Map outlining El Salvador surrounded by graphics depicting bitcoin. Photo by Mia Lassiter ’25.
Daisy Halaszyn ’25, a 2023-24 Hackworth Student Grant recipient at the Markkula Center for Applied Ethics is a junior majoring in accounting and information systems. Views are her own.
Abstract
El Salvador’s passage of The Bitcoin Law, introduced for the purpose of improving remittance sending efficiency, reducing reliance on the U.S. dollar, and promoting a means for disadvantaged citizens to enter the modern economy, has raised questions about the ethical nature of implementing a cryptocurrency as legal tender. The implementation of the Law - through the Chivo electronic wallet and Chivo ATM system - is unethical due to its uneven distribution of infrastructure and lack of education, particularly among disadvantaged citizens. The Chivo use disparity between wealthy urban citizens and impoverished rural citizens is most effectively explored through El Salvador’s history of institutional distrust, civil war, and guerrilla control.
This ethical analysis is achieved by comparing locations of formerly guerrilla-controlled territories with Chivo search term interest and Chivo ATM locations. Less than 5% of all Chivo ATMs are located within communities living in formerly guerrilla-controlled territories, harkening to a substantial lack of support by the Salvadoran government and a failure to achieve all three of The Bitcoin Law’s goals. To rectify this, El Salvador will need to actively install Chivo ATMs in these rural communities and provide outreach and education programs detailing the potential benefits and risks of using cryptocurrency as a store of value.
Introduction
In 2021, the government of El Salvador passed legislation to implement an avant-garde economic policy; bitcoin was adopted as legal tender within the country’s borders. This highly speculative venture has the potential to grow into a model able to be adopted by other developing countries with faltering economies, or it could become a cautionary tale against using speculative currency to shore up national fiscal crises. The following research will explore the short-term and long-term results of El Salvador’s Bitcoin Law on poverty and economic opportunity, its effectiveness involving underbanked populations, and whether this current model should be adapted to suit similar emerging economies.
Salvadoran President Nayib Bukele’s primary hopes for the bitcoin project are three-fold: it would increase remittance efficiency, serve underbanked Salvadorans, and lessen reliance on the U.S. dollar, which has served as its currency since 2001. As mandated by the law, the bitcoin project utilizes the government-partnered e-wallet Chivo which completely removes transaction, conversion, and ATM fees, with the intention of promoting inclusion and lowering the entry barrier for poverty-stricken citizens to participate in the modern economy. On the other hand, many citizens have voiced skepticism over the viability of the formal use of cryptocurrency. This is particularly evident when reflecting on Chivo’s lack of continued use both within El Salvador and internationally for the purpose of sending remittances. The move to bitcoin also poses a challenge for Salvadoran businesses and the country’s global financial standing. Credit rating and lending companies have expressed concern about The Bitcoin Law’s sustainability amid high fluctuations in bitcoin’s value.
Despite being a recent phenomenon, it has already had international effects. Panama, for example, has proposed bills that may allow Panamanians to use cryptocurrency as a valid form of commercial payment. This only further amplifies the pressing importance of discussing the ethical implications of widespread cryptocurrency use on an international scale. Digital currency ethics research has the potential to change the lives of millions of stakeholders both in the short and long terms and could promote steps towards equality in emerging economies by reducing barriers to financial inclusion, the actual cost and benefit of which will be further analyzed.
Read/Download the full report: "Bitcoin in El Salvador: The Ethics of Cryptocurrency in Emerging Economies."