El Salvador between benefits and dangers of the Bitcoin Law a month after its entry into force

Key facts:
  • Individuals and civil society organizations insist on the flaws of the Chivo Wallet.

  • Some Salvadorans say it takes time to understand the benefits of bitcoin.

Today, October 7, marks one month since the entry into force of the Bitcoin Law of El Salvador. A regulation that made the country the first in the world to make the cryptocurrency its monetary unit.

It has been 31 days since the experiment that uses cryptocurrency as a determining factor to transform the economy of the nation in crisis was launched. And while the eyes of the world remain on the Salvadoran territory, the inhabitants try to discover the benefits and dangers that the adoption of bitcoin (BTC) may have, trying to unravel the scope that the new law will have.

As the nation’s president, Nayib Bukele, has pointed out, bitcoin can be a useful tool to send remittances faster and at no cost. This is because the Chivo Wallet does not generate fees for the transactions that users make.

So by using the government wallet to transfer their BTC, Salvadorans do not pay the fees charged by transfer agencies such as Western Union or MoneyGram. By Bukele’s calculations, these cross-border payment service companies, could lose about 400 million dollars a year in commissions An amount that the inhabitants of the Central American country will now be able to save.

The president of El Salvador seeks in bitcoin an economic boost that will return the dynamism to the productive activity that the country has lost in recent years. Remittances are an important part of this, since the volume of resources received by the Salvadoran population represents 20.22% of its Gross Domestic Product, a very significant amount for its economy.

According to Bukele, El Salvador, hand in hand with bitcoin, will generate employment and financial inclusion for thousands of people who are unbanked. In addition, the government projects that the new law will attract tourism and investment.

From the macro to the micro: two perspectives for viewing bitcoin

However, the macroeconomic variables that the government manages around bitcoin and its social impact require time. “In just one month it is not fully appreciated what will be the footprint that the cryptocurrency will leave in the country,” says the Salvadoran César Borjas.

The El Salvador trader, along with other residents consulted by CryptoNews, comments that the Bitcoin Law has been tarnished by the two political fronts dividing the country.

They believe that this division has prevented the implementation of the regulation to occur under an environment of broad participation and, on the contrary, each group has a biased view from its own trench. However, there is also a particular vision held by different sectors that make up civil society.

Salvadoran.

There are the Salvadoran opponents who reject bitcoin without knowing why, but as a political obligation. Under the same scheme are those who are pro-government, who must accept the cryptocurrency because that is the line to follow. But beyond all this, there are the people who don’t have access to the technology and are not interested in bitcoin because they don’t understand it and don’t even have the possibility of accessing it. There are also those who use the Chivo Wallet as a survival measure because it gives them a bonus of 30 dollars and, finally, there is the group that understands and takes advantage of the benefits of adopting the cryptocurrency.

César Borjas, trader from El Salvador. milaros-cabrera-beneficios-criptomonedas milaros-cabrera-beneficios-criptomonedas Milagros Cabrera has a street food stall and is part of the group that understands and takes advantage of the benefits of cryptocurrency. Source: DW Español / youtube.com

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Adoption of bitcoin in El Salvador a mirage or a reality?

In the midst of the controversy that has been unleashed in El Salvador around the implementation of the Bitcoin Law, Nayib Bukele reported that about 3 million Salvadorans have downloaded the Chivo Wallet application. It means that, if the country’s population was 6,453,553 in 2019, according to World Bank data

, there would be a large adoption of bitcoin.

However, is this level of adoption is perceived in the streets of El Salvador? “In a way yes,” responds the Salvadoran Carlos Palomo who has seen crowded bitcoin ATMs.

What I have been able to personally verify is that there are huge lines at the Chivo ATMs because people go to them to collect in cash the bonus of 30 dollars in BTC that the government gives the government to download the application. So I do believe that, at least, the number of registered users in the Chivo Wallet is quite true because you can see it on the streets. It’s something I’ve seen in San Salvador and outside of the capital because in the head of the department of Cuscatlán, which is Cojustepeque, I’ve also seen the plaza where the ATM is crowded.

