Bumpy start to the Bitcoin era in El Salvador


Bumpy start to the Bitcoin era in El Salvador

A shop in Chiltuipan that accepts bitcoins. El Salvador was the first country in the world to introduce cryptocurrency.

Photo: dpa

A Bitcoin city at the foot of an energy-generating volcano, funded by a multi-billion dollar bond: El Salvador was the first country in the world to introduce cryptocurrency and has big plans.

San Salvador. More than six months after the introduction of Bitcoin as legal tender for the first time in the world, the record in El Salvador so far is mixed.

Tourism is on the rise: Many hotels in the Central American country are full at Easter, Tourism Minister Morena Valdez told TCS television on Thursday. Since the introduction of the digital currency on September 7, tourism has increased by 30%, it had announced ten days earlier. Tourists interested in bitcoin also stayed longer and spent more money. Investments from abroad are also arousing great interest.

However, the issuance of a ten-year Bitcoin bond worth US$1 billion, which was scheduled for March, has not yet materialized – according to Finance Minister Alejandro Zelaya, the right time is expected. According to the plans of authoritarian President Nayib Bukele, the bond is intended to finance, among other things, the construction of a Bitcoin city at the foot of the Conchagua volcano. The energy needed to mine the cryptocurrency is to be generated by a geothermal power plant on the volcano.

The system is prone to failures

On September 7, the Salvadoran Bitcoin Law came into effect. According to him, any merchant who is technically able to do so must accept cryptocurrency. Taxes can also be paid there. The Chivo digital wallet was introduced – whoever downloaded it got a starting credit worth 30 US dollars (almost 28 euros). In addition, approximately 200 Chivo ATMs have been installed. According to the media, however, the Chivo system suffers from problems.

There was also a lack of acceptance of the new currency among the population. In a survey conducted by UCA University in December, a total of 70.1% of nearly 1,300 participants said they had little or no confidence in Bitcoin. According to their own statements, more than a fifth did not know what Bitcoin is. About 70% of people in El Salvador, where since 2001 the US dollar has been used as a means of payment instead of its own currency, do not have a bank account, according to the government.

Majority of businesses do not use bitcoin

The Chamber of Commerce and Industry surveyed the country’s small and medium-sized businesses in January. Among them, nearly 92% said Bitcoin adoption had no impact on their business. 86% had not used the payment method.

The International Monetary Fund (IMF), with which El Salvador is negotiating a $1.3 billion loan, asked the country in January to revoke Bitcoin’s status as legal tender because it was financially too risky. Cryptocurrency is subject to violent price fluctuations.

© dpa-infocom, dpa:220417-99-942629/2

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