Bitcoin’s continued entry in El Salvador began with a systemic collapse due to strong demand and generated strong volatility in the cryptocurrency’s price. Nayib Bukele’s plans have sparked fear and controversy.
Bukele’s controversial plan has drawn opposition among the majority, and El Salvadorans are expected to pay for any goods or services using bitcoin, the equivalent of the US dollar, the official currency 20 years ago. The mobile app “Chivo Wallet” is used as an electronic wallet to buy and sell bitcoins, and 200 ATMs are installed across the country to exchange bitcoins for cash.
But the system failed for hours in the morning, as people crowded around an ATM in the historic center of San Salvador. “@chivowallet won’t work for a while, we disconnected it while increasing the capacity of the image capture server,” Bukele wrote on Twitter, asking for “a little patience.”
In the central market, vendors sell fruits and vegetables for dollars. “Bitcoin? No,”one trader said when a client asked her if she would accept it. After trading above $52,000 in midday Asian markets, bitcoin prices suffered a severe setback, plunging to $43,000 in European markets but later recovering to $47,000.
At its peak in April, one bitcoin was worth $63,000, although it halved in value in June. Hours later, Bukele announced that two of the three download platforms already had access to a “Chivo wallet” that would give the equivalent of $30 in bitcoin gifts.
Buckler’s “Roller Coaster”
“We don’t measure things by days, we measure things over time. It’s a journey, not a destination (…) It’s kind of like a roller coaster, prices go up and down, but over time Over time, they have continued to rise,”said Brock Pierce, a cryptocurrency billionaire who is visiting the country.
A proponent of the Bukele plan, Pierce funded a show on Tuesday night in which he used 150 drones to design various symbols in the sky, including bitcoin, on El Sunzal Beach, southwest of the capital.
Hundreds of people demonstrated against Bitcoin around the San Salvador Legislative Assembly and burned tires under the watch of riot police. Rosa Martha Perez, a 68-year-old farmer, said during the protest: “We don’t want it because the currency will affect us a lot. A man in the field sells fruit and we how will this money be managed?” …
“Volatility, money laundering and the risk of becoming a drug state”
“I don’t trust Bitcoin for three reasons: first, it’s a very volatile currency. Second, it helps with money laundering, and third, we can be a drug state,”said Luis Mejillon, 28.
The government has assured that the measure will contribute to the banking of the population and will prevent El Salvadorans from losing about $400 million in commissions for sending money from abroad through financial entities.
The remittances of some 2 million Salvadorans account for 22% of El Salvador’s GDP. The Buchler government, which has a parliamentary majority, allocated $203 million from the budget for his plan to support automatic conversion of bitcoin into dollars.
To date, its management has purchased 550 bitcoins, which is equivalent to about $26 million at current prices. For the authorities, Bitcoin will stimulate the economy, which has stagnated since dollarization in 2001, growing on average between 2% and 4%, before contracting 7.9% in 2020 during the pandemic.
serious corruption problem
But economists and organizations such as the World Bank, the International Monetary Fund and the Inter-American Development Bank (IDB) are skeptical of Bitcoin’s high volatility as a flat currency. Susannah Streeter, a market and investment analyst at London-based financial services firm Hargreaves Lansdown, said: “It’s a huge gamble for the country’s payments system, because it’s risky to trade currencies with such uncertainty about future prices. of.”
“There are concerns that by becoming a bitcoin safe haven, a country already facing serious corruption problems will attract misguided investments from criminal groups seeking anonymity,” he added.
A recent survey by the University of Central America (UCA) revealed that seven in 10 Salvadorans “disagree or strongly disagree” with the use of bitcoin and prefer the dollar. However, rulers are more than 80 percent popular, according to the same university.
Bukler, 40, exploits dissatisfaction with the traditional parties Arena (right) and the FMLN (former partisan, left), some of whose members are on trial for corruption. Last week, a congressional-appointed Supreme Court room tied to Bukele gave the green light to the presidential re-election bid. His current government begins in 2019 and ends in 2024.