SAN SALVADOR — Salvadorans awoke to a partially bitcoinized economy Tuesday when a landmark law to adopt the cryptocurrency as legal tender took effect.
The measure, championed by El Salvador President Nayib Bukele in part to ease the flow of remittances from Salvadorans in the United States to family back home, has made this Central American nation the largest bitcoin experiment to date.
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Many Salvadorans say they want no part in it.
“It was imposed,” said Silvano Moya, a 26-year-old call center employee, who joined an anti-bitcoin protest in the capital on Tuesday. “The only thing we know up until now is that the costs are going to come from our taxes. ”
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Bukele, 40, often described as Latin America's first millennial president, announced the initiative in Miami in June; El Salvador’s legislative assembly pushed it through in a few hours.
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“We should break the paradigms of the past,” Bukele tweeted before the law took effect at midnight. “El Salvador has the right to advance toward the First World.”
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The law requires businesses to accept bitcoin payments, but convoluted government statements have caused confusion about whether its use is optional or obligatory, and the rollout on Tuesday was marred by glitches. The U.S. dollar will continue to circulate as an official currency.
Bukele has promised adopting bitcoin will cut fees for Salvadoran migrants sending money home, help the unbanked gain access to financial services and attract foreign investment. As of Tuesday morning, he had bought 550 bitcoin, worth roughly $25 million, with public funds.
Economists have warned of the potential havoc Bukele’s bitcoin gamble could wreak on the Salvadoran economy, given the currency’s volatility. The country is in negotiations with the International Monetary Fund for a $1 billion dollar loan; the IMF has criticized the move to bitcoin.
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álvaro Trigueros, an economist at the Salvadoran Foundation for Social and Economic Development, called making bitcoin legal tender “unjustifiable,” and said it could cause an economic crisis.
“The currency is unstable and sometimes it will increase and sometimes it will decrease,” he said. “There's absolutely nothing we can do to tip the balance in favor of an increase or decrease. It's like playing at the casino. It's unknown.”
From midnight to 11 a.m. Tuesday, the price of bitcoin fell nearly 23 percent to $42,830.77. It later rose above $46,000, a drop of about 13 percent.
The government on Tuesday launched its digital bitcoin wallet, an app called “Chivo,” — literally, a male goat, but also Salvadoran slang for “cool.” ATMs emblazoned with the name, guarded by soldiers, were installed throughout the country in the lead-up to implementation day. By Tuesday, businesses were expected to be ready to accept the payment.
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By 9 a.m., hundreds of people gathered at the Salvador del Mundo monument to protest in one of the largest actions against a Bukele policy since he took office in June 2019.
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“For the Salvadoran people who could be affected, we don't want this currency,” said Gladis Elizabeth Benítez, a 44-year-old who works as a market vendor. “Maybe it favors the companies and people with money, but for the middle, working and lower class, we feel this isn't going to benefit us.”
Bukele has enjoyed popularity ratings in the 80s and 90s, some of the highest in the region, even through the coronavirus pandemic. But critics say he has grown increasingly authoritarian, worrying civil society organizations and the Biden administration, which has prioritized strengthening democratic institutions and fighting corruption in Central America.
When Bukele’s party assumed a supermajority in Congress in May, it immediately moved to replace the attorney general and constitutional court judges, in apparent violation of Salvadoran law. In the past week, legislators approved a law to remove one-third of the country’s judges and a new constitutional court ruled Bukele can seek reelection in 2024, contrary to a constitutional ban on consecutive terms.
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The bitcoin law in particular is making Salvadorans doubt the president.
“Everything he's done has been good, but not this,” said Ulisses Edgardo Samayoa Villalobos, a 29-year-old street vendor. “He didn't ask the people. He doesn't see all the harm it's causing.”
Samayoa Villalobos said he will not accept bitcoin payments at his candy stand. He can’t risk losing any of the $40 he earns on a typical day.
Workers at nearby businesses — a dollar store, a bakery and a chicken restaurant — said they were not yet accepting bitcoin but were planning to do so soon. McDonald's said it was prepared.
The Chivo app faced technological hurdles the first day. Bukele tweeted early Tuesday that the government wallet was malfunctioning. He assured citizens the government was working on fixing the servers.
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“Like any innovation, the process of bitcoin in El Salvador has a learning curve,” Bukele tweeted Monday night. “Every path to the future is like this and everything won't be achieved in one day, nor one month.”
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Some citizens were hesitant to download the app for fear of privacy concerns because it requires personal information.
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“We don't have any guarantee that he isn't going to use the information against us,” said Moya, the protester. At a protest days before, uniformed police officers took photos of protesters, stoking fear in a country that suffered government repression during the 12-year civil war that ended in 1992.
Maria Elba Montoya Menjívar, a 48-year-old selling pupusas near the protest, said she won’t accept bitcoin payments because she doesn’t have a phone and can’t read.
She voted for Bukele back in 2019. But she has recently grown more critical: “Is it possible we made a mistake?”
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