BTC Has Officially Become Legal Tender In El Salvador

September 8, 2021 04:00 PM
Crypto Story of the Day

Crypto Story of the Day




Crypto was broadly down this morning. BTC and ETH spot volumes are 3x their 30-day averages.

Crypto Story of the Day

BTC officially became legal tender in El Salvador yesterday as the country’s president tweeted about the country’s ongoing purchases of BTC. News outlets have described the rollout as one that’s had technical glitches.

BTC’s adoption as legal tender, along with the U.S. Dollar, in El Salvador includes a number of measures aimed at facilitating the asset’s use. These include the launch of the Chivo wallet. The wallet’s BTC-related features are being supported by Mexico-based crypto venue Bitso, while U.S.-based Silvergate Bank will work with the exchange to facilitate USD transactions to Chivo. 

The wallet will be supported by 200 physical ATMs across the country that will allow users to deposit or withdraw funds from Chivo. It’ll allow users to receive funds from abroad in both of the country’s legal currencies, while the option of automatically converting received BTC to USD will also exist. Users who download Chivo will also receive USD 30 in BTC and the app will allow users to make purchases in both USD and BTC. 

Following the launch of the wallet yesterday, new Chivo downloads were suspended while additional servers were brought online to provide additional capacity. 

Another element of BTC’s rollout in El Salvador is a USD 150 million fund which will be used to facilitate conversion between the country’s 2 currencies, USD and BTC. Throughout Tuesday and the weekend, El Salvador’s President Nayib Bukele tweeted about the country’s purchase of a total of 550 BTC. Bukele’s tweets included thanking the IMF “for the dip.” 

The first day of the rollout saw a number of individuals tweet about using BTC to make purchases at Western franchises, including Pizza Hut, McDonalds, and Starbucks

El Salvador’s BTC ambitions have drawn the criticism of some institutions. For example, the World Bank denied a request from the country to assist in the BTC rollout in June. A spokesperson for the World Bank said that "[w]hile the government did approach us for assistance on [BTC], this is not something the World Bank can support given the environmental and transparency shortcomings.”

The adoption of BTC has also seen protests in El Salvador’s capital on Tuesday. A recent survey by the Salvadorian Central American University found that 67.9% of 1,281 Salvadoran surveyed said they disagree with the use of BTC as a legal tender. BTC sold off as much as about 15% yesterday in a move that coincided with El Salvador’s BTC rollout. 

Several media outlets attributed yesterday’s selloff to either a sell-the-news reaction to the El Salvador launch or any early issues with the country's wallet system. Google search data for “bitcoin” over the past 7 days indicate that El Salvador’s BTC rollout dominated related search topics. Such an association, particularly given the asset class' recent run-up, is hard to quantify. 

Ultimately, the success of El Salvador’s BTC adoption is a milestone moment for BTC and a story where successes and failures will be judged over the long term.

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