Crypto fans eye El Salvador as the ‘next Singapore’ amid sharp reforms, but concerns remain

(NEW YORK) — El Salvador says it’s now making a profit on the Bitcoin investments at the center of President Nayib Bukele’s economic and social reforms, a surprising turnaround for a country with a decades-long reputation for rampant gang violence and one of the highest homicide rates in the world.

Bukele said last week that the country is profiting from the investments he initiated over two years ago, posting on X, “With the current #Bitcoin market price, if we were to sell our #Bitcoin, we would not only recover 100% of our investment but also make a profit of $3,620, 277.13 USD (as of this moment).”

In 2021, El Salvador passed legislation to adopt Bitcoin as their legal tender, becoming the first country in the world to do so. The move became a key part of Bukele’s dramatic social and economic reforms, with the president saying that the adoption of Bitcoin would “grow the country’s economy, providing access to credit, savings, investment and secure transactions.”

Bukele tweeted in September 2021 that the country held 400 Bitcoin and announced that the country will be “buying one #Bitcoin every day starting tomorrow.”

Some experts, however, have cautioned that Bitcoin’s volatility makes it difficult to mitigate risk.

Bitcoin reached its all-time high in November 2021 at $68,789.63 — two months after Bukele’s initial investment into the coin. Nearly a year later, the coin’s value plummeted nearly 75% to around $16,000, according to Coinbase, a popular cryptocurrency exchange platform. Bitcoin’s value is currently about $41,000.

“Given the risks involved, you really would expect to have to double your money every year in cryptocurrency to justify the underlying risk,” David Yermack, a professor of finance at NYU’s Stern School of Business, told ABC News. “They’ve really had very bad timing in the whole thing, and have only clawed their way back to even basically.”

Despite its apparent risk, the country has continued pushing cryptocurrency as a means toward economic reform, recently rolling out a new “Freedom Visa” program that would grant residency and a potential passport to 1,000 individuals per year that meet certain financial requirements.

The program is “primarily designed for high-net-worth individuals or investors interested in contributing to building Bitcoin Country” who have a “financial threshold of $1 million in Bitcoin or USD,” according to a government statement.

Meanwhile, El Salvador’s social reforms have also raised concerns that they’ve “restricted and violated fundamental rights,” according to a recent Amnesty International report.

In response to over 80 gang-related homicides in a three day period in March 2022, the country’s “security forces were empowered to arrest anyone suspected of belonging to a gang or providing support to gangs” and “suspended the rights to be informed immediately of the reason for detention,” according to a 2022 U.S. State Department report.

According to the U.S. report, over 52,000 individuals were “arrested in the first six months of the state of exception, leading to allegations of overcrowding and inhuman treatment in the prisons.”

Mari I, a 42-year-old El Salvadoran who declined to give her last name, told ABC News, “We are talking about a real purge. El Salvador arrested more than 70,000 people including thousands of children.”

“[Bukele] has no idea what human rights means,” she said.

Following the crackdown on crime, El Salvador reported 7.8 murders per 100,000 in 2022, one of the lowest in Latin America, down from 103.6 murders in 2015, one of the highest in the world.

Some observers say the efforts have done little to enact meaningful change in the country.

“Because there’s so much joy around being able to feel safe right now people don’t want to think about what else might be happening behind the scenes that might really be mostly about supporting those who have always been in power in the country,” said UCLA Professor Leisy Abrego, who was born in El Salvador.

Bukele has previously defended his administration from accusations he is governing in an authoritarian manner. Amid criticism from the Biden administration over his dismissal of judges on the Constitutional Court, Bukele tweeted “[to] our friends in the International Community … with all respect, we are cleaning our house … and that’s none of your business.”

A spokesperson’s for Bukele’s office did not immediately respond to ABC News’ request for comment.

The changes have drawn praise from some investors. Jack Mallers, the founder of Bitcoin payment provider Strike, says he believes the country is full of potential. Mallers says he advised Bukele on the country’s cryptocurrency initiatives and Strike’s global operations are based out of El Salvador.

“I liked the analogy that El Salvador is attempting to become, maybe the Latin American Singapore of sorts,” he said. “They’re very tough on crime. They’re very pro technology and innovation. They want to harbor entrepreneurs, businesses to innovate to create, they’re very naturally rich and their resources, they’re right on the water, they have beautiful land, they have a lot of natural resources they can utilize, and they’ve become an attraction to those that believe deeply in Bitcoin.”

The country recently attracted the 2023 Miss Universe pageant to the country’s capital, San Salvador.

“I was skeptical when they first approached us, particularly about safety. We’ve all seen the news stories in the United States,” Miss Universe CEO Amy Emmerich told ABC News. “But they just kept saying that we need to come and see what we’re doing here for yourselves.”

Emmerich added that the government of El Salvador “more than proved themselves as a partner.”

But Bukele has continued raising concerns among his critics. He is currently on a six-month leave from the presidency to campaign for reelection, despite a previous constitutional prohibition that forbids a president from running a second consecutive term. In 2021, El Salvador’s Supreme Court’s Constitutional Chamber removed this ban, paving the way for Bukele to seek reelection.

Roger Milano, a 36-year-old engineer in El Salvador, defended the government’s reforms, telling ABC News, “People can criticize as much as they want. I can walk freely in my city. It was not the case before. Bukele makes the difference between a criminal and a victim.”