SAN SALVADOR, Sept. 7 (Reuters) – El Salvador became the first country to adopt Bitcoin as legal tender on Tuesday, despite teething troubles when the government had to unplug a digital wallet to meet demand.
President Nayib Bukele, who was pushing for the adoption of the cryptocurrency, called on users who had already downloaded the government-backed app for help to test that it is now working properly.
“Could you please try to register and post in the comments if you encounter any errors or if the whole process goes smoothly?” wrote the president on Twitter.
Bukele said the use of Bitcoin will help Salvadorans save $ 400 million a year in commissions on remittances, while also providing access to financial services for those without a bank account.
Carlos Garcia, who gave advice on the new currency at a booth in a mall on Tuesday to learn how transactions work, was excited about the possibilities Bitcoin could offer.
“El Salvador is taking a big step forward today,” he said.
However, the poorest may struggle to gain access to the technology needed to make Bitcoin work in El Salvador, where nearly half the population has no internet and many more have sporadic access.
“I will continue to suffer with or without bitcoin,” said candy seller Jose Herrera, who said he was having trouble accessing a cellphone.
Others say the move could fuel money laundering and financial instability. It has already clouded prospects for more than $ 1 billion in funding that El Salvador is seeking from the International Monetary Fund (IMF).
Bukele, 40, is the most popular leader in Latin America, but has been accused, not least of all, of undermining democracy by the administration of US President Joe Biden. Continue reading
Last week, top judges appointed by his legislature ruled that he could serve a second term.
Early Tuesday, Salvadorans discovered they were trying to download the government-sponsored Chivo digital wallet, which promised $ 30 in Bitcoin to each user, and found it was not available in popular app stores. Then Bukele tweeted that the government had temporarily unplugged it to hook up more servers to meet demand.
Bukele blamed Apple Inc (AAPL.O), Google (BrilleL.O) and Huawei (HWT.UL) app download platforms for the delay.
“Set him free! @Apple @Google and @Huawei,” wrote Bukele in one of his tweets, which was accompanied by a red-faced “angry” emoji. The wallet was later available from Huawei.
Google and Apple did not immediately respond to requests for comment.
Surveys show that Salvadorans are suspicious of the volatility of the cryptocurrency, which can lose hundreds of dollars in value in a day.
Prior to its launch, El Salvador bought 400 bitcoins worth around $ 20 million, Bukele said, helping push the currency’s price above $ 52,000 for the first time since May. Hours later, however, Bitcoin weakened, last trading 8.84% to $ 47,327.32. L8N2Q927A
Another cryptocurrency, Ethereum, fell 10.52% to $ 3,537.62 while the Coinbase Global (COIN.O) crypto exchange fell 3.96% after reporting delays in some transactions on its platform.
The change means companies should accept payments in Bitcoin alongside the US dollar, which has been the official currency of El Salvador since 2001 and will remain legal tender.
It remains unclear whether companies will be penalized for not accepting Bitcoin.
In advance of the launch, the government installed ATMs that allow Bitcoins to be converted into dollars and withdrawn from the digital wallet called Chivo without commission.
“Like all innovations, the Bitcoin process in El Salvador has a learning curve,” tweeted Bukele. “Not everything is accomplished in a day or in a month.”
LEVER OF FORCE
In just under two years in office, Bukele has taken over almost all levers of power. But despite promising to clean up the transplant, the Biden government recently put some of its close allies on a corruption black list.
Analysts fear the introduction of Bitcoin, whose transaction records are circulated over the internet, out of the reach of national jurisdictions, could fuel money laundering.
After the Bitcoin law was passed, the rating agency Moody’s downgraded El Salvador’s creditworthiness, while dollar-denominated bonds came under pressure.
Not afraid of controversy, Bukele retweeted a video on Monday showing his face over the body of actor Jaime Foxx in a scene from Django Unchained, a Quentin Tarantino film about American slavery. The video shows Bukele whipping a slave trader with the IMF emblem emblazoned on his face.
Bukele later deleted the retweet.
In his own tweet, Bukele said, “We have to break the paradigms of the past. El Salvador has the right to move towards the First World.”
Reporting by Anthony Esposito and Nelson Renteria; Additional coverage by Wilfredo Pineda in El Zonte, El Salvador and Frank Jack Daniel; Editing by David Gregorio and Alistair Bell
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