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Bitcoin Becomes Legal Tender in El Salvador: Five Things to Know About This World First

Many questions have arisen since the adoption of bitcoin as the national currency of this Central American country.

El Salvador became the first country to make bitcoin a legal tender for any transaction, alongside the dollar, which replaced the national currency, the colon, 20 years ago. In the country, bitcoin trader profession is getting more and more popular. But how does it work in practice? Here are the five things to know about the device wanted by Salvadoran President Nayib Bukele:

  1. What is the “Chivo” virtual wallet?

Since bitcoin does not exist as a hard currency, its users put their bitcoins, or rather usually fractions of it (one bitcoin currently trades between $40,000 and $50,000), into digital applications that are downloaded to a smartphone and serve as an electronic purse. In El Salvador, this wallet has been baptized “Chivo” (“great”, in colloquial language) and only holders of a Salvadoran identity document can use it.

The user can configure his “Chivo” to automatically exchange in US dollars: thus, he will receive dollars directly, even if the payment was made in bitcoin. Two hundred terminals, called “Chivo Points”, have been installed by the government throughout the country to be able to make deposits and withdrawals in dollars or bitcoin, the two currencies being legal tender.

  1. Is the use of bitcoin compulsory?

The law stipulates that “every economic actor must accept bitcoin as a means of payment” for goods or services. But if the seller does not want to receive bitcoin in his account, the amount will be immediately converted, at the current rate at a time “T”, and transferred into dollars using the “Chivo” application. To carry out the transactions, both parties must therefore have a Salvadoran electronic wallet.

  1. What can be paid in bitcoin?

With the “Chivo” you can buy services, buy and sell goods and make transfers to bank accounts, without having to pay fees or commissions. And even “all dollar obligations prior to the entry into force of the law may be liquidated in bitcoin”, specifies the law. Thus bitcoin can function like ordinary currency. People will be unable to tell the difference between the two other than that bitcoin only exists in a digital form that is governed by a blockchain. This is a revolution that most financial experts may never have foreseen.

  1. How much does it cost the state?

The Salvadoran government has invested $203 million in public funds to set up the device and encourage the use of bitcoin. In this envelope, 150 million dollars are dedicated to a fund guaranteeing the convertibility of bitcoin into dollars, 23.3 million to finance the implementation of the project, and 30 million to give the equivalent of 30 dollars in cryptocurrency as a gift of welcome to those who download the Chivo app.

  1. What do Salvadorans think?

According to a survey by the Central American University (UCA), “seven out of ten Salvadorans disagree, or totally disagree”. In addition, 82.8% of respondents said they did not trust cryptocurrency, while 65.2% said they had no intention of downloading the virtual wallet. The government did not communicate what was the number of downloads of “Chivo” on Tuesday, the first day of the launch, which affected it is true to technical problems.

See also  What if you used Bitcoin to reduce your international payment costs?

Cryptocurrencies are predicted to dominate in the next decade, along with the rapid development of the digital world. Metaverse, as an embodiment of the digital world that is accessible to anyone, contributes to the increasing demand for cryptocurrencies. Bitcoin, Ethereum, and other popular cryptocurrencies will be more stable going forward, as they become legal tender.

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