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The Status of Bitcoin Adoption in El Salvador

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Written by   1381
6 months ago

A few months ago, the world was shocked when the president of El Salvador announced that Bitcoin would become the country’s second legal currency, and that vendors everywhere would be required to accept the coin. They were even more shocked when congress approved the motion. Bitcoin became a legal currency in El Salvador on September 7th, 2021.

The road to adoption has been rocky however, as people all over the country have to suddenly learn how to use and accept new technology. And some are still refusing to use Bitcoin, even though the El Salvadorian government gave all citizens some Bitcoin for free.

Read on to find out more about the status of Bitcoin adoption in the country of El Salvador and some of the trials and tribulations the people will be facing as they navigate the new world of cryptocurrency.

How the El Salvador Bitcoin Project Began

On September 7th, Bitcoin became the second legal currency in the country, but the US dollar remained the first, allowing people to use either to pay for goods and services. This was done intentionally, as many of the citizens of El Salvador don’t have a good education and didn’t understand how the cryptocurrency works.

To try and help with adoption, the president of the country purchased enough Bitcoin to give every citizen 0.00065 BTC. Which, on September 7th, it was the same as giving every citizen about $30. In a country as poor as El Salvador, this could feed a family for almost a week as the average income is just $5.50 per day.

And this is where the problem with the project began. Since most people within the country don’t understand how Bitcoin works, many began to line up at the Bitcoin ATMS spread throughout the country to pull out the $30. Whether or not this caused the dip, no one can say for sure, but on this day the price of Bitcoin fell 11%. This caused El Salvadorians to panic further, as they simply don’t understand that Bitcoin is a store of value, or it’s volatility. This cause social unrest as people waited hours in line to cash out their Bitcoin, upset that people in the line were getting different amounts for the same amount of Bitcoin that they held.

Additionally, much of the technology surrounding Bitcoin was foreign to El Salvadorians. Few new how to work the Bitcoin ATM when they got to the front of the line. Plus, all El Salvadorians had to download a state sponsored wallet called Chivo in order to receive their free Bitcoin. And in a country where scammers run rampant, many people’s identifications were stolen to set up false wallets to get extra of the free cryptocurrency. This left many El Salvadorians without the chance to even try to use Bitcoin.

Why Did El Salvador Adopt Bitcoin?

After reading all of the above problems the country has had with adopting the cryptocurrency, you may be wondering why they did it in the first place. Although the plan was perhaps poorly educated to the people, the president of El Salvador, Nayib Bukele, knew what he was doing.

El Salvador receives much of the money in its economy from abroad (over 25%), and it doesn’t do this through trade deals. Rather, most El Salvadorians have a family member who lives and works abroad, sending money home to their family on a regular basis. And until the legal adoption of Bitcoin in the country, many of these people had to wait days for this money, plus pay high international wire fees at their bank (sometimes exceeding 10% of the wire). With Bitcoin, there is no longer a long wait for money, and the fees to use the money are much less.

And although centralized apps like Chivo are never recommended when it comes to storing cryptocurrency, the app was made with the El Salvadorian people in mind. Chivo allows citizens to send transfers to others with the Chivo app commission free and all transactions happen instantaneously. This means that El Salvadorians that live abroad can send money to their family for free. And now, with the implication that all businesses must accept Bitcoin, their families can spend that Bitcoin on goods and services without having to pay the Bitcoin ATM fee.

Was Bitcoin Adoption in El Salvador a Good Idea?

Bitcoin adoption in the country of El Salvador really was done in the right mindset, and it earns the president a pat on the back. The problem? Well, the execution of this idea was very bad.

As mentioned above, many El Salvadorians woke up to find they got a free week’s salary with no explanation of how this worked or how it was a store of value that could help them in the future. Imagine for a second you woke up to a second salary for the week. That would be nice right? And that’s what many in the country thought, which is why they immediately cashed it out, not understanding it could be a store of value.

Additionally, there was no education to the people of the country on how volatile cryptocurrencies are. Thus, when people started to watch the value fall, they panicked. Which, if they had held on to it, as of the writing of this article they would have $40 instead of the $30, but most of them didn’t understand that.

In El Salvador, 70% of the citizens don’t have a bank account. But before you blame the government (who is clearly trying to solve this problem with Bitcoin) the issue is actually the El Salvadorians themselves. After years of unstable governments, many don’t trust the bank—preferring to store what little money they have extra, elsewhere. Which brings up the final problem.

People in El Salvador mostly live paycheck to paycheck. This means they don’t have extra money to put away. And if they do, putting it in something as volatile as Bitcoin can be heart wrenching. Imagine saving $100 (when you earn $5.50 a day) only to go to use it and find it has lost value all the way down to $50. This fact alone will dissuade many in the country from putting their money into Bitcoin.

Not to mention that most businesses within the country, who are suddenly forced to accept Bitcoin, will likely not keep their earnings in the cryptocurrency. This is because, again, it is too volatile to do so. Most businesses in El Salvador run on a thin margin, and if they keep money in Bitcoin only to watch the price fall by 50% in a single day—this could ruin their ability to pay payroll and order goods. This is why most in the country immediately cash out Bitcoin to USD when they have the chance.

Overall, Bitcoin adoption in El Salvador has been anything but smooth. From technological to educational difficulties, the country isn’t taking to the cryptocurrency like the president had previously hoped. But Bitcoin really is a great idea for El Salvador, and if the kinks can be ironed out, it could take a poor country to a much brighter future.

This article was brought to you by the MintDice Bitcoin Casino. Originally posted on MintDice's Bitcoin Blog.

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Written by   1381
6 months ago
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Comments

Nice✅✅✅

$ 0.00
6 months ago

When rate of Bitcoin decreases I'm feeling so upset but when increase I always feels happy

$ 0.00
6 months ago

Nice! the bitcoin has a good use for them. The problem is the people don't have the knowledge what is bitcoin all about may be the government is lacking in educating people about the new currency. Crypto currency can be a good use in currency because we can send the money fast and it is low in fees.. I hope that my country Philippines can adopt this to..

$ 0.00
6 months ago

Wow, El Salvadorians can send money through Bitcoin with their families, time to time they will learn also how to used it.

$ 0.00
6 months ago

Let's hope that the government of El Savador can fix the situation so that all its citizens can make proper use of and benefit from the use of Bitcoin, and that the country can reach a higher level of development. Greetings from Venezuela.

$ 0.05
6 months ago

If they start crushing... it'll just be a matter of time before other countries FOMO in.

$ 0.00
6 months ago

I agree, my mom was telling me about this, and she said she thinks that other Latin American will do the same soon. Any idea whaty country could be next or is it too early to predict? Thank you for the upvote btw, it was my very first, yayyy! :D

$ 0.00
6 months ago

I am sure they will learn in time. I am both young and not very skilled with computers and such, so if I can learn, so can anyone,. ;)

$ 0.05
6 months ago

Ojala e implementen esto en Cuba aunque dicen por ahí que si pero no lo he visto en particular. Que bueno la modernisation y sus veneficio. Linda sea tu día rodeado de tus seres queridos y amigos

$ 0.00
6 months ago

I was always certain it's acceptance was going to be rocky

$ 0.00
6 months ago

Good work, technological advancement is something you can never stop, we can't just stop moving, growth is constant wether we like it or not, we have to move too

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6 months ago

Nice move. I hope we can do this one day in My Country.

$ 0.00
6 months ago

Happy you all el savadorians for your government's astute move by making btc your second legal means of exchange. What a prospect that move is?

$ 0.05
6 months ago