Everybody wins with bitcoin
10:50 7 de December de 2021 By Daniel Oiticica
The smallest country in America took the big leap. El Salvador is since September 7, 2021 the first country in the world to adopt bitcoin as official currency, with the implementation of the Law that makes the world’s most important cryptocurrency legal tender.
The electronic currency is operating in the country in a bimonetary system, alongside with the US dollar, which will be maintained in the accounting system of companies and the Government, and for the payment of salaries, pensions, bank accounts and prices.
The main objective of this measure is to favor the Salvadoran population, tourists and investors who choose to use bitcoin in the country. The Law determines that no one is obliged to use the cryptocurrency, and those who wish to do so have all the technology in their favor and the possibility to instantly make via smartphone application the conversion of bitcoins to the dollar, and thus avoid the exposure of users of the currency to the daily exchange variation.
This innovation in the financial world will allow El Salvador not only to arrive first to the future of money and the digital economy, but also to become one of the most important financial centers in the world, attracting investments, generating jobs and boosting its economy.
For the implementation of bitcoin circulation, the Government of El Salvador set up a whole digital and physical infrastructure that involves the launch of its own electronic wallet, the Chivo Wallet, a free application for iOS and Android, in addition to 200 bitcoin ATMs and 50 Chivo points of attention.
Bitcoin in El Salvador is a transformational project that will facilitate the financial inclusion of Salvadorans who have not had access to banking, and with the great advantage of not charging commissions. The huge Salvadoran community that lives in the United States and sends frequent remittances to their relatives in El Salvador also does not pay commissions to transfer their resources.
The acceptance of the Salvadoran population to this new monetary system is growing and the country’s business ecosystem is joining in, adapting systems and training staff to use bitcoin, with the support of the entire governmental structure, such as the Ministry of Economy.
To promote the use of the Chivo system, the Government offered 30 dollars in bitcoins to anyone who installs the Chivo Wallet application on their cell phone. The strategy worked and by the end of November 2021, nearly 3 million Salvadorans (almost half of the country’s total population) were already using the electronic wallet. In a short time, the system will have more users than all the country’s banks combined.
The global favorable reaction to bitcoin as El Salvador’s currency/asset is positive. Many countries, including Brazil, Costa Rica and Honduras, are considering implementing it. Since its adoption on September 7, 2021, until the end of November 2021, bitcoin continued its unstoppable rise, surpassing by far the $52,000 band of the launch day, reaching $64,800, an increase of 24%. In other words, the $30 given in September to those who downloaded the e-wallet app was already worth $37.2 in November.
It is not only people who get benefits from the new currency. In early October 2021, President Nayib Bukele announced via Twitter, “FIDEBITCOIN (the trust for the adoption of bitcoin) has an amount established, by law, in dollars. However, in its balance sheet it holds dollars (USD) and bitcoin (BTC). Chivo, the state-owned company that operates FIDEBITCOIN, must settle this amount in dollars to the Development Bank of El Salvador (Bandesal). But there has been an accounting ‘problem’. And it is that, with the same amount of USD and BTC in the trust, now the trust is worth more, since bitcoin went up in value. So now, FIDEBITCOIN has a ‘surplus’ of USD 4 million. Therefore, the state-owned company Chivo can dispose of $4 million, without affecting the amount of the trust. This is done by keeping the same amount of BTC, even if the amount of USD is reduced. So, we can invest USD 4 million in other projects”. The Government’s decision was to invest part of the money in a veterinary hospital.