A glimpse into the future of finance? The political economy of cryptocurrency adoption in Latin America

Joshua Rose, Faculty of Arts

In June 2021, the parliament of El Salvador passed “The Bitcoin Law”, which established Bitcoin as legal tender and promoted its usage alongside the United States Dollar (USD). Inspired by U.S. expatriates’ establishment of the “first circular economy on bitcoin” in the regional town of El Zonte, Salvadoran President Nayib Bukele claims to have embraced Bitcoin to economically enfranchise the 70 per cent of Salvadorans who currently do not have access to financial services. This ethnographic research project seeks to determine the suitability of digital currencies for international development and to develop a framework for introducing financial services to previously unbanked populations.

The Central Bank of El Salvador holds Bitcoin in a national trust alongside USD and facilitates the exchange of the dollar to Bitcoin over the Lightning Network through the government backed Chivo application. Chivo was developed with support from Jack Mallers, Illinois based CEO of crypto-fintech applications Strike and Zap. The Salvadoran Government’s attempt to create an economy in which Bitcoin and USD can be used interchangeably is a world-first. In June of 2022, the Central African Republic also made Bitcoin legal tender.

The international community has, justifiably, criticised El Salvador's rollout of Bitcoin, however President Bukele remains popular and has refused to back down. Cryptocurrencies more broadly have attracted widespread academic criticism; as Hillary Allen (2022, 3) convincingly argues, “DeFi (decentralised finance) does not purport to provide any new types of financial products or services – it just aspires to deliver existing financial products and services in a decentralised way”. Many have pointed out that the decentralisation offered by cryptocurrency enthusiasts does not necessarily mean an egalitarian distribution of resources and power, rather, simply the relocation of these power centres from state control and traditional intermediaries towards newer, more shadowy actors. Here Tatiana Cutts’ (2019, 50) assessment of ‘Smart Contracts’, software that executes the terms of a contract, is relevant. Crypto proponents argue that smart contracts will move power away from those with the most commercial power. However, the delicate balance contract law strikes between ensuring parties fulfil their obligations and allowing parties to leave ill-formed contracts, is in many ways facilitated by the intermediaries smart contracts seek to replace. In effect, “there is a substantial cost to removing these intermediaries – and that cost is borne by consumers.”

Notably, criticisms of digital currencies have not deterred countries from investigating the suitability of blockchain technology for national financial instruments, including Australia and China. As we have recently been made aware, failure to accurately predict key economic indicators like inflation can have significant economic consequences. Among other things, some central banks are interested in the quality of data that financial regulators might be able to access when all transactions are recorded on the same ledger.

Interest from central banks aside, the strongest sign that cryptocurrencies are here to stay is that the industry is investing heavily in lobbying the U.S. congress. Between 2018 and 2022, industry lobbyists increased from 115 to 320 with a 309 per cent increase in money spent, totalling $9 million in the last financial year. Critically, in addition to the ‘coins’, established technology corporations like Meta and IBM are also lobbying on behalf of digital currencies and are interested in integrating artificial intelligence and blockchain technologies to develop a range of products across finance, healthcare and logistics.

In this context, an anthropological understanding of Bitcoin’s effects in El Zonte is of interest to those concerned with the integration of artificial intelligence and financial technologies, and the suitability of digital currencies for the people who are supposed to benefit from development initiatives. The task of facilitating economic development, particularly in a region marked by violence and scarcity, unlike, for example, the task of building a bridge, does not rely on principles and rules that are demonstrably ahistorical and universal like the laws of physics (Pitluck, Mattioli and Souleles 2018, 160). The operation of Bitcoin in El Zonte is determined by the complex interplay of legal, political, commercial, environmental, and regulatory conditions locally, domestically, and internationally. This ethnographic project will evaluate the novel attempt to integrate Bitcoin with USD and use it to establish a circular economy in El Zonte.


Allen, H.J. (2022) DeFi: Shadow Banking 2.0? SSRN Scholarly Paper 4038788. Rochester, NY: Social Science Research Network. Available at: https://doi.org/10.2139/ssrn.4038788.

Cutts, T. (2019) ‘Smart Contracts and Consumers’, West Virginia Law Review, 122, p. 389.

Pitluck, A.Z., Mattioli, F. and Souleles, D. (2018) ‘Finance beyond function: Three causal explanations for financialization’, Economic Anthropology. Wiley Online Library.