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El Salvador's president is taking a massive risk on Bitcoin

SACHA PFEIFFER, HOST:

The president of El Salvador is making a huge bet on bitcoin with his country's treasury. President Nayib Bukele hopes to borrow a billion dollars to stock up on bitcoin and to build a bitcoin trade zone near a dormant volcano. The plan has made him a hero in the crypto community, but as NPR's Carrie Kahn reports, many are concerned it's too big a gamble and possibly part of an authoritarian turn.

(SOUNDBITE OF WAVES CRASHING)

CARRIE KAHN, BYLINE: Just a few blocks up from the crashing waves of El Zonte beach on El Salvador's Pacific coast, Maria del Carmen Aguirre tends to her small store, where the bitcoin symbol is posted and accepted here.

MARIA DEL CARMEN AGUIRRE: (Speaking Spanish).

KAHN: "Thanks to my bitcoin earnings, I was able to buy a lot for my little store," she says, like a new griddle for making pupusas - El Salvador's signature stuffed tortilla - and a new refrigerator.

Uh-oh (ph).

DEL CARMEN AGUIRRE: (Speaking Spanish).

KAHN: (Laughter).

As three large cows skirt past us, the 51-year-old grandmother says she wasn't an early adopter like many here in the community that's been renamed Bitcoin Beach. She waited until the president made bitcoin legal tender right along with the dollar last September.

DEL CARMEN AGUIRRE: (Speaking Spanish).

KAHN: "If I'd gotten in before, I would have been able to buy a car with my earnings," says Aguirre. This is the exact testimony President Nayib Bukele loves to promote. He insists bitcoin helps millions here who don't have traditional bank accounts, especially those getting hit with high fees on money transfer from relatives abroad. The 40-year-old leader, a voracious tweeter who prefers jeans and baseball caps over suits, has become a star among crypto backers around the world.

JAAP-JAAN VANHANGEL: We like him because when you follow him on Twitter, he's really funny - right? - with all the crypto memes.

KAHN: Brothers Jaap-Jaan and Martin Vanhangel from the Netherlands - and both in their early 20s - say they've been able to buy nearly everything on vacation with bitcoin.

MARTIN VANHANGEL: And we like to go here to support the people who accept bitcoin, so - and to see how it works. It's pretty cool.

KAHN: But despite a strong economic recovery last year, El Salvador has real money problems. Bukele asked the International Monetary Fund for a loan, but talks broke down after the IMF objected to his bitcoin binge. Undeterred, Bukele has pushed forward with his bond. He plans to use half the revenues to build what he calls Bitcoin City, a tax-free zone located at the base of an extinct volcano fueled by geothermal electricity. The other 500 million will go to buy even more bitcoin. Jaime Reusche, a vice president at Moody's sovereign risk group, is among those skeptical that bitcoin can save El Salvador.

JAIME REUSCHE: It's a heck of a gamble. This would be the first of its kind throughout the world.

KAHN: Moody's estimates El Salvador may have actually lost as much as $22 million when the volatile currency recently took a plunge. Russia's traditional investors are wary of Bukele's speculative use of the National Treasury and other ways he's ruling.

REUSCHE: However, the president seems to be emboldened by the fact that his popularity remains sky-high inside the country.

KAHN: That's because Bukele's message is simple - that he's ousted corrupted elites who plundered the country, says Alvaro Artiga, a political scientist at the Central American University in San Salvador.

ALVARO ARTIGA: (Speaking Spanish).

KAHN: "And he portrays all his critics as those former elites desperate to get back into power," says Artiga. But there are many who say Bukele's rule has become much more authoritarian. Since taking office, he's fired independent judges and prosecutors and stacked the Supreme Court with justices who just cleared the way for him to seek reelection in 2024, despite a constitutional ban. He's also been accused of spying on journalists. Attempts to interview Bukele, his spokesperson and several leaders of his political party were all declined.

U.S. officials also concerned about Bukele have sanctioned top aides suspected of paying off gang members, and some in Congress are concerned El Salvador's bitcoin usage could hurt the U.S. financial system. Bukele shot back at that last point, tweeting, OK boomers, we are not your colony. Stay out of our internal affairs. Bitcoin remains his big play, and he advertises it repeatedly on national television.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON: (Speaking Spanish).

KAHN: But many Salvadorans are still reluctant to adopt it. A lot of them immediately cashed in the $30 Bukele gave away in bitcoin last year to jumpstart use of the cryptocurrency.

(SOUNDBITE OF WAVES CRASHING)

KAHN: Strolling along El Zonte - that's the Bitcoin Beach - Laura Castro says she cashed her bitcoin in and took her mom out for dinner. She likes a lot of what the president does, especially building roads and bridges.

LAURA CASTRO: (Speaking Spanish).

KAHN: But laughing nervously, she says, "it's worrying we don't know what's in store for our country's economic future." Carrie Kahn, NPR News, San Salvador. Transcript provided by NPR, Copyright NPR.