Chivo`s problems continue. To sign up for Chivo and get their $30 worth of Bitcoin, Salvadorans would need a photo of their national ID card, a photo of themselves, their ID card number, and their date of birth. But Chivo`s ID verification feature didn`t even verify the photos – you could only sign up with a DUI number and a corresponding date of birth. Some users have noticed that their DUI number has already been used. Others have tested the system with publicly known DUIs. Residents who did not install the app received verification codes via SMS. In the United States, Salvadorans who wanted to send remittances home had difficulty registering. A recent survey by the Universidad Centroamericana José Simeón Cañas, a Jesuit college based in El Salvador, found that 67.9% of people disagreed with the decision to make Bitcoin legal. Many respondents said they didn`t know how to use cryptocurrency, according to the survey. However, government intervention is not the only option. As many Latin American governments express disinterest in accepting Bitcoin as legal tender, we are beginning to consider alternative options to promote widespread adoption from a broader popular perspective.
In my opinion, there are five key factors that we need to consider: mobile access, education, financial barriers, institutional acceptance, and Bitcoin alternatives. Bitcoin was launched on September 7. September 2021 officially became legal tender in El Salvador, making it the first country to adopt the currency. This decision made the Central American country the first national experiment regarding the use of the often volatile currency, which is becoming increasingly popular among many investors and speculators around the world. The U.S. dollar will remain the country`s other important medium of exchange. Moreover, many Salvadorans had no idea about Bitcoin when they discovered that their country was considering making it legal; A survey conducted by the University of Central America among about 1,300 Salvadorans in the run-up to the launch found that only about 10% of respondents fully understood cryptocurrency. Alejandro Molins, who works at Athena Bitcoin and whose job it is to get traders in El Salvador to download and use the Chivo wallet, told the rest of the world that his own mother has not yet signed up for her Chivo wallet.
“I just went to a McDonald`s in San Salvador to see if I could pay for breakfast with Bitcoin, tbh expects to be told no,” Aaron van Wirdum said in a tweet retweeted by Bukele. Another advantage was the no-fee transactions. Outside of Chivo, Bitcoin transactions can incur high fees. When using a Bitcoin ATM, a fee of up to 20% of the transaction amount may be incurred. But with Chivo, there are no fees for transactions, bitcoin to dollar conversions, and chivo ATM withdrawals. El Salvador`s President Nayib Bukele (featured here at a press conference in May 2020) led efforts to make Bitcoin legal in his country. Yuri Cortez/AFP via Getty Images Hide the bukele legend had previously suggested that legalizing bitcoin would boost investment in the country and help the roughly 70 percent of Salvadorans who don`t have access to “traditional financial services.” The Daily Mail. “The First Bitcoin Nation: The Government of El Salvador Buys 400 Bitcoins – worth an estimated $21 million – as the first country to accept digital currency as legal tender,” accessed September 7, 2021. Meanwhile, Bukele is no less optimistic about Bitcoin. He regularly boasts on Twitter of buying Bitcoin with government funds – to date, the government has acquired more than 1,000 Bitcoins. But since it peaked at nearly $69,000 in early November, the price of a single bitcoin has fallen, falling nearly 50 percent in late January, reducing the value of the country`s bitcoin holdings by tens of millions of dollars. Bukele may well fall victim to one of the main reasons why governments tend to shy away from Bitcoin: its volatility.
As a result, the Bukele government was excluded from international financial markets. The usual way out of this debt would be a multilateral loan. But thanks to the Bitcoin law, Bukele was reprimanded by the International Monetary Fund. In late January, the organization warned him to withdraw Bitcoin as legal tender. Bukele responded on Twitter with a Simpsons meme. Last year, El Salvador dominated the headlines as the first country to adopt Bitcoin as its legal tender. The move is controversial both inside and outside the country, is heralded for its potential to provide financial services to a large portion of El Salvador`s unbanked population, and is criticized for its top-down implementation. This created a sense of insecurity and made some Salvadorans feel they had no choice, even though places like El Zonte already accept Bitcoin (BTC) as a means of payment thanks to organic developments that precede the law. Shortly after ten o`clock in the morning, the price of Bitcoin collapsed by $10,000 in three minutes. Chivo users have seen their $30 in Bitcoin fall below $25 in real time – a solid hands-on training on Bitcoin volatility. Bukele blamed the International Monetary Fund for the crash, though it was more due to leaked information that crypto exchange Coinbase had received a warning from the U.S. Securities and Exchange Commission.
