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Bitcoin Becomes Official Currency in El Salvador

states that “the exchange rate between the bitcoin and the United States dollar, hereinafter dollar, will be freely established by the market”

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The law that allows the circulation of bitcoin as a currency in El Salvador alongside the US dollar comes into force this Tuesday, making this country the first in the world to take this step.

The Bitcoin Law, approved in June by the official majority in the Legislative Assembly and allies, indicates that “all economic agents must accept bitcoin as a form of payment when it is offered by whoever acquires a good or service”.

The regulation states that “the exchange rate between the bitcoin and the United States dollar, hereinafter dollar, will be freely established by the market”.

As of Tuesday, Salvadorans will be able to make use of ATMs, where people who have bitcoin will be able to withdraw dollars in cash.

Likewise, they will be able to download the electronic wallet promoted by the Government and called “Chivo Wallet”.

People who decide to install the application in their cell phones will receive a bitcoin voucher equivalent to 30 dollars, which cannot be exchanged for dollars.

The key between accepting and receiving bitcoin, according to an explanation given by Bukele, lies in the “automatic and instantaneous convertibility” of the crypto-asset to dollars.

The Salvadoran president has promoted the use of bitcoin as a measure to eliminate the payment of commissions for sending remittances from the United States, which sustain the Salvadoran economy and benefit 1.63 million Salvadorans.

A total of 471,633 households receive these currencies, of which 13,530 are in extreme poverty and 68,874 in relative poverty, according to official sources.

According to the president, Salvadorans abroad pay 400 million each year to send remittances, which in 2020 totaled more than 5.9 billion.

However, most Salvadorans show disinterest, rejection and distrust to the use of bitcoin, according to surveys.

Hundreds of Salvadorans, mostly young people, have demonstrated in recent days against the implementation of bitcoin as a currency and have called for the repeal of the law that will allow its use.

According to a survey by the Instituto Universitario de Opinión Pública de la Universidad Centroamericana (Iudop), 66.7% of the population is of the opinion that the Bitcoin Law should be repealed, 78.3% of the citizens are little or not at all interested in downloading the electronic wallet application in their phones and 71.2% prefer to use the dollar.

The official currencies in El Salvador, according to the Monetary Integration Law, are two: the US dollar and the colón, although the latter is no longer in circulation.

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