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The Balance of Bitcoin’s Use in El Salvador One Month After Its Legalization

CryptocurrencyOct 17, 2021 07:30AM ET
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The Balance of Bitcoin’s Use in El Salvador One Month After Its Legalization

  • The problems in the use of the Chivo Wallet have not been completely overcome. There are still complaints from users, some of whom claim to have lost money.
  • President Nayib Bukele announced that about $2 million per day in remittances are already being received through the digital wallet.
  • The adoption of Bitcoin in the country is growing, but not the number of companies that accept payments in the cryptocurrency.

Although the number of Salvadorans who are using bitcoin to buy and sell is increasing every day, technical problems with cryptocurrency persist in the small Central American country that adopted BTC as legal tender a month ago.

So far, at least two million dollars in bitcoin are sent daily by Salvadoran migrants through remittances, using the Chivo Wallet and ATMs installed by the Salvadoran government in several cities in the United States.

Despite this, only a small percentage of companies in the country accept payments in bitcoin, even though the asset is now legal and mandatory. From the very day the Bitcoin law came into force, a series of technical problems related to the Chivo application have arisen.

This has generated frustration among users who support the use of blockchain technology. Adalberto Gálvez, a 32-year-old construction worker, told Reuters that he lost $220 when he tried to withdraw cash from the Chivo digital wallet.

Galvez claimed that the app took his money, but gave him nothing in return. Despite complaining, he still hasn’t been able to get his money back, he said. Although he had previously been using bitcoin without problems through another application called ‘Bitcoin Beach.’

Other’s have also experienced problems with the Chivo Wallet that the government launched with the purpose that Salvadorans could trade or save in bitcoin, as well as to thwart attempted identity theft and transaction fraud.

The government of President Nayib Bukele has not immediately responded to these user concerns.

The Rapid Adoption of Bitcoin

Despite all the flaws detected with the Chivo digital wallet (which means “Cool” in Salvadoran jargon) the adoption of Bitcoin has been very fast, especially among people who live abroad and need to send remittances to their families.

A fifth of Salvadorans depend on remittances, and the Chivo Wallet allows them to send or receive money without commission. In addition, for downloading the wallet, users receive a bonus of $30 USD from the government.

According to data from Bukele, about half of the country, 6 million people strong, already own the digital wallet. The government had initially predicted that there would be 2,500,000 people, but the figure was quickly exceeded.

By September, the wallet had around 2.1 million active users and, a month after its launch, 12% of consumers in El Salvador have already made use of Bitcoin, according to calculations by the Salvadoran Foundation for Economic and Social Development.

On Wednesday Bukele tweeted:

"Since yesterday, Salvadorans are inserting more cash (to buy #bitcoin) than what they are withdrawing from the @chivowallet ATMs." “And if we add remittances (almost $2 million per day), the incoming USD QUADRUPLES the outflow. This is very surprising so early in the game." A survey carried out by the foundation found that the use of Bitcoin among companies is still very low. The survey, which applied to 233 companies from different sectors, found that 93% of companies had not reported any type of payment with bitcoin.

"We are still not sure of the benefits that the government expected," said Leonor Selva, spokesperson for the National Association of Private Companies. Other business unions in the country remain skeptical about the use of cryptocurrencies.

To overcome this difficulty, programs such as Kripton Market and others have been launched in order to aid in expanding the number of points of sale.

The Goal Is to Capture the Majority of Remittances

Bukele’s goal is for the 2.5 million Salvadorans who reside in the U.S. to use the Chivo Wallet and ATMs to send remittances regularly. 30 ATMs were installed in Chicago, Los Angeles, Houston and Atlanta by the Salvadoran government as part of the program, and another 50 in cities in El Salvador.

According to Bukele, 2 million dollars are sent daily through Chivo. Annually, El Salvador receives approximately $6 billion USD in remittances from the US, representing approximately 25% of GDP. Most of these remittances are still made through bank transfers, since the volatility of Bitcoin still generates mistrust.

On The Flipside

  • In September, the government of El Salvador faced harsh criticism for the fall in the price of Bitcoin. Cryptocurrency prices fell sharply following the initial launch in the country and the ban on BTC in China.
  • The government decided to take advantage of the situation and bought 700 bitcoins at lower cost. Now BTC is rising again, and this week it is hovering around $53,000 USD.

Why You Should Care?

  • If the price of BTC continues to rise, along with the growing number of Chivo Wallet users despite its technical problems, the government of El Salvador’s commitment to the cryptocurrency may become favorable.
  • The announcement of the United States Federal Reserve about the possible issuance of a digital currency once again boosted the price of BTC. On the other hand, Morgan Stanley (NYSE:MS), the largest investment bank in the US, has recommended crypto assets.

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The Balance of Bitcoin’s Use in El Salvador One Month After Its Legalization
 

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