Guatemala City — ‘Bitcoin Lake’ (Lago Bitcoin) is a project in Guatemala that seeks to replicate the experience of El Zonte beach in neighboring El Salvador, a tourist destination that became a pioneer in accepting the cryptocurrency long before the country’s President Nayib Bukele created his Bitcoin Law.
Patrick Melder, founder of the Bitcoin Lake project, spoke with Bloomberg Línea about the cryptocurrency’s incursion into Panajachel, a town located in the Guatemalan highlands on the shores of Lake Atitlán, in the country’s Sololá department.
Panajachel, also known as ‘Pana’, is surrounded by the San Pedro, Tolimán and Atitlán volcanoes.
The town has become famous for mining Bitcoins, and which is how the project took off, and which seeks to expand to other locations.
Calle Santander is the main street, lined with cafes, bars and stalls selling handicrafts and fabrics. In the old town is the colonial-era San Francisco church, which has a stone façade.
At the end of this main road are the boats that connect Panajachel with the Maya villages on the lakeshore, and some of their owners already accept Bitcoin payments for the trip, in addition to the 17 businesses that also accept the cryptocurrency, according to Bitcoin Lake founder Melder.
Recently, the project received a visit from U.S. TV journalist Bill Whitacker, who came to Panajachel to help set up the Bitcoin enclave.
Bloomberg Línea: When and how was the Bitcoin Lake initiative born?
Patrick Melder: I started thinking about this project in the spring of 2021, shortly before President Bukele announced the intention to legalize Bitcoin as legal tender in El Salvador. My effort is largely based on what El Zonte Beach did in El Salvador, which became the test case for that country to see that it could be used for economic transactions and savings.
What was the most interesting thing you found about Atitlán to be able to install this project there?
It really could have been anywhere in Guatemala, but my family and I had been to Panajachel many times over the years to help out at the Josué Educational Center. We came every summer from 2012 to 2018 and even organized an art camp for the school.
Over time we developed relationships that made it easier for us to participate again, but now, educating through technology. That’s why we chose to work immediately with the school and develop a Bitcoin curriculum that we teach every week.
Why do you think it is important to generate a culture of cryptocurrencies in Guatemala?
Bitcoin offers an economic freedom that is not found in current fiat currencies or other cryptocurrencies. Having access to a bank account in a place like the United States and also in Guatemala is the first step to generate personal and generational wealth.
Between 60-65% of people in Guatemala do not have access to a bank account, creating endemic poverty. Bitcoin is the ultimate private property that cannot be confiscated. If you can remember twelve words in your head, then you can take your bitcoin anywhere in the world and pass it on from generation to generation.
What are the advantages of having these initiatives in a place that is an important tourism destination?
Our goal is to attract the Bitcoin tourists who flock to El Salvador, because we have observed that, after the Bitcoin Law came into effect there, tourism grew by double digits in the neighboring country. We want to attract those Bitcoin tourists to come to Panajachel and Lake Atitlán.
For the economy in general, there is a boom in Bitcoin startups, and even large multinational companies, such as CashApp and Square, that need to be where people use Bitcoin as currency, are starting to open offices in San Salvador to be close to the pulse of the Bitcoin economy.
Therefore, it presents a great opportunity for young Guatemalans to learn about Bitcoin from the early stages and provide critical Spanish-speaking skills in a business sector that prior to El Salvador’s implementation [of the cryptocurrency] lacked qualified Spanish speakers who knew much about the subject.
Given that in Guatemala there is still no regulation for cryptocurrencies, how do you think it can work?
This is a very complex issue. It really comes down to economic game theory. Guatemala can decide to legalize Bitcoin or not. It won’t matter, because people will use it independently because they see its characteristics, that allow them to save and store wealth.
Because it is digital, it can be sent anywhere in the world and from one person to another. If Guatemala adopts negative policies towards Bitcoin, and the broader crypto market, it will lose a massive historical opportunity.
Guatemala is likely to follow the U.S. response and regulation that seems to be favoring Bitcoin, and there is certainly no indication that the country will ban it or limit its use, because there are too many jobs related to it.
Guatemala needs to think very carefully about how regulation will affect the innovation of this historic technology.
Is there still a lot of education needed on the topic of cryptocurrencies, how can the project be a model so that more people can learn about it?
I think we make cryptocurrencies complicated, and it shouldn’t be, it’s a digital money, that’s it. You don’t need to understand anything else, how many of us understand our current monetary system or how credit cards and credit card settlements really work? We can make it a little more complicated by understanding what a cryptocurrency is.
A cryptocurrency is a digital currency protected and secured with cryptography. Can I buy a Coke with a quetzal? Yes. Can I buy a Coca-Cola with Bitcoin in Panajachel? Yes. Can I buy groceries with quetzales? Yes. Can I buy groceries with Bitcoin in Panajachel? Yes. Is Bitcoin a volatile asset? Yes, but so is any “new technology” growth stock.
A person with a smartphone can own Bitcoin. Even if you don’t have a smartphone, you can hold Bitcoin and store it on something as simple as a piece of paper or remember a string of words. Anyone can be part of this transformational savings technology.
What is your projection for the short and medium term? Do you think this model can be replicated in another region, and where would that be?
At the moment, we just want to educate as many children as we can. We want to incorporate as many companies as we can. We want to create an effective closed-loop Bitcoin economy here in Panajachel.
In the long term, our goal is to use Bitcoin mining to help generate basic income for people around the lake. We want to help build a reliable and renewable energy network using Bitcoin mining and renewable energy sources. Every renewable energy source known to man is available around the lake.
That is a free resource that can be used to mine Bitcoin without harming the environment. In fact, my goal is that Bitcoin mining will help provide an economic incentive to clean up the lake for the benefit of the people around it.
No Backing Yet for Bitcoin in Guatemala
Guatemala’s banking regulator Superintendencia de Bancos (SIB) warned in February 2021 that cryptocurrencies are not legal tender in the country, in accordance with the provisions of the Monetary Law, which determines that for Guatemala only the quetzal is legal tender.
The SIB added that virtual currencies are not backed by the state of Guatemala, and that “they are not considered foreign currency, are not guaranteed, nor can they be forced to be accepted as a means of payment in transactions of goods and services”.
In that note, the Bank of Guatemala stated that it is the only entity that may issue banknotes and coins in the country.
“Virtual currencies are not backed by the state of Guatemala, because they may not comply with protection standards or risk mitigation processes”, according to Sergio Recinos, president of Guatemala’s central bank (Banguat).
Translated from the Spanish by Adam Critchley