El Salvador: On bitcoins and presidential re-election

CENTRAL AMERICA - In Brief 08 Sep 2021 by Felix Delgado

On bitcoins

On Tuesday El Salvador adopted bitcoins as a legal tender currency. Daily transactions such as buying groceries or paying taxes can now be made using bitcoins through a digital wallet called “Chivo” (local slang for "cool"). President Bukele confirmed that on Monday the government purchased 400 bitcoins to fund Chivo transactions in an operation amounting to nearly $20 million dollars. More purchases will be made as people start using the app. Authorities will also be promoting the use of bitcoins by granting the equivalent of $30 bonuses in bitcoins to people who download the app.

According to the approved law, people are not required to use bitcoins, but they are obliged to accept them as payments for products and services. The government offered that the official wallet would permit the immediate conversion of bitcoins to dollars if the recipient wishes it. This will be a challenge for a country where only a third of its population uses the internet and a quarter live below the poverty line. Recent polls conducted by the Central American University revealed that 80% of respondents are not interested in using bitcoins despite the $30 bonus. Bitcoin users will be able to withdraw money from 200 ATMs and 50 consulting centers across the country.

As pointed out in previous reports, other challenges remain, with digital asset volatility being the most important. On Tuesday bitcoin dropped from a value of nearly $52.000 to nearly $46.000, a 10% loss. Before that, it reached a maximum of $60.000 in April and $30.000 in June. El Salvador will face more hurdles in expanding its new national currency, some r...

Now read on...

Register to sample a report