Tue. Oct 19th, 2021

El Salvador updates

As bitcoin became legal tender in El Salvador this week, a long queue arose at an ATM on the outskirts of the capital. Those in line were mostly on one thing: US dollars.

Many waited for the $ 30 free bitcoin value that the Salvadoran government gave them to convert into a hard currency, but the ATM stopped working. An official admitted that only three people could pull money out of the machine all day.

Francisco Alemán, one of the three lucky ones, collected bitcoin incentives that were collected from several family members – although the combined $ 120 had dropped to $ 118 by the time he received the money because the price of the volatile currency had fallen.

“I think it’s a good thing,” the 24-year-old student said, adding that he thought the technical problems were temporary. ‘The people who want to use it will stick to it, and those who do not want it, and will not. It will regulate itself. ”

According to a plan hastened by Congress by authoritarian President Nayib Bukele, El Salvador will this week become the first country in the world to adopt bitcoin as a legal tender – a daring monetary experiment closely watched by central bankers and crypto-enthusiasts. .

Eva Montes shows off the Chivo Wallet app, a Bitcoin wallet that introduces the Salvadoran government to use Bitcoin as a legal tender. © Jose Cabezas / Reuters

Businesses from shops to restaurants and hairdressers now have to accept bitcoin along with the dollar, which has been El Salvador’s official currency since 2001.

Since Tuesday, Salvadorans who download the Chivo digital wallet – the name means ‘cool’ in the local snake – can register with a national identity number to receive the bonus, equivalent to about 0.00065 bitcoin. To purchase a product, users scan a QR code to send the payment immediately.

Named by Bukele as a way to attract investment, reduce the cost of transfers from abroad and reach the country’s bankrupt – estimated at 70 percent of the population – his government has spent more than $ 200 million to launch the app create and a network of money machines and pay the bill for commissions.

But the initiative has been criticized by economists, the IMF and credit rating agencies, who say it threatens economic stability, endangers consumers and exposes the government to potentially large exchange rate movements.

Bitcoin is the most recognizable of the thousands of virtual cryptocurrencies that are building traditional finances and challenging central banks.

Train this week’s rollout of the digital currency in the Central American country of 6.5 million people was far from smooth, with the app plagued by bugs and protests in the capital against its launch.

Although the $ 30 incentive was meant to be spent in stores, many users have found that it can be taken to another digital wallet in cash – which can lead to long queues at cash distributors.

Multinational companies in El Salvador such as Pizza Hut and Starbucks now accept bitcoin payments, just like the mobile phone company Claro. “I’m fine – as long as it works,” says Ricardo Mejía, 27, a small business owner who was one of the queues.

Although this is only week one, survey of the currency as a means of payment appears to be limited. One of the country’s largest banks told the Financial Times that less than 0.0001 percent of its daily transactions were in bitcoin. By Thursday, many of the country’s largest supermarkets still could not accept bitcoin payments.

The government of El Salvador did not respond to a request for comment or offer figures on the number of downloads or transactions with the app.

Most business leaders in the country have remained silent while preferring to keep a low profile. “We are in a ‘wait-and-see’ position,” said a senior executive at a major bank in El Salvador on condition of anonymity. “We try to administer it in the most conservative way possible.”

The executive said the bank had processed a small number of transactions in bitcoin this week and that it had an agreement with an international exchange to convert it straight into dollars anyway.

Chivo workers help people use Bitcoin: Salvadorans downloading the Chivo digital wallet can register with a national identity number to receive the bonus © Jose Cabezas / Reuters

Patrick Murray, co-founder of the El Salvador-based e-commerce app Tuyo, criticized the government for forcing businesses to accept bitcoin and for not bringing business on board.

‘Few people I’ve talked to are in themselves against bitcoin. “People are opposed to how things are done in the name of bitcoin,” said Murray, part of the family that owns the Grupo Agrisal hotel and real estate conglomerate. “We are making this decision for the wrong reasons on the map.”

Yet not everyone is so pessimistic. Among those in Salvadoran society who benefit from bitcoin are those who send and receive money – which contributes a quarter of El Salvador’s $ 25 billion in GDP.

A Starbucks coffee shop that accepts Bitcoin as a payment method in San Salvador. Most of the country’s business leaders remained silent at the launch © Camilo Freedman / Bloomberg

Banks and money transfer companies can traditionally charge huge fees: more than 10 percent. Bukele said the adoption of bitcoin would save Salvadorans $ 400 million in commissions a year.

At the ATM, one family was trying to raise money sent by cousins ​​in Italy, and had been waiting for more than an hour.

In another series, Kiara Hueso (27), a beauty product saleswoman who was very happy to withdraw $ 75, sent her father to the US after two days of trying. “It’s easier and faster,” she beamed.

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