Bitcoin Adoption in El Salvador: Everything You Need to Know
Bitcoin, the largest cryptocurrency by market capitalization, has witnessed significant adoption in recent years due to its ability to lower transaction costs and promote financial inclusion. Several countries worldwide now recognize Bitcoin as an investment, with some, like El Salvador, adopting it as legal tender.
This article focuses on El Salvador. Read on to learn how Bitcoin is transforming the financial sector of this Central American country and how it’s changing citizens’ lives.
El Salvador’s Bold Move to Recognize Bitcoin as Legal Tender
El Salvador shook the world in September 2021 when it announced that it had adopted Bitcoin as a legal tender. According to the country’s President Nayib Bukele, the move was intended to address several national problems, such as remittance fees and financial inclusion.
At the time, he revealed that over 60% of El Salvador’s citizens had no access to conventional banking services. Therefore, his government aimed to onboard more people into the country’s financial system using Bitcoin.
Furthermore, Bukele noted that traditional financial institutions charged high fees and took days to process transactions. So, by integrating Bitcoin into El Salvador’s financial system, citizens would be able to transact quickly and cheaply.
To ensure seamless integration of Bitcoin, Bukele’s administration launched the Chivo wallet, allowing citizens to store their BTC and make daily transactions.
The move to adopt Bitcoin wasn’t welcomed by all El Salvador people. Some protested against it as they feared the coin’s price volatility. Also, global institutions like the IMF warned Bukele’s government against risks associated with Bitcoin.
However, the El Salvador President wasn’t moved. Instead, he made a commitment to buy one Bitcoin daily, arguing that the digital asset could help turn his country into a hub for blockchain innovation.
Bitcoin’s Impact on Various Sectors in El Salvador
While many small businesses in El Salvador are still struggling to integrate Bitcoin into their payment systems, large companies like Starbucks, McDonald’s, and Pizza Hut now allow customers to pay their bills in BTC.
Regarding remittances, Salvadorans can now send and receive funds within seconds via Bitcoin. What’s more, the transaction fees incurred are 90% lower than those imposed by financial institutions.
Speaking of financial institutions, numerous banks in El Salvador have embraced Bitcoin in recent months. For example, Banco Hipotecario has started providing Bitcoin-backed loans. Banco Agricola, on the other hand, permits customers to make payments toward credit cards or loans with Bitcoin. Meanwhile, Banco Davivienda is exploring blockchain technology to improve its transaction speeds.
The Chivo Wallet
As mentioned, the government of El Salvador has its own Bitcoin wallet, Chivo, which allows people to convert their BTC coins to US dollars instantly. Furthermore, it supports cash withdrawals via Bitcoin ATMs. Notably, El Salvador hosts over 220 Bitcoin ATMs installed countrywide to facilitate easy access for citizens.
Although faced with technical problems during its early stages, the Chivo wallet now functions as expected. Salvadorans use it to pay for various bills, from school fees to meals at their favorite restaurants. As stated, the wallet comes with an auto-conversion feature, enabling quick swaps from BTC to USD. This shields merchants against Bitcoin’s high price volatility.
The Nayib Tracker
El Salvador is one of the countries with the largest Bitcoin treasuries. And since Bukele bought the coins using public funds, he has launched a portfolio monitoring platform, the Nayib Tracker, to allow all Salvadorans to monitor the country’s Bitcoin holdings. As of October 2024, data on the platform (nayibtracker.com) shows that El Salvador holds 6,136 BTC valued at $385.15 million. The investment has generated an all-time profit of $72.67 million.
Conclusion
While some Salvadorans remain skeptical about Bitcoin due to high price volatility, the coin continues to play a crucial role in bringing financial services closer to people. Citizens of the Central American nation can now make transactions quickly and at affordable fees, thanks to Bitcoin. However, financial education is required to help more Salvadorans understand Bitcoin so the coin can reach its full potential.
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