El Salvador: A Case Study in Crypto Colonialism
Crypto is usually met with either mockery or dismissal, another wacky initiative from silly billionaires. But it is becoming very clear that cryptocurrency is a vital tool in the venture capitalist artillery for infiltrating and colonizing underdeveloped nations. El Salvador offers an early case study in the geopolitical impact of crypto, its use as a tool by extremist right wing politicians, and an entry point for tech billionaires into countries in the global south, bringing extreme policing, natural resource exploitation, suppression, wealth gaps and poverty.
In the US and other western countries, it's easy to brush off crypto as a joke, but that's only because they get to enjoy a relatively stable banking system. In countries with more volatile and unstable economies, it's far easier to market crypto as a way for regular people to build financial independence. And it functions as a trojan horse – the vehicle for tech billionaires and fascists to enter a country economically and to capture land and resources.
It is not a coincidence that the transformation of El Salvador into “Bitcoin Country” has built the largest prison in the Americas, constructed from July 2022 to January 2023 the year following Bitcoin adoption. In the Bay Area before it, the arrival of unchecked tech wealth and power has led to rampant policing and incarceration, displacement, gentrification and the destruction of public life. In El Salvador, we see one of the most advanced cases of how this colonial and imperialist dynamic plays out, elevating monied venture capitalists while an authoritarian police state locks up over 77,000 people without due process.
As the transformation of El Salvador into a venture capital playground continues, Bukele is widely considered an authoritarian dictator running a police state, who has suppressed the free press and land and water defenders, tortured inmates locked up without due process under a suspension of constitutional protections, holds an unconstitutional consecutive second office while taking further steps to dismantle the constitution and democracy.
El Salvador’s “Bitcoin Law” and Bitcoin Beach
In 2021, President Nayib Bukele announced the Bitcoin Law, adopting Bitcoin as an officially recognized currency in El Salvador. It was the first country to do so. His promise was to alleviate the country's severe economic problems – long suffering under economic restrictions from the IMF – and help its citizens escape poverty. The law was put into place without the input or knowledge of most regular Salvadorans. It wasn’t even announced in El Salvador to Salvadorans, but at a Bitcoin conference in Miami, in English, to an English-speaking audience, and its announcement was quickly met by thousands of protestors in the country’s capital; ABC News reporting: “The demonstrators gathered in the capital San Salvador on the 200th anniversary of the country's independence, brandishing placards reading ‘No to Bitcoin’ and ‘Respect the Constitution’. They accuse the president of using authoritarian means to tighten his grip on power.”
Bukele says he was inspired by Bitcoin Beach, an experiment in the Salvadoran town of El Zonte, dreamt up by a US investor and Christian missionary from California named Michael Peterson, in 2019. After an anonymous donor gifted him a large donation of bitcoin – with the stipulation that it only be distributed in bitcoin, not dollars – he created a marketplace in El Zonte in which people buy and sell exclusively in the cryptocurrency. Peterson, like other missionaries, claims it is a way to include the unbanked population, a sort of "poor people's money for everyday use". Reuters reported earlier this year: “At Bitcoin Beach, ground zero for crypto in El Salvador, tourism has shot up. Many local businesses are happy about the influx, but several bemoaned skyrocketing prices, particularly of land as foreigners accumulate beachfront property.”
The adoption of Bitcoin has accompanied a boom of venture capital activity. Bukele installed the National Bitcoin Office (ONBTC) in late 2022, led by Max Keiser, an early American crypto venture capitalist. Saifedean Ammous, an Austrian crypto economist, was named as economic advisor in 2023. Ammous is the author of the Bitcoin Standard, a book that ahistorically whitewashes colonization and genocide as the natural result of inferior and superior monies.
Multiple large-scale Bitcoin projects have been announced in El Salvador, backed by American crypto investors and distributing more profits to venture capitalists than to the people of El Salvador. Bukele hopes to build the largest Bitcoin mine in the world on a precious natural resource, its volcanoes. The project plans to begin mining in 2025, and though it will be using El Salvador’s natural resources, only 23% of revenue will go to El Salvador. The chairman of “Volcano Energy” which will be powering the mine, is Max Keiser, and the billion-dollar project’s lead funder is crypto company Tether, headquartered in Seattle, Washington.
Bukele is also planning to build “Bitcoin City”, a smart city that will be funded by Bitcoin and take the architecture/design of Bitcoin’s signature logo. The emergence of smart cities has been documented in the book “Silicon Valley Imperialism”, noting that “smart city making has led to a rise in rents and evictions alongside new racial geographies of dispossession and segregation”. The same effects of tech take-over have been documented for decades in the Bay Area.
Bitcoin City will be a Special Economic Zone (SEZ), a place where special rules are implemented to the benefit of corporations and foreign investors. Of Bitcoin City, Bukele has said “We will have no income tax, forever. No income tax, zero property tax, no procurement tax, zero city tax, and zero CO2 emissions ... The only taxes that they will have in Bitcoin City is VAT, half will be used to pay the municipality's bonds and the rest for the public infrastructure and maintenance of the city.”
