El Salvador Bitcoin Launch Evaluated
Ten days on from the launch of Bitcoin as on official legal tender in El Salvador, things aren’t going as smoothly as hoped! Protests against El Salvador’s President Nayib Bukele saw thousands gather in the streets of its capital on Wednesday.
Marchers in San Salvador protested Bukele’s controversial decision to make Bitcoin an official currency in El Salvador. The government launched “Chivo,” a national digital wallet for the token on September 7th , but the rollout has been hit by system bugs and frequent periods offline.
During Wednesday’s demonstrations, some protesters attacked new Chivo cash machines set up to handle Bitcoin transactions, with at least one machine set on fire.
The machines had been inoperable for most of the week since they were installed due to crashes in the Chivo system that appeared to be overloaded by the number of Salvadorans looking to take advantage of a $30 gift put in each account to incentivise adoption.
Bitcoin is obviously subject to wild swings in value, limiting the token’s functionality as an official currency. The cryptocurrency’s price fell by 11.1 per cent on September 7, the day El Salvador adopted it as legal tender.
In August, protesters at a demonstration against Bitcoin’s adoption held up signs saying “Bukele we don’t want bitcoin” and “No to corrupt money laundering”.
“We know this coin fluctuates drastically. Its value changes from one second to another and we will have no control over it,” Stanley Quinteros, a member of the Supreme Court of Justice’s workers union said.
The country’s Bitcoin Law, passed by a large majority of El Salvador’s congress in June, requires all businesses that are technologically able to accept the token as payment. Private citizens have no obligation to hold or use it.
What was the Reasoning Behind this Decision?
As Bitcoin has shown to be a deflationary asset, El Salvador could find its economy growing in value much quicker compared to other countries.
This is especially critical at present given the rate at which most central banks are devaluing their currency, while Bitcoin’s supply is not only limited, but new coins are mined at a decreasing rate as well. El Salvadorians will find their currency suddenly buys them more when they ship from overseas, and they will realise they’re suddenly a very affluent consumer goods importation economy like the United States.
In addition to this, foreign investment and capital inflows will increase as well, with cryptocurrency aligned companies setting up shop in Bitcoin-friendly El Salvador. Due to the widespread adoption of cryptocurrency nationwide in El Salvador, there are plans in place for the newest crypto infrastructure to be constructed in the country, with a volcano-powered bitcoin mining facility even being mentioned!
Although the rollout has not gone to plan, many in the country see this brave move in a similar way to some of the affluent Middle Eastern countries profiting from their quick thinking surrounding natural resources in recent times. If done correctly, El Salvador may quickly become a Central American twin to Dubai in terms of standard of living. This will only be accelerated if the rest of the world sticks to traditional currency, inevitably creating a wider spread between inflationary fiat and deflationary cryptocurrencies.