Bitcoin legal tender: a big gamble for El Salvador?
El Salvador has become the first country in the world to approve bitcoin as legal tender. To this end it has launched a digital payment and exchange system (or cyberwallet) called Chivo based on the cryptocurrency last week. The World Bank, IMF and rating agencies are very critical of the move, and there have also been protests among the country's population. Reactions from the press are more mixed.
You can't base a state on cryptocurrency
This is a big mistake, The Economist explains:
“The law [President] Bukele passed making it legal tender, along with the US dollar, is domineering. It will force businesses to accept bitcoin, though few want to do so. Indeed, the initial roll-out of a new digital wallet, called 'Chivo' (cool), was a shambles. It had to be taken offline for hours after servers were overwhelmed. The price of bitcoin slumped by 10% on September 7th, a day after Mr Bukele spent millions of dollars of public funds buying 400 of the tokens.”
Traditional cash transfers too expensive and slow
Novaya Gazeta, on the other hand, sees the move as understandable in view of the high commissions paid by Salvadoran guest workers for money transfer:
“400 million dollars [annually] are being diverted from the income of low-income earners and end up in the pockets of intermediaries who speculate on the shortcomings of the traditional banking system. ... The slow pace of money transfers is unworthy of the 21st century. Western Union, for example, takes three days to transfer funds from the US to El Salvador. ... With the help of the cyberwallet Chivo, Salvadorans can make transfers 365 days a year around the clock - without middlemen, without paying a cent in commission, and with the money reaching the recipient within a few minutes!”