Bitcoin’s bumpy first week in El Salvador

For several consecutive days, the Chivo experienced technical difficulties, ranging from not being able to access the digital wallet to not being deposited the US$30 bonus that the president had promised all users who signed up for the new app.

What happened?

• On September 7, El Salvador officially adopted Bitcoin as legal tender in the country alongside the US dollar, meaning it can now be used to make transactions, investments and even pay taxes.

• The national switch also included a crypto-wallet app called “Chivo,” which is Salvadoran slang for “cool.”

• The app can be used by any Salvadoran in El Salvador or abroad to transfer bitcoin.

• But the rollout was rocky, as was the adoption of Bitcoin altogether.

• The crypto wallet went down temporarily on Tuesday, with Salvadoran President Nayib Bukele saying that it was due to the influx of new accounts, and “We prefer to correct it before reconnecting it.”

• The price of Bitcoin dipped from above US$52,000 on Monday to around US$45,000 on Tuesday – the day of the launch.

Why did El Salvador adopt Bitcoin?

• The Bukele administration said that they transitioned because it would give people greater access to global banking.

• One of the most significant ways this takes effect is when it comes to remittance when Salvadorans from outside the country send money back home to their friends and family.

• Previously, this process would have taken several days and would have been riddled with high fees. With this new system, though, Salvadorans could send money to or from family anywhere in the world for little to no fees added on top.

• “Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee. That’s drop-dead stunning. It’s an incredible humanitarian improvement,” said Alex Gladstein, chief strategy officer for the Human Rights Foundation to CNBC.

• According to President Bukele, this shift could cost bank-transfer companies like Western Union US$400 million a year. Some, however, think that number might be closer to US$1 billion.

• With that said, Bukele also seems to be capitalizing on a political opportunity with this move. The president primarily plays up his youthful entrepreneurial attitude toward innovations within the country, making young crypto entrepreneurs like him.

How did the first week go?

• Well, not the smoothest.

• For several consecutive days, the Chivo experienced technical difficulties, ranging from not being able to access the digital wallet to not being deposited the US$30 bonus that the president had promised all users who signed up for the new app.

• Complaints on the Google Play and App Store also grew.

• “I downloaded it and entered all my data. Now when I want to log in again, it doesn’t let me and it doesn’t recognize my pin or face ID. I don’t have other options. Truthfully, a really bad app!," said one user.

What do Salvadorans, in general, think about it?

• One newspaper poll found that most Salvadorans were against the adoption of Bitcoin, and nearly three-quarters of them say they would not accept it as payment.

• “The truth is that here as the poor people that we are, we don’t understand that,” said José Lopez, an 81-year-old shoe-shiner to The New York Times. “I’m worried.”

• But some have pointed out its benefits, namely that it makes sending remittances easier than going through companies that pose both high fees and potential safety risks for the people picking the money up, who frequently get robbed by gangs waiting outside the banks.

• “In this day and age, it is wild that I had to go to a physical Western Union office, give them actual cash, and then hand them another $25 on top of that, before they would send my money over,” said Jaime García, a Salvadoran living in Canada who sends remittances to his family in El Salvador, to CNBC.

What does the crypto-community say about it?

• There is a little bit of division in the crypto-enthusiast community about whether or not this move is a good one for the currency, considering it goes against the original point, which was to thwart centralized currencies.

• But crypto-advocates generally have agreed with Bukele that adding the currency could foster better access to banking within the country.

• In fact, Bukele’s rhetoric on the subject seems to vary very little from the language crypto-enthusiasts in general use, in one tweet even saying “Buying the dip,” when the country bought more crypto during the fallen price.

• Michael Saylor, the CEO of one software intelligence firm that holds billions of dollars in Bitcoin, even encouraged his followers to buy US$30 worth of the crypto asset in “solidarity,” matching the amount that new adopters of Chivo would get for signing up.

• Others, like American crypto-entrepreneur and former presidential candidate Brock Pierce, defended the tech glitches saying that the tech issues were to be expected and that, with time, would be resolved and that it was a “historic” moment.

What’s next?

• Well, the big question is whether or not this will work in the long run, considering the volatile nature of cryptocurrencies like Bitcoin.

• The government is aiming for 2.5 million Salvadorans, which is around 39% of the population, to download Chivo.

• But El Salvador isn’t the only country moving toward crypto adoption. This includes Cuba, Panama and even Ukraine.

• But all seem to be anxiously watching and waiting to see if El Salvador’s experiment with it will prove successful before they decide to get in deep. And, under a Bukele presidency, there doesn’t seem to be any turning back since the president has tied his reputation so tightly crypto.

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