Bitcoin became legal tender for a country for the first time in history in El Salvador on Tuesday.
The digital currency is the official currency of El Salvador alongside the US dollar, a move that is sure to drawn attention to the opportunities and risks associated with cryptocurrencies.
Just before midnight local time on Monday, El Salvador's President Nayib Bukele, announced that the country was about to “make history” after confirming that the government bought 400 Bitcoins, the equivalent of around $21 million at current prices.
The government created a $150 million fund to back conversions of bitcoin to US dollars and 200 ATMs have been installed throughout the country to operate with Bitcoins and dollars. Salvadorans will be able to download “Chivo,” the government’s digital wallet to receive $30 in Bitcoin.
The government said the measure will benefit those living abroad by saving millions of dollars in commissions on remittances given such transactions account for more than 23% of the country’s gross domestic product, according to figures from the World Bank.
But polls show most Salvadorans are skeptical about Bitcoin and have concerns about how it will affect their earnings. A recent survey revealed that seven out of 10 Salvadorans said that they "disagree or strongly disagree" with the use of Bitcoin and that they prefer the dollar.
International bodies such as the World Bank and the International Monetary Fund have also warned against the adoption of the cryptocurrency saying it could increase risks for financial institutions.
Early Tuesday, problems were reported on the platform because of the number of people trying to log in.
"For a few moments @chivowallet will not work, we have disconnected it while we increase the capacity," Bukele said on Twitter.
Some critics say that with the change, Bukele seeks to distract from an authoritarian regime.
The right-wing leader, who has been in power since 2019, has been heavily criticized for making arbitrary decisions.
In May, he fired five Supreme Court justices after the Salvadoran judiciary ruled that the president’s use of emergency powers during the pandemic was unconstitutional. Bukele defended the firings as “getting our house in order.”
The new Supreme Court last week gave the green light for Bukele to run for reelection in 2024.
The 40-year-old president, who recent polls indicate is backed by more than 80% of Salvadorans, said Bitcoin could help boost economic development and employment./aa
