El Salvador became the first country in the world to establish Bitcoin as its legal currency this month. El Salvador’s millennial President Nayib Bukele said in a tweet that El Salvador recently bought 150 more coins, taking its total to 700. Bukele, who describes himself as ‘the coolest dictator in the entire world globally’ in his Twitter bio, added that the country will continue to “buy the dips” as the price of bitcoin fell to its lowest level since August.
The Central American country is mandating businesses to accept the cryptocurrency as a payment method for goods and services. The country’s digital wallet called “Chivo,” a local term for something “cool,” exchanges dollars for Bitcoin cryptocurrency and has been full of issues since it was implemented.
As the Central American nation celebrated its 200th year of independence, El Salvador’s top courts got rid of a constitutional ban on consecutive presidential reelections, which now leaves an open space for President Bukele to seek a second term in 2024. The majority of Salvadorians took to the streets in nationwide protests to oppose Bukele’s government and the controversial decision to make Bitcoin an official currency.
The country’s transition to bitcoin has not been an entirely pleasant one. The technology systems needed to handle Bitcoin transactions were down frequently for maintenance throughout the first week it was rolled out. There have been reports of multiple troubleshooting issues within the app and machines that most employees were unaware of how to fix. The government has installed 200 electronic ATMs of its Chivo digital wallet around the country. In El Salvador’s capital city, one of the ATM machines was set on fire by anti-Bukele protesters who are opposed to the new Bitcoin law. Many held signs demanding an “end to corruption” and wore T-shirts that read “NO To Bitcoin.”
Many demonstrators in El Salvador also complained about the government not providing them with enough information about switching to electronic wallets and are against President Bukele’s controversial decisions. Major food chains such as Starbucks, McDonald’s and Olive Garden are the only ones already on board with the crypto payments, while numerous local business owners are still waiting to receive government training on how to use the cryptocurrency.
In a survey from July, 49% of people were uncertain about the outcomes of implementing Bitcoin in the country, while only 19% of people were feeling optimistic about it. 60% of people said they did not have any type of bank account, 25% had only a debit card, and only 6% owned a credit card. The survey also concluded that 25% of people think El Salvador’s economy will improve with Bitcoin and 43% believe it will worsen as some fear it could lead to inflation in the country that has long been impoverished.
Salvadorians have been accustomed to using US dollars — the country’s current national currency since it was adopted in 2001 — but are now being left in the dark about how Bitcoin actually works and what the outcomes of this new currency will mean for them.
The World Bank and the International Monetary Fund have been skeptical of the decision and raised some concerns over the adoption of bitcoin. The World Bank recently said that it could not assist El Salvador’s bitcoin implementation given environmental and transparency drawbacks.
However, the leader of El Salvador is convinced that his new Bitcoin policies will help banking in the country and reduce remittance fees for citizens with relatives abroad. Bukele has also pointed out that more than half a million users are using the digital payment system in the country. The many others who are in support of the new economic advancement in the country have not wasted any time in getting acquainted with the new financial system put in place.
As a worker building financial systems with crypto, Briana Lynch visited San Salvador in El Salvador to document her experience of paying for their day-to-day purchases with Bitcoin. As she tested out for the first time what it was like to be in a city only operating with Bitcoin, it was rare for her to see some business vendors accepting Bitcoin payments. “I think all merchants are loving that Bitcoin is accepted,” she said. “It’s contactless, it’s fast, it’s quick, it’s easy.” As the country is still adjusting to this new change, most businesses only accept Chivo wallet for now. Lynch was still only able to pay with her Paxful Lightning Wallet in certain cities or shopping areas. She shared, “50 percent of businesses were accepting Bitcoin payments, about fifty percent weren’t.” From tipping the waiter at dinner, stopping for gas or ordering food from a bakery, she was amazed at how paying with digital wallets is still not possible in the US.
As a way to urge more citizens to download Chivo or other digital crypto wallets, the government is even offering them $30 worth of bitcoin if they do. Salvadorians will also be allowed to pay taxes and buy land with bitcoin. For now, only time will tell whether El Salvador’s Bitcoin adoption will harm the country’s economy or if it will turn into a crypto model for other countries to follow suit.
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