Latin Americans perceived Bitcoin as an interesting term, which has gained more noticeable traction in recent years and has been influenced by several regional political and financial factors. The idea of Bitcoin appeared in 2008, but the platform was launched in 2009, and since that time, it has benefited from great recognition worldwide and exponential growth in value.
Now people are very interested in finding more information about the crypto pioneer and the best way to buy Bitcoin. Plus, Bitcoin is a factor that will also influence the value of the other altcoins, including the ETH price. This is the reason why Bitcoin has been well-perceived by Latin American countries, including El Salvador.
El Salvador actively impacted the Bitcoin revolution by accepting the digital coin as legal tender in September 2021 under the leadership of President Nayib Bukele, who is recognized as a passionate crypto enthusiast. In this article, we will discover how El Salvador implemented Bitcoin as a legal tender and what challenges it faced along the way.
El Zonte, a coastal city, inspired El Salvador
The acceptance of Bitcoin as a legal tender in El Salvador didn’t happen all of a sudden, as previously, there was a smaller-scale experiment. This small experiment occurred in 2019 in El Zonte, a local coastal city later known as the Bitcoin Beach.
This initiative had three phases. The first introduced Bitcoin to the local economy and covered the necessary technological infrastructure so that the companies could integrate Bitcoin transactions, which helped the city adopt Bitcoin faster. The second step was to educate the community, which comprises about 600 families, about the best ways to use blockchain technology and how they can pay with Bitcoin.
The third phase focused on promoting Bitcoin adoption through local activities, such as tours, surfing classes, or the release of baby turtles, which could be paid for by using BTC. This decision aimed to draw international investors and tourists interested in crypto.
This experiment inspired El Salvador to accept BTC as a legal tender in 2021. This decision was announced in Miami on 5th June 2021 at a Bitcoin conference. Then, on 8th June, the Ministry of Economy showed a draft of the bill to the National Assembly, which, to citizens’ surprise, was accepted within just a single day.
On 7th September 2021, Bitcoin officially became a legal tender and was fully operational, as it had all the necessary technological infrastructure.
The Chivo Wallet, the first step to encourage the adoption of Bitcoin
To promote the acceptance of Bitcoin among citizens and to integrate it better into the country’s economic framework, the government came up with the idea to develop an application that would facilitate Bitcoin transactions. Chivo Wallet was the mobile app launched and was available shortly after the Bitcoin Law was passed.
But things didn’t stop at this, as the government took the needed steps to integrate Bitcoin into the economy, with the help of $75 million, which was allocated to give a $30 equivalent in Bitcoin to every person who decided to download the app and create an account. This initiative made the app successful, as more than 2.5 million users downloaded it.
What was the general perception of the public about this event?
The initial reaction of the population was divided between wanting to accept this improvement and fearing the implications that this event would bring. A study by Instituto Universitario de Opinia Publica revealed that nine out of ten Salvadorans didn’t know what Bitcoin was or its technicalities. Additionally, 70% of the individuals said they didn’t trust Bitcoin because of its constant value fluctuation and unpredictability.
The impact of accepting Bitcoin as a legal tender was also seen on companies that needed to make changes to comply with the new laws. Although, at first, the regulation said that adopting Bitcoin as a virtual currency was voluntary, it mandated that each company operating in El Salvador must set up an e-wallet and accept Bitcoin from individuals who wanted to pay with crypto for services and goods.
The voluntary aspect of this process was that the mandate said businesses could choose whether to receive transactions in USD or Bitcoin in the Chivo Wallet. But in the end, they were required to have an e-wallet.
A massive part of the population of El Salvador didn’t agree with the decision of Bukele, which made them protest in the streets of the capital. Although President Nayib Bukele said that digital coins could help Salvadorans working abroad send money home, citizens didn’t believe in the implication that BTC would bring to their everyday lives.
Most people believe Bitcoin will bring inflation and instability to the impoverished country. Additionally, most people didn’t have good resources, and they didn’t realize the term cryptocurrency. The protesters even set fire to a Bitcoin ATM while displaying placards written “Respect the Constitution” and “No to Bitcoin.”
Conclusion
June 2021 was a surprising time for several people, as then the President of El Salvador, Nayib Bukele, announced that Bitcoin would be adopted as a legal tender, becoming the first state to do so. At that time, Bitcoin gained widespread recognition, being used for trading, but it was also recognized for its high volatility.
Additionally, Bitcoin was starting to be recognized universally in that period, which is why Bukele took the necessary steps to make this decision. The president believed this measure would bring a boom in economic development, financial inclusion, innovation, and investment.
Furthermore, something needed to change in the economy of El Salvador, as it went through an extended period of high public debt, persistently low growth, and strong dependence on remittances, and they thought that things could change by adopting Bitcoin at a broader scale.
However, this initiative attracted both supporters and skepticism, as people feared all the implications Bitcoin would bring to their country.