El Salvador is the first country to use bitcoin as legal tender. All residents who download the appropriate Chivo wallet and register will receive thirty dollars in bitcoins. The country itself has purchased 400 bitcoins.
On Tuesday, the Chivo wallet was released for residents of El Salvador. They can download it from the app stores of Google, Apple and Huawei. When users register, they get the equivalent of thirty US dollars in bitcoins. The country wants to use this to encourage the use of Chivo. Via the wallet, users can convert dollars into bitcoins and vice versa without commission. A $150 million fund has been set up to facilitate this.
Bitcoin is the second legal tender in El Salvador, next to the US dollar. It is not mandatory to pay with bitcoins, and wages and pensions are still paid in dollars. From now on, residents can pay their taxes with bitcoins if they want to, or make purchases at stores with bitcoins.
Retailers do not have to accept bitcoins, because the crypto currency can be converted directly into dollars via the Chivo platform. The government of El Salvador has set up a system for shopkeepers for this. Two hundred Chivo ATMs have also been installed, where residents can withdraw dollars with their bitcoin balance and exchange dollars for bitcoins. A company has promised to place another fifteen hundred. These vending machines should especially come in handy for the large group of Salvadorans who do not have a bank account.
El Salvador government promotional video for the use of bitcoins
Money flow from abroad
The country places a lot of emphasis on sending bitcoins between Chivo users, without commission. El Salvador’s economy depends in large part on money that Salvadorans living abroad send home. Last year it was about $6 billion, while the total economy was $26 billion. Now Salvadorans use money offices to send currency; they often charge high commissions and use unfavorable exchange rates.
In June, El Salvador officially recognized bitcoin as legal tender. The introduction had to wait until a technical implementation was ready. The country wants to get the economy going with the step. Seventy percent of Salvadorans would not bank, but they would have a phone with a camera. That target group can now use QR codes and the Chivo app to pay digitally.
President Nayib Bukele reports on Twitter that the country has purchased another 200 bitcoins. El Salvador thus owns a total of 400 bitcoins. At the time of writing, that is worth more than 17 million euros.
Some residents of El Salvador are against the introduction of bitcoin as legal tender and are demonstrating against it. This can be seen in a video report at the NOS. They point to the instability of the cryptocurrency. The International Monetary Fund also warned against the use of cryptocurrencies as a means of payment. El Salvador probably does not have enough reserves to survive a major fall in the bitcoin price unscathed. El Salvador is one of the poorest countries in Latin America. The country has 6.5 million inhabitants.
There are some problems with the introduction of the Chivo wallet for bitcoin payments on Tuesday, according to reports from President Bukele on Twitter. Users report, among other things, that they do not receive the promised thirty dollars. Scaling up the server capacity and releasing the apps in stages for the different mobile platforms should solve the problems, the president says.
President Nayib Bukele points to the Chivo app