- El Salvador’s Bitcoin and AI adoption plans have the potential to significantly boost the country’s GDP.
- ARK Invest CEO Cathie Wood is optimistic about the economic impact of these initiatives.
- Wood believes that El Salvador’s GDP could increase tenfold within the next five years.
Discover how El Salvador’s ambitious Bitcoin and AI adoption plans could transform its economy and drive unprecedented growth.
El Salvador Thriving With Crypto
During Bukele’s presidential run, El Salvador made Bitcoin legal tender, eliminated taxes related to tech innovation, and removed income tax for foreign investments and remittances in March. El Salvador has also adopted cryptocurrency as the core of its financial system, holding 5,764 Bitcoin in its treasury. The value of these holdings is $396.2 million, reflecting a 58.6% increase over the average purchase price. These initiatives have turned El Salvador into a hub for cryptocurrency and innovation, drawing attention from investors and international corporations. In April 2024, Google expanded into the country through a $500 million strategic partnership. Consequently, El Salvador has seen unprecedented economic growth. According to World Bank data, its GDP was $32.4 billion in 2022, up over 30% since Bukele first took office in June 2019. With these further initiatives to increase Bitcoin and AI adoption, a 10-fold increase in the country’s GDP could see it reach $300 billion. It would put the Central American country’s GDP roughly on par with Romania, the Czech Republic, and Chile. This prospect is made even more likely by rising interest in AI-related cryptocurrency, which surged 257% in the early months of this year. Popular AI Crypto projects are providing real-world utility and present an undeniable opportunity.
Civilian Bitcoin Adoption is Struggling
Although El Salvador has seen massive institutional adoption, Bitcoin adoption among the local population arguably hasn’t been as successful. In 2023, only 12% of the local population used Bitcoin at least once to pay for goods and services, down from 2022. A largely tech-illiterate population, lack of merchant enforcement, and issues with the rollout of El Salvador’s Chivo Wallet in 2021 have slowed the progress of its adoption. Merchants have been resistant due to a lack of customer demand to pay in Bitcoin. This is likely due to volatility concerns since the Bitcoin price fell from its all-time high of $69,000 to as low as $15,600 in early 2023. The government of El Salvador has been bolstering its efforts to increase crypto investment within the nation, however. In December 2023, it was reported that the country had initiated a fresh citizenship-by-investment initiative. The process would grant residency visas and citizenship to individuals who invest $1 million in Bitcoin or Tether within the nation.
Conclusion
El Salvador’s ambitious Bitcoin and AI adoption plans have the potential to revolutionize its economy. While institutional adoption is thriving, challenges remain in achieving widespread civilian use. Nevertheless, the government’s continued efforts and strategic partnerships could pave the way for unprecedented economic growth, making El Salvador a notable player in the global financial landscape.
