El Salvador and bitcoin: the moment of truth
On September 7, El Salvador became the first country in the world to adopt bitcoin as legal tender, a risky experiment by the government and on which President Nayib Bukele has staked his political reputation.
The launch faces difficulties and has sparked protests across the country, with some businesses complaining that uptake of bitcoin will be mandatory (denied by the government), while critics warn it will be used by drug traffickers to launder money and that it is highly unstable; a fear borne out by the 9% fall in the price of bitcoin shortly after its launch, which is not unusual for a cryptocurrency, but which one opposition politician said meant the country lost about $3 million.
That said, the government has installed ATMs to exchange bitcoins throughout the country, and has created an electronic wallet application, Chivo, to deposit $30 in bitcoins in the bank accounts of the minority of Salvadorans with one. In fact, President Bukele has highlighted the benefits of bitcoin for the large numbers of unbanked people and for the 70% of the population dependent on overseas remittances, who will now be able to save a good part of the commissions they have been paying to money transfer companies like Western Union, which stand to lose around $400 million a year.
