The Chivo digital wallet, operated by Bitso, was seen by President Nayib Bukele as a way to give the US dollar-based economy of El Salvador a boost, but it’s off to a rocky start.
Bukele hoped that the nation-wide adoption of Chivo (slang for ‘cool’), would save on transaction fees for money sent from abroad, and encourage investors to spend more in the country.
Things have moved quickly since the bold move to accept bitcoin came into law yesterday.
Since then, the value of the currency has plummeted and El Salvador is awash in protests, with an opposition government saying the gamble has cost one of South America’s poorest country’s $3 million.
Prior to the official rollout, El Salvadore invested in 400 Bitcoin and locals were incentivised to sign up for Chivo with the promise of $30 in Bitcoin.
Things started badly yesterday, with giants such as Huawei and Apple not offering Chivo, then servers had to be pulled for registrations as they could not keep up with demand.
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“We must break the paradigms of the past,” President Bukele tweeted. “El Salvador has the right to advance towards the first world.”
During the first day of it being legal tender in El Salvador, bitcoin’s value dropped from more than $52,000 to less than $46,000. At one point, it reached its lowest value in almost a month, at under $43,000.
This saw one of the core criticisms of the currency’s adoption at a nation-wide level come to fruition – it’s simply too volatile to be adopted at this scale.
Opposition politician Johnny Wright Sol told the BBC: “It was a very bad day for President Bukele, his government and his Bitcoin
“The majority of the population knows very little about cryptocurrencies. What we do know is it’s a very volatile market. Today that was surely made manifest.”
Sol added that the legislation to approve Bitcoin as legal tender was passed in “about five hours”.
According to the Central American University, nearly 70% of Salvadorans surveyed disagreed with the government’s decision to adopt Bitcoin as legal tender.