El Salvador has become the first country in the world to adopt Bitcoin as an official currency that can be used to purchase goods and services.
The new law, which was introduced in June, took effect Tuesday, 7 September. In preparation for the official adoption, Salvadoran President Nayib Bukele announced on 6 September that the country had purchased 400 Bitcoin at a cost of roughly $20 million.
Chivo crypto wallet
In order to facilitate a smooth translation to the digital currency, the country released a government-backed crypto wallet. The Chivo app was released on the Google Play store and awarded $30 in Bitcoin to every new registering user.
The app is initially only available on Alcatel devices to ensure that a rush of new registrations doesn’t crash the nascent infrastructure. According to President Bukele, additional devices will be added in the coming months.
Technical difficulties persist
Despite the government’s best intentions, the first few days of the app’s deployment were fraught with technical difficulties. The app has been taken down twice since Tuesday in order to “improve user experience” and deal with bugs.
The system’s teether problems prompted President Bukele to take to Twitter in order to personally assist those having difficulty with the app. Assuming the language of IT consultants the world over, the president asked users to close and restart the app before seeking additional support.
In a note published on Wednesday, JP Morgan Chase stated that technical snags were to be expected.
“These technical issues should not be a surprise given the country had only three months to prepare for this grand experiment,” the bank said.
Chivo to cost Western Union $400 million a year
In 2020, 2.5 million Salvadoran citizens around the world sent an estimated $6 billion back home to friends and family. This figure accounted for roughly 23% of the country’s gross domestic product.
In order to send money back to El Salvador, many utilize money services providers like MoneyGram and Western Union, who charge as much as 12.5% for a $100 transfer. This, however, is all about to change.
The country’s new Chivo digital wallet will allow anyone anywhere in the world to send funds to other Chivo users free of charge. According to President Nayib Bukele, this is likely to cost money services providers more than $400 million a year.