good for speculation and investment, bad for daily transactions, price measurement, or savings. For working-class Salvadoran families who depend on remittances to make ends meet, the risk of only receiving a fraction of the value of funds dispatched is a risk they can’t take. Indeed, far from a tool for emancipating the Salvadoran economy from foreign dependency, bitcoinization only offers new forms of subordination and external vulnerabilities.

These concerns have only been confirmed in light of the chaotic rollout of Bukele’s Bitcoin infrastructure. Days before implementation, police illegally detained Mario Gómez, a prominent critic of the Bitcoin Law and minor Twitter celebrity, sparking international outcry. On September 7, the Chivo wallet launch revealed a system plagued with glitches and frequently down for maintenance. That day, the price of Bitcoin took a steep dive, a “dip” from which it has yet to recover.

At the same time, San Salvador saw its first massive, multi-sector march against the government. Under the banner of “No to Bitcoin,” the mobilization included judges recently dismissed by Bukele’s Supreme Court denouncing the government assault on the Constitution.

The September 7 march, however, was only a rehearsal. On September 15, as Bukele prepared official ceremonies for the Central American Bicentennial, thousands more took to the streets to reject the government’s authoritarianism. From departure points across the capital, marchers converged in the Morazán Plaza of San Salvador’s old central district, which proved too small to host the crowds. Feminist organizations, student groups, war veterans, labor unions, and FMLN committees joined professional guilds and right-wing politicians in the streets to rally against the president.

Hoping to destabilize and delegitimize the protests, Bukele recalled all police from the streets and seeded the march with infiltrators — who were then immediately identified and isolated by organizers. The movement’s show of force easily eclipsed the president’s Independence Day service. In his recorded address that evening, Bukele claimed the protesters were internationally financed dupes and vandals. He never mentioned the word “Bitcoin.”

The Left

Bukele has defended his government’s antidemocratic measures by citing his enduring popular support. At the heart of his authoritarian populism, however, is a profoundly anti-popular project, a top-down and unilateral exercise of power in service of an elite few. The emergent protest movement marks a turning point, providing the first mass challenge to the president’s rule.

It also marks a new moment for El Salvador’s embattled left. The recent mobilizations were remarkably diverse, with participation from across the political spectrum and a significant spontaneous turnout of Salvadorans with no organizational affiliation. That diversity, however, should not obscure the critical role of the Left in organizing the actions.

The collectives that convened the September 7 and September 15 marches, some of which have direct ties to the FMLN and others openly at odds with the party, demonstrated heartening levels of maturity and capacity in coordinating the actions and mobilizing turnout. These efforts deployed the vast experience of generations of militant struggle in El Salvador together with the creativity and energy of young organizers.

After successive electoral defeats, the FMLN is wracked with internal conflict. As long-suppressed ideological and strategic divisions are finally finding open expression, a schism has emerged between the party’s right and left flanks. Nevertheless, the party’s strength in the burgeoning opposition coalition is undeniable. The FMLN’s viral anti-Bitcoin campaign and notable representation in the recent mobilizations are a reminder that even at its weakest, the party’s territorial reach, resources, and organizing capacity remain unmatched on the Salvadoran left.

As Bukele’s authoritarian consolidation intensifies, El Salvador’s popular movements are forging a broad opposition front against the government. These organizations are no stranger to fighting repressive, antidemocratic regimes. Nearly halfway through his five-year term, Bukele’s honeymoon is over.