El Salvador began using bitcoin as legal tender alongside the dollar, a controversial plan by popular President Nayib Bukele that started on Tuesday with problems in the system, complaints, mistrust and a sharp drop in the price of the cryptocurrency.
In the Historic Center of San Salvador, some people crowded into the “Punto Chivo” ATM, which allows transactions between dollars and bitcoins through an application on the cell phone that works like an electronic wallet.
But the so-called “Chivo wallet” was not yet fully available after a system crash. “Right now, for the moment, the servers are not there to download the application, but we are open to the public for any questions,” Berenice González, manager of one of the 200 Chivo points installed by the government, said near Parque Morazán the country.
A few meters further on, in the Central Market, trade normally continued via the dollar, a currency that this country adopted 20 years ago.
Vendors tout fruit and vegetables in dollars. “Bitcoin? No,” says a merchant when a customer asks if she accepts it.
After trading at half a day above 52,000 dollars in the Asian market, the price of bitcoin suffered a severe setback and plummeted to 43,000 in the European markets, although it then recovered towards 47,000.
The government has already bought 550 bitcoins so far, equivalent to about $ 26 million at current prices.
The Chivo electronic wallet for cell phones comes with a gift equivalent to $ 30 in bitcoins for anyone who downloads the application.
Economists and organizations such as the World Bank, the IMF and the Inter-American Development Bank (IDB) are skeptical about the adoption of bitcoin as legal currency due to its high volatility.
“This is a huge gamble for the country’s payment system as trading the currency when the future price is so uncertain is risky,” said Susannah Streeter, an investment and markets analyst at London-based financial services company Hargreaves Lansdown.
“There is concern that by becoming a bitcoin safe haven, the country that has already faced serious corruption problems will attract the wrong kind of investment from criminal groups seeking anonymity,” she added.
The government assures that bitcoin will stimulate the economy that, since its dollarization in 2001, has been stagnant with an average growth between 2 and 4%. In 2020, it contracted 7.9% amid the COVID-19 pandemic.