Photo by André François McKenzie
Ever since 9 June, when the legislature of El Salvador passed a law that would allow, facilitate, and encourage the use of Bitcoin in “all transactions” beginning on 7 September (with the US dollar remaining the country’s official tender), observers worldwide had awaited this day to see how the controversial cryptocurrency’s debut would transpire. They now have their answer. Concerns expressed by the World Bank and IMF, among others, about the volatility of Bitcoin have come to pass. On Tuesday alone, the price of Bitcoin plummeted by nearly $10,000 (from $52,000 to $42,000), which opposition politicians are claiming led to $3mn in losses nationwide. The fluctuation in Tuesday’s prices can partially be attributed to technical issues with the rollout of Chivo, the government’s digital wallet, which apparently gives new users $30 for signing up (and has separately raised questions about how this incentive would be paid for). Chivo turned out to be unavailable in the Apple and Huawei application stores on Tuesday, which significantly diminished participation. Meanwhile, even with the reduced participation, Chivo was still unable to handle the volume of the user registrations it was receiving, and its servers had to be temporarily taken offline as a result. These issues culminated in protests outside of the Supreme Court in the capital city of San Salvador that numbered over 1,000 people, which at times turned violent. The situation improved later in the day, as Chivo gradually became available across more devices, and major chains like McDonald’s and Starbucks began to accept it. In spite of Bitcoin’s inauspicious debut, many El Salvadorians remain optimistic about the future of Bitcoin in their country, as more than 200 specialised ATMs (to exchange US dollars and Bitcoin) continue to be installed nationwide. For instance, one shopkeeper in San Salvador told the BBC that he believes Bitcoin will protect him from counterfeit bills, adding that, “During the pandemic, it will be nice not to use physical cash.” More broadly, President Nayib Bukele’s assertion that Bitcoin will save citizens $400mn per year in foreign transaction fees gives hope to a nation that remains heavily reliant on remittances.
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