A Bitcoin story: “banking the unbanked” in El Salvator, Central America

Two realities of the same little village in El Salvador — El Zonte.

El Zonte is a surfing paradise and attracts many tourists, fueling their economy as much as they can. Unfortunately, the sanitary crisis has hit every single country worldwide, some more than others. El Salvator was already densely populated and poor, the covid-19 crisis precipitated their economy down faster than ever.

However, one year later the virus and restrictions the village seems to be doing alright and is becoming quite famous because of its uniqueness. Indeed, El Zonte 3000 locals are using Bitcoin on a regular basis: to pay their electricity bills, their groceries and many other things. This particularity gives them the nickname of the Bitcoin village, thriving on its use — saving their economy and keeping El Zonte the paradise it always has been. Although, it is important to note that this success was not easy and many steps and months were required for it.

Bitcoin Beach and the Anonymous donor

Mike Peterson is the director of Bitcoin Beach and has been invited to many podcasts to explain his adventure. It all started in 2006 when he decided to move to El Zonte to surf and realised that things were very different from the US. He then decided to help its locals mainly because after all, El Salvator is beautiful and worth the detour.

Mike searched for solutions and started to work with non-profit organizations and churches through an umbrella company to support them. Helping the relief on their population was one of his goals and after being introduced to Bitcoin and facing strong difficulties to send money from one country to another one but also adding the ridiculous amount of fees the banks charged in El Salvator to have access to financial services, Mike looked for a better solution for El Zonte inhabitant to keep their money and be able to actually save.

The fact is that in this kind of country having the same taxes that bigger countries like the US or even European countries make it hard for individuals if not impossible to save and live. Plus, the inflation increasing the rate of these taxes forces individuals to not even be able to just pay these. Mike is experienced in business and has been running his business in the US and said in one of its podcasts that just the taxes on his business was $40k a year — how can people living in a country like El Salvator be able to build a business? It is just not possible and even seems ridiculous.

Another fact that troubled Mike was the complicatedness of sending money from one country to another, it would take many checks and fees. Remittances are crucial for a country like El Salvator when 22% of its GDP is from the US from inhabitants’ families leaving overseas.

Once its choice was made to introduce the cryptoverse to El Zonte, Mike pitched investors and found an anonymous donor to supply its project. That particular anonymous donor had only one request: he was happy to fuel the Bitcoin economy only if the Bitcoin were to remain Bitcoin and not change into fiat — Mike basically had to create a whole economy based on transacting in Bitcoin … and succeeded.

Worked until acceptance

Having a whole economy in Bitcoin is not as simple as said. Infrastructures and education had to be deployed.

El Salvator brief summary (Source)

Bitcoin Beach divided its plan into phase starting with “youth work programs improving the local environment by cleaning the local beaches and river, educational stipends to students staying in school, Bitcoin stipends for university students”

Once the youngsters understood and saw the interesting aspects of Bitcoin they would transfer to the elderly and poorest families and it would go to community construction projects — all through Bitcoin.

It has been trickier for the elders to accept it as it is in their culture to prefer cash and to use it as soon as possible as it is a way for them to save and invest. A big help to be accepted in addition to the youth explaining it to them was the safety Bitcoin Beach was advocating: no need to go to the next city (3h away) to deposit money or receive it, everything was possible through phones.

Therefore, to start this economy, Bitcoins were injected and given to the population who were explained to not change it to fiat in order to make this economy work.

Of course, infrastructures had to be built. Mike Peterson pointed out that we don’t realise how lucky we are when we are from developed countries in terms of digital application and financial services. About 80% of El Zonte locals don’t have bank accounts and probably the same percentage in the country due to the high amount of fees. Even worse, 20% of the world population don’t have access to financial resources.

So Bitcoin Beach worked first with a consumer wallet use but then changed for a custom-made more on the community banking and underdeveloped country to ease its use.

This app would show where the Bitcoin ATMs are and through QR scanning invoices would be directly sent.

The Plan: How to create a parallel economy?

  1. Find the right community/country
  2. Inject BTC to begin with
  3. Train the community
  4. Set up the infrastructure
  5. Pay the work community in BTC

‍The success and recognition

Getting the Bitcoin economy started through Bitcoin training and negotiations with local businesses to accept Bitcoin as the Bitcoins were injected was the plan for the first months. Fifteen months in the operation and it is a success.

Bitcoin Beach is currently witnessing an almost solely Bitcoin economy system and they have successfully managed to help the youth through their programs. As shown on their website many of their employees are young people who after training at their turn decide to help and train others to understand the advantages of the use of cryptocurrencies. It has somehow helped them to step away from the crime and violence of their country by working.


The Citadel by the Sea is the future

A lifeguard program for the young people during the weekends and school holidays as El Zonte is a coastal city. They will be paid in Bitcoin and be taught responsibilities and skills, hoping to have an impact on their future.

The “Citadel by the Sea” is the name of the community Mike Peterson is hoping to build. In a podcast, he said that its next goal would be to build up a Bitcoiner community by bringing crypto companies together. He would be looking at crypto companies willing to send some of their teams for a 3 months trial and see whether they would be happy to completely relocate. They would keep developing apps and connect professionals together to ease daily use so locals could pay gardeners, restaurants, hairdressers, etc…

Then, the Citadel of the Sea would be THE crypto hub.

The only concerning aspect would be the no regulation policy but as it can be seen in El Zonte there is an agreement and the locals are respecting it as they have seen the advantages for them.

Home is where your heart is

It all started with a surfing spot discovery but then once you have a place in your heart, closing your eyes on its struggles is too difficult. When reality hits, either you act or you ignore. Mike Peterson acted and helped a whole community.

→ Could this be repeated to a bigger community?

A Bitcoin story: “banking the unbanked” in El Salvator, Central America was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.