Bitcoin’s adoption in El Salvador is enduring a bumpy ride, after protests erupted in the streets of the South American country.
Last week El Salvador officially became the first country in the world to accept Bitcoin as a legal tender, after the digital currency was officially adopted on Tuesday 7 September 2021.
This meant that businesses in the South American country from last week were obliged (where possible) to accept the controversial digital currency as payment.
Prior to its adoption, a survey in El Salvador revealed that nearly three quarters of the population there disagreed with their government’s decision to adopt Bitcoin.
In an effort to sweeten the deal, the El Salvador government allowed citizens to download a digital wallet app, which gave away $30 (£22) in equivalent Bitcoin to every person in the country.
However, due to the extreme volatility of Bitcoin, there was concern that any monetary value could be seriously impacted by a crash in the e-currency.
And this happened after the value of Bitcoin crashed the day that El Salvador officially adopted the e-currency.
Matters were not helped by technical glitches, server crashes, and even street protests at the move.
Bitcoin is currency valued at $47,985.
But a week later the BBC has reported that thousands of protesters have taken to the streets in El Salvador, some protesters set fire to a brand-new Bitcoin machine (one of several hundred that have been installed in the country), while others held signs reading “Bukele Dictator”.
The demonstrators reportedly gathered in the capital San Salvador on the 200th anniversary of the country’s independence, brandishing placards reading “No to Bitcoin” and “Respect the Constitution”.
They reportedly accuse the president of using authoritarian means to tighten his grip on power.
The decision by El Salvador to adopt Bitcoin came after the local Parliament in June approved President Nayib Bukele’s proposal to embrace the cryptocurrency.
The move surprised many, and the World Bank (the international lender to developing nations) refused to help implement it as legal tender, due to concerns over transparency and the environmental impact of Bitcoin mining.
In late June rating agency Fitch also warned of greater risks for banks due to the El Salvador law.
It said the move could open floodgates to money laundering, increase banks’ exposure to regulatory risks.
President Bukele has championed Bitcoin adoption as a way to help low income countries like El Salvador move from a largely cash economy, to a digital economy, where a person’s bank account is essentially their smartphone.
It should be noted that roughly 70 percent of people in El Salvador do not have bank accounts or credit cards.
The country replaced its its local currency, the colón, with the US dollar in 2001.
Historically the country had a mostly agriculture-based economy, but it has been riven chronic political and economic instability including coups. It continues to struggle with high rates of poverty, inequality, and gang-related violent crime.
Nowadays remittances account for more than 20 percent of El Salvador’s GDP, and incumbent services can charge 10 percent or more in fees for international transfers that take days to arrive and must be collected from a physical location.