El Salvador hits snags as it adopts bitcoin as official currency, first country to do so

SAN SALVADOR – El Salvador rushed to iron out issues Tuesday after becoming the first country to adopt Bitcoin as legal tender.

Chivo’s digital wallet became available on the Apple and Huawei app platforms shortly before noon local time on Tuesday after President Nayib Bukele, who pushed for adoption of the cryptocurrency and has promised each user $ 30 in Bitcoin, which has been railed against the technology giants for not carrying the application.

Earlier on Tuesday, Salvadorans who tried to download Chivo’s digital wallet found that it was not available in major app stores. Bukele said the government temporarily disconnected it to add more servers to meet demand.

Bukele blamed Apple Inc, Alphabet’s Google, and Huawei’s app download platforms for the delay.

The country’s adoption of bitcoin is seen as a real-life experiment, with proponents saying it will cut commission costs on billions of dollars sent from overseas, while critics warn that it could fuel money laundering.

The change means companies should accept payments in Bitcoin alongside the US dollar, which has been the official currency of El Salvador since 2001 and will remain legal tender.

The government bought an additional 150 bitcoins worth around $ 7 million on Tuesday, and McDonalds started accepting the cryptocurrency in its restaurants in El Salvador.

Carlos Garcia, who offered advice on the new currency at a booth in a mall on Tuesday to learn how transactions work, said he was excited about the possibilities Bitcoin could offer.

“El Salvador is taking a big step forward today,” he said.

However, the poorest may struggle to access the technology needed to make Bitcoin work in El Salvador, where nearly half the population has no internet access and many more are only sporadically connected.

“I will continue to suffer with or without bitcoin,” said candy seller Jose Herrera, who said he was having trouble accessing a cellphone.

Pres. Bukele, 40, is popular with the public but has been accused of undermining democracy, including by the US Biden administration.

Doubters say Bitcoin could increase regulatory and financial risks for the Central American nation, and surveys show that Salvadorans are suspicious of the volatility of the cryptocurrency, which can depreciate hundreds of dollars in one day.

To warm up a skeptical public, Bukele has promised every citizen $ 30 in Bitcoin when they sign up for a government digital wallet. Before the launch, El Salvador bought 400 bitcoins, Bukele said, helping push the currency price above $ 52,000 for the first time since May.

“It will be beneficial … we have a family in the United States and they can send money for free while the banks charge fees,” said Reina Isabel Aguilar, a shopkeeper in El Zonte Beach, 30 m . southwest of the capital San Salvador.

The town of El Zonte known as Bitcoin Beach is aiming to become one of the first Bitcoin economies in the world.

In advance of the launch, the government installed ATMs that allow Bitcoin to be converted into dollars and withdrawn from the digital wallet called Chivo without commission.

Bukele tried to lower expectations for quick results on Monday and asked for patience.

“Like all innovations, the Bitcoin process in El Salvador has a learning curve. Every way forward is like this and not everything will be achieved in a day or in a month, ”he said on Twitter.

The cryptocurrency was notoriously volatile, rising to more than $ 64,000 in April and falling to nearly $ 30,000 in May of this year.

The move to make Bitcoin legal tender alongside the US dollar has clouded the outlook for El Salvador’s quest for more than $ 1 billion in funding from the International Monetary Fund (IMF).

Analysts fear that the introduction of the cryptocurrency could fuel money laundering in a country with serious problems of government corruption and organized crime.

Bukele has promised to clean up grafts, but the Biden government recently got some of its close allies on a blacklist for corruption.

In just under two years in office, he has taken control of almost all the levers of power. Top judges were appointed by his allies last week decided he could serve a second term.

After the Bitcoin law was passed, the rating agency Moody’s downgraded El Salvador’s creditworthiness, while the country’s dollar-denominated bonds came under pressure.

follow NBC Latino At Facebook, Twitter and Instagram.

Leave a Comment