Carlos Palomo, resident of El Salvador.

During the last month, some companies enabled methods to receive payments with BTC, however, paying with bitcoin is not something that is available in all businesses in the country. Fast food chains like <a href=”https://www

.criptonoticias.com/comunidad/adopcion/mcdonalds-pizza-hut-comienzan-aceptar-bitcoin-el-salvador/” target=”_blank” rel=”noopener”>Pizza Hut, KFC or Wendy’s

, as well as large establishments that offer products or services, do receive the cryptocurrency as a form of payment, but something very different happens in small establishments.

There are difficulties in finding informal businesses that accept bitcoin payments. I have been able to talk to small merchants and many openly state that they do not find the law adequate, so for me it is notorious that informal commerce has not yet assimilated it.

Carlos Palomo, resident of El Salvador. El Salvador between benefits and dangers of the Bitcoin Law a month after its entry into force El Salvador between benefits and dangers of the Bitcoin Law a month after its entry into force In the Giovannys store in Puerto de La Union, 185 kilometers from San Salvador, they accept BTC as a form of payment and residents come there looking to exchange their voucher for cash. Source: CANAL 9 LA UNION, EL SALVADOR. / youtube.com

A different perspective is held by Salvadoran cyber activist Mario Gomez, who believes the adoption of bitcoin is nothing more than a mirage in his country. For him, many people download the Chivo Wallet to receive the gift voucher, but “they don’t do it because they want to use bitcoin, but because they want to exchange it for dollars in cash”.

When we compare the daily use of the dollar with the use of bitcoin, what we see is that a lot of people prefer the dollar because it doesn’t have the volatility that cryptocurrency has. That is something that is reflected in small businesses, where there is a permanent subsistence mode, where there is the fear that by keeping their balances in BTC, suddenly the price of the cryptocurrency drops and they run the risk of not being able to buy inputs for their business to face a new day of work.

Mario Gómez, a resident of El Salvador.

Several Salvadoran economists also doubt that half of the population is actively using the government’s bitcoin application. In fact, Luis Membreño, Carlos Acevedo and Tatiana Marroquín question

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the prosperity of the system and argue that, once the gift voucher is withdrawn, users will not continue to use the wallet.

Bitcoin between two waters: more risks than benefits?

While Bukele reports promising statistics, users in El Salvador have been reporting failures with Chivo Wallet transactions. Reports of abundant failures, if true, would be affecting Salvadorans.

in the handling of money to make purchases in the market or sending funds between family members.

On Wednesday, October 5, the association Transparency, Social Control and Open Data (Tracoda), chaired by Carlos Palomo, denounced that transferring bitcoin

or dollars from Chivo Wallet to other wallets or bank accounts could be “something catastrophic”.

The group of young people who make up the organization, which promotes transparency of the technology used by state entities, conducted tests with the Chivo wallet, and found that transfers to other wallets do not reach the destination addresses.

The same failure was reported by several Salvadorans who participated in a Twitter Space convened by user Miguel Rivas. During the space, several users pointed out that bitcoin transfers from Chivo to other wallets such as Muun , Trust Wallet

or to exchanges such as Coinbase are still pending.

For this reason, all agree in warning that, to avoid risks, it is best not to transfer bitcoin or dollars from Chivo to other wallets.

Payments made from the Chivo wallet to other users of the same platform work without any problems. We have bought lunches, paid at gas stations, shopped at malls and everything is perfect. But when we transfer to other wallets problems arise, because sometimes the money is sent and sometimes not. That is why we warn that you should not send BTC from Chivo to other wallets, at least until we are sure that the Government solves this impasse.

Carlos Palomo, president of the organization Tracoda.

Another concern of the group of young people who make up Tracoda is that the Chivo application requests permissions to access the microphone, the camera and the contacts of those who download it. These requests, according to these technology experts, puts the privacy of users at risk.

