It has been just over three weeks since Bitcoin was adopted as legal tender in El Salvador and initial results seem to confirm the success of the initiative with the Central American country’s population.
Bitcoin and the spread of cryptocurrencies in El Salvador
According to the first data to emerge, around 2.7 million Salvadorans (out of a population of around 6.4 million) have moved money to Chivo’s virtual wallet. The country’s president, Nayib Bukele, commented on this data, saying that the wallet now has more users than any single bank in El Salvador. At the same time, in a tweet, the President warned of the risks of the sudden spread of cryptocurrencies.
“Chivo is not a bank, but in less than 3 weeks, it now has more users than any bank in El Salvador and is moving fast to have more users that [sic] ALL BANKS IN EL SALVADOR combined. This is wild!”
This represents the contradiction this decision has sparked in the country and around the world over the choice, which some say was perhaps over-hasty.
The International Monetary Fund has criticized the Salvadoran government’s decision.
The international rating agency S&P has also warned of the risks related to the country’s credit that such a decision could entail.
“The risks associated with the adoption of bitcoin as legal tender in El Salvador seem to outweigh its potential benefits,” S&P said. “There are immediate negative implications for credit”, reads a report from the agency.
There have been demonstrations on the streets in the country, harshly protesting the President for this decision, alleging risks that such a decision could pose for a country in serious economic difficulties like El Salvador.
Pros and cons of Bitcoin adoption in El Salvador
The decision taken by President Bukele on 7 September is bound to be discussed for a long time, considering that the country could be a test case for the cryptocurrency adoption process.
But beyond the exciting results in terms of the number of users who are using Bitcoin, the first few days have seen both pros and cons.
For days, the state-run wallet Chivo itself has had many technical problems, which have made the service very difficult for users. The country’s Court of Auditors has opened an investigation into the creation of several Bitcoin ATMs with public money.
JP Morgan described El Salvador’s move as “an ill-conceived experiment” and that it could lead to highly volatile prices and problems for the country’s banks.
Following local media reports, many shops still seem sceptical about accepting Bitcoin for payment of goods, while there have already been several cases of some users’ wallets being hacked and their accounts being emptied.
Panama, Ukraine and Bitcoin
In Panama, a bill to make Bitcoin legal is being discussed, the same thing is happening in Ukraine, and in Cuba, where Bitcoin is already widely used on the black market, the legalization of cryptocurrencies has been under consideration for some time.
Despite the difficulties encountered, other countries may soon follow El Salvador’s example.