Jorge E. Cuéllar, Salvadoran academic and professor at Dartmouth College, expresses his concern for SEZs: "They are basically creating enclave economies throughout the region. They are creating walled gardens of prosperity that reproduce and exacerbate local inequalities, creating tributary communities around them that are forced to work for the enclave. There are ample historical cases where this type of project-led investment leads to economic apartheid between those who accumulate capital through these efforts and those tasked with working, often cheaply and without protection."
Bukele has also introduced massive tax incentives for venture capital and the crypto class: “On May 4th, 2023 the President of El Salvador approved the Law for the Promotion of Innovation and Manufacture of Technology, which will promote innovation and technology manufacturing in El Salvador by eliminating tariffs and taxes for 15 years. This will include the elimination of the income tax and any withholding on income tax, capital gains, municipal taxes on net company assets, customs duties, and transportation taxes, as well as the elimination of taxes on the importation of goods, inputs, machinery, equipment, and tools necessary for the new technology related investments.” The suspension of taxation will result in even less money from tech development going to the people of El Salvador, even as its corrupt dictatorship is enriched.
Additionally, Bukele is heavily courting the crypto class, giving citizenship to foreign Bitcoin investors for 1 million in Bitcoin. This joins the large influx of monied crypto tourism to the region, including a large number of Bitcoin-related conferences, festivals, pop-up cities and events. He is also giving away full citizenships to 5,000 foreign “highly skilled” workers in technology, science and other fields.
These events mark the transformation of El Salvador into a venture capital economy for tech and the crypto classes. Meanwhile, the lofty promises of economic advancement in El Salvador exploit the desperation of poverty and lead many regular citizens into further economic ruin. By onboarding Salvadorans – and the many other countries being targeted by crypto development – into the digital landscape, they are also onboarded into state surveillance, where their lives and data can be easily tracked and exploited. Already, there’s been a massive data breach where personal information linked to 80% of El Salvador’s population – practically every adult in the country – was made available for free on the dark web. This included full name, date of birth, telephone number, and email and physical addresses, in addition to national ID information and selfies. The breach is suspected to come from national digital wallet Chivo.
“Gang Violence” and Ethnic Cleansing
The rise of crypto colonialism in El Salvador has accompanied a state of human rights crisis, with the administration creating the largest prison in the Americas and locking up over 77,000 people as part of its new economic program.
Nayib Bukele has been able to maintain a very high approval rating because of how he's "cleaned up" the country's gang problem. While gang violence has dropped drastically under draconian measures, the government's "tough on crime" stance has become more of a bonafide witch hunt in which citizens are encouraged to turn each other in for "gang activity", leading many to follow through on longstanding grudges and resentments. All it takes is an anonymous call to a "hotline" to get somebody arrested, and there is often no proper investigation or trial. "Cracking down" on gang activity becomes a pretense for cleansing a population of "undesirables" (LGBTQ, elderly, disabled, etc.) and clearing the land for colonization, while the imprisoned population can be utilized for slave labor and medical experimentation.
Those arrested are thrown into prison where they endure severe conditions and mistreatment. The elderly and the disabled are denied necessary medical care, and many die within the prisons, their bodies later dragged out of their cells like "animals". Meanwhile, actual gang members are said to have direct relationships with government officials, including Bukele's administration, who has been accused of striking deals with gang leadership to reduce gang violence and keep crime statistics low; via the Associated Press in 2022: “The U.S government alleges Bukele’s government bought the gangs’ support with financial benefits and privileges for their imprisoned leaders”. Meanwhile, the many structural factors that lead to increases in crime and violence go unaddressed.
Crypto and the Network State
Bitcoin Beach and “Bitcoin City” are not the only “crypto cities” of their kind, but rather, part of a larger venture capital project to set up many such cities around the globe.
We find the most advanced case in Honduras, neighboring El Salvador, on the island of Roatán. There, the crypto settlement Próspera operates in a special economic zone (SEZ), independently of Honduras, with no effective regulation. Established under a corrupt right-wing government, Honduras has since repealed legislation permitting the colonial project. Pronomos, the venture capitalist firm behind Próspera, has retaliated by suing the government for $11 billion. In November of 2023, the CEO of Prospera, Erick Brimen, met with Bukele in El Salvador, stating “I’m excited about the possibility of bringing the Próspera vision to El Salvador and being part of that success!”
Special economic zones (SEZs) are blooming all across the globe, creating the perfect environment for crypto venture capitalists to set up colonial projects. Through Pronomos and its affiliates, crypto cites are underway in Latin America, Africa, the Mediterranean and the Philippines, even right in the US, in Solano County, California. They all promise a hub for technological advancement, innovation and economic prosperity in exchange for sovereignty from the host governments; each city is a node of the greater network. Indeed, the goal is to create a “distributed nation-state”, called The Network State, out of many colonies. The crypto cities will all connect together to create one overriding, sovereign state.
That is the most dangerous aspect of this crypto-colonialism: the true goal is not to raise the people out of poverty, but to create a new financial infrastructure and ultimately a sovereign, diplomatically recognized nation-state led by crypto fascists. Crypto in its current state may not be advanced enough to replace the current global financial system, but it is not too early in its development to disrupt a nation’s economy, displace its people, compromise its government, colonize its land, and exploit natural resources and labor. Wherever crypto leads, it is followed closely by fascist billionaires with aims of conquest and empire.