By granting permissions to an application, users authorize that part of their lives and their private data are exposed and can be used improperly. “For this reason we recommend to people who want to download Chivo Wallet that it would be best to keep the application on a device that they do not use regularly where they have information that can fall into the hands of third parties,” said the president of the organization.

carlos-palomo-advierte-privacidad-usuarios-chivo-wallet <img src=”https://yellowrocketagency.com/wp-content/uploads/2021/10/carlos-palomo..jpg” alt=’carlos-palomo-warns-privacy-users-chivo-wallet’ width=”248″ height=”304″ /> Carlos Palomo, president of Tracoda warned about the security risks of the Chivo Wallet. Source: Zoom Screenshot.

Life changes for those who feel winners with bitcoin

A month after the entry into force of the Bitcoin Law, life has begun to change for some Salvadorans. At least that is what César Borjas, a merchant dedicated to the sale of clothing who is categorized as a winner “because he understands and takes advantage of the benefits that can be extracted from the cryptocurrency”, as he explained to CriptoNoticias.

Borjas points out that solving the economic difficulties of a population or changing their lifestyle attached to the dollar is not something that can happen in the short term. In fact, he believes that it will be a progressive process for the people of El Salvador to gradually understand what advantages they can extract from bitcoin.

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He explains that his vision changed when he began to devote attention to bitcoin and to discover what the pioneering cryptocurrency has for him. The first thing he did was to download the Chivo Wallet app, with which he received his USD 30 bonus in BTC.

With the idea of experimenting he decided to keep his balance in bitcoin, so before long he noticed he had an extra $2 because the price of the cryptocurrency had increased slightly. Then he changed that small surplus and returned to have USD 30 in BTC, which days later gave him a higher return.

El Salvador between benefits and dangers of the Bitcoin Law a month after its entry into force El Salvador between benefits and dangers of the Bitcoin Law a month after its entry into force César Borja is the owner of Borjastore, a company dedicated to the manufacture of clothing. Source: borjastore.com

In this time I have learned that today bitcoin can have a price of USD 50,000 and tomorrow it can go down 10%, but in a year it can increase 100%, something that has never happened with the money I have saved in paper. So I’m going to leave my money saved in bitcoin because it’s giving me a return and I’m sure it will continue to give me a return because I’m not going to use that money for at least six months.

Cesar Borja, a resident of El Salvador.

The Salvadoran trader believes that, like him, a small percentage of the population is changing their views on bitcoin. In fact, several of the participants in the Twitter Space, convened by Miguel Rivas, also declared themselves winners by earning at least a 10% return due to the price

increase that the cryptocurrency has experienced recently.

However, the benefits that Bojas is getting from bitcoin not only have to do with the profit, product of the price increases, as he recently made a payment for some supplies for his business that he bought in Honduras. This way, he saved himself the high cross-border commissions charged by the agencies that offer these services. He said that, fortunately for him, the Government of El Salvador is now offering to pay for his business in Honduras.

or subsidizes sending bitcoin money to other nations.

He adds that a large percentage of the population cannot afford to keep a small balance in BTC, because saving is not something they can afford.

“A shoemaker, for example, spends every day everything they produce and many times they are left owing at the grocery store and that’s why, upon learning that they will receive a USD 30 bonus as soon as they download the Chivo Wallet app, they go running and do it,” explains Borjas.

He believes that, for now, most of the Salvadoran population is using bitcoin as a means of payment, which he does not consider wrong, “but with a little education many can learn that the crypto-asset can also function as a store of value, better than the dollar,” adds the trader from El Salvador.

The Salvadoran mentions that the government of the Central American country still has many pending tasks regarding the Bitcoin Law. He believes that, while it is true that financial inclusion can be assured for a good number of unbanked Salvadorans, it is also true that there are still many populations in the country that do not have Internet connection.

Borjas also believes that the government should be concerned about reducing the digital divide that is deepening inequality in the country. To do so, it requires the provision of computer equipment and connectivity. This is because from his perspective, now that there is the Bitcoin Law in El Salvador, “we must ensure that it reaches the largest number of Salvadorans”.