Bukele had bought $20.6 million in bitcoins for the Treasury the day before. A year ago, Bukele urged its citizens to keep their money in bitcoins. For all those who would, the losses would be devastating. El Salvador introduced the Chivo wallet in September 2021 with incentives to incentivize households to download and use it. These included $30 in free bitcoin with each download, which is nearly 1% of the average annual per capita income, and big discounts on gasoline paid in bitcoin. Residents didn`t need a bank account or credit card to make transactions, just a cell phone with internet access, which two-thirds of residents had. Bukele is advancing the Chivo project – his plans need those remittance dollars, and he`s still hoping for an influx of foreign bitcoins. Fears that criminals will bring in dirty bitcoins and exchange them for clean dollars, draining the $150 million trust established as a buffer between bitcoins and dollars have not materialized – because Chivo doesn`t work well enough. “It`s basically just the big companies that use it,” Bonilla said. “Between Bitcoin and cash, I prefer [customers] to pay myself in cash.” On June 5, El Salvador`s President Nayib Bukele said that Bitcoin, the first cryptocurrency, would be legal tender in El Salvador. A few days later, the Bitcoin law was passed, which came into effect on September 7.
Businesses should accept Bitcoin for all payments. No other country with its own currency, not even those like Zimbabwe and Venezuela with discredited currencies, has followed suit and made Bitcoin legal. Nearly 78% of those who knew about the app tried to download it. The most common motivator was the $30 bonus, although respondents also highlighted contactless payment technology at a time when the COVID-19 pandemic was in full swing and the ability to receive referrals. Among the five Salvadorans who knew Chivo but did not download it, the main reason was a preference for using cash. Others said they didn`t trust the system or Bitcoin, they didn`t own a phone with the internet, or the technology was complicated. In September 2021, El Salvador became the first country to make Bitcoin legal, requiring all businesses to accept the cryptocurrency. In an attempt to popularize and regularize its use, the government has given citizens financial incentives to download a special cryptocurrency app. The board directors have now “called on the authorities to limit the scope of the Bitcoin law by removing Bitcoin`s status as legal tender,” he said in a statement. Bukele made sufficient tweets about “buying the drop,” but almost all bitcoins bought by the government were for more than $30,000, at an average price of more than $40,000.
El Salvador opted for government intervention and implemented Bitcoin as legal tender as part of a broader strategy to lift El Salvador out of poverty. In fact, the government itself has even decided to invest its reserves in Bitcoin, risk volatility in favor of potential profits, and keep its promise to support the construction of infrastructure such as schools and public facilities across the country. In a January 2022 tweet, he argued that a “gigantic price increase is only a matter of time” because there will only ever be 21 million bitcoins, while there are 50 millionaires in the world. “Imagine that each of them decides that they should have at least ONE #Bitcoin,” he announced. The value of Bitcoin has since halved. Fortunately for Salvadorans, nothing came from the $1 billion Bitcoin bond program. But the Bukele government still spent more than $100 million to buy bitcoins — which are now worth less than $50 million. President Nayib Bukele said that raising Bitcoin to legal tender status will help many Salvadorans, about 70 percent of whom don`t have a bank account, transition to the formal economy. In particular, it expects that this measure will enable citizens to receive remittances from abroad at a lower cost and more quickly. Remittances are an important source of income for his highly indebted country. An electronic payment system could be of great benefit to El Salvador if it were designed to gain the public`s trust. But if Bukele wanted Salvadorans to hate everything related to Bitcoin and electronic payment systems in general, Chivo was a concrete example of how to get there.
In January, the IMF called on El Salvador to reverse Bitcoin`s legal lender status due to “major risks to financial and market integrity, financial stability, and consumer protection.” .