After Months of Buildup, Bitcoin is Finally Legal Tender in El Salvador

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After nearly a year of buildup, Bitcoin is now officially legal tender in El Salvador. President Nayib Bukele confirmed so himself, which effectively sent the crypto market in a downward spiral. At the same time, El Salvador’s sovereign bonds dropped over 6%, with Bitcoin crashing around a fifth of its original price at just over $50,000.

It was a bumpy first day for the South American country. The rollout was clouded by the massive price dip as well as angry protests on the streets by citizens who don’t trust the switch. President Bukele further fanned the flames when he announced that the official government-backed app was not available on Apple’s and Huawei’s platforms. The technical difficulties with digital wallet Chivo were later resolved, but overall, the launch was stalled by a slew of problems.

“A Great Step Forward”

El Salvador’s official Bitcoin launch didn’t go exactly as planned. There were over 1,000 protesters on the streets against the government’s decision, and technical difficulties with the Chivo wallet clouded the initial rollout. To make matters worse, the crypto market imploded right after the initial Bitcoin launch as legal tender in El Salvador, confirming many citizens’ doubts regarding volatility.

Still, as many put it, it was a massive step forward for El Salvador. With this move, El Salvador has officially become the first country in the world to switch from fiat money to cryptocurrencies. It was a highly criticized move and a controversial one. President Nayib Bukele pulled the switch after the International Monetary Fund (IMF) rejected El Salvador’s request for a $1 billion loan.

The IMF has cited the country’s bad finances as the reason for rejecting the financing loan, pushing Bukele to the brink and adopting Bitcoin as the country’s official currency. Many believed it was a bluff, but a couple of days ago, the launch was made official.

Every El Salvador citizen got $30 as part of the initial rollout so they can test the crypto and see how it works. Still, with half of El Salvador’s population having no access to the Internet or a smartphone, it will be interesting to see how the experiment works.

Buying the Dip

At the same time the launch went live, the crypto market imploded. After holding the $50K ground for a few days, Bitcoin took a massive dip, dragging other cryptos with it. Right in the middle of the market crash, president Bukele announced that it allowed the government to buy an extra 150 Bitcoins, bringing the total amount to around 550 which are worth close to $25 million.

According to the president himself, Bitcoin’s adoption in El Salvador would save the country around $400 million in remittance costs and commissions. It will also give people with no bank accounts access to financial services, although it’s still unclear how that would be possible in rural areas.

The moment of truth for El Salvador has finally arrived. In just a short time, we’ll see if the experiment pays off or the small island country implodes.

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September 8, 2021: • No Comments

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