El Salvador will become the first country in the world to recognize bitcoin as legal tender on Tuesday (7), amid strong skepticism and warnings from economists and international financial organizations.
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The government of Nayib Bukele guarantees that the controversial measure will contribute to the bankarization of the population and will prevent a loss of US$ 400 million in the remittances sent by Salvadorans from abroad, which represent 22% of GDP, although some experts question it.
In El Salvador, which dollarized its economy two decades ago, most of the 6.5 million Salvadorans reject the bitcoin promoted by Bukele and prefer to continue using the dollar, according to the latest polls.
“This bitcoin is a currency that doesn’t exist, it’s a currency that won’t favor the poor but the rich, because the poor, who barely have to eat, cannot invest,” said José Santos Melara, civil war veteran to the AFP (1980-1992) who on Friday participated in a protest against the cryptocurrency.
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Seven in 10 Salvadorans indicated they “strongly disagree or disagree” with bitcoin, which will circulate alongside the dollar, found a recent survey by the Central American University (UCA), which polled 1,281 people in mid-August.
Of the more than 1,500 consulted in another survey by the newspaper La Prensa Gráfica, 65.7% said they disapprove of cryptocurrency.
The director of the UCA’s Institute of Public Opinion, Laura Andrade, guarantees that the population is resisting bitcoin for not considering it a way to improve their economic situation.
“These are decisions without consultation that this government has taken together with legislators, and that people do not perceive a positive impact to significantly transform their living conditions,” Andrade told AFP.
The UCA survey indicated that 65.2% of the population is not interested in downloading the “Chivo” e-wallet needed to make purchases and sales in bitcoins, and does not agree that the government will provide the equivalent of US$30 as an incentive to users of the cryptocurrency.
But Jorge García, a 34-year-old hairdresser who has been using bitcoin for three years, believes he “has a future” and hopes it will “increase his value”.
The Legislative Assembly passed the bitcoin law in June and in late August endorsed a $150 million fund to ensure “automatic convertibility” of bitcoin into dollars.
By law, bitcoin will have “unlimited libertarian power in any transaction”. The law establishes that the exchange between bitcoin and the dollar “will be freely established by the market” and obliges “to accept bitcoin as a form of payment”.
Across the country, the government installs more than 200 “Chivo points”, bitcoin ATMs, some protected by the army to avoid possible depredations.
Economists and organizations such as the World Bank, the IMF and the Inter-American Development Bank (IDB) are skeptical about adopting bitcoin as a currency alongside the dollar.
It will have a “negative impact” on the living conditions of the population given the “high volatility of the price” and “will affect the prices of goods and services”, says economist Óscar Cabrera, from the University of El Salvador.
The fact that it is determined “exclusively by the market” makes bitcoin “highly volatile”, warned the Salvadorean Foundation for Economic and Social Development (Fusades). The Foundation also considers it “unconstitutional” to impose “mandatory acceptance of bitcoin as a form of payment when offered” in any economic transaction.
Encouraged by high public approval, but criticized for several measures considered authoritarian and affecting the independence between the powers of the state, Bukele defends his decision and accused the opposition of “scaring” the population about the cryptocurrency.
The United States called on El Salvador to have a “regulated”, “transparent” and “responsible” use of bitcoin and “to protect itself from evil actors”.