- On September 7, El Salvador became the first country to adopt Bitcoin as a legal currency. The country has no other national currency and also uses the U.S. Dollar.
- The roll-out has suffered major technological issues and sparked protests across the country.
- Journalist Anna-Catherine Brigida writes a dispatch from El Salvador on what it's like trying to purchase items with Bitcoin.
SAN SALVADOR, El Salvador — El Salvador's millennial President Nayib Bukele promised his citizens they will lead the Bitcoin revolution. In June, the country approved a landmark law to make El Salvador the first country in the world to accept bitcoin as an official currency. The government also announced plans to create a bitcoin wallet called "Chivo" (Salvadoran slang for "cool"), and install 200 " Chivo ATMS " in El Salvador and the U.S., that would allow people to buy bitcoin or exchange them for dollars.
But days into the implementation of the Bitcoin Law, which took effect last week, major technological hurdles have tainted this one-of-a-kind cryptocurrency experiment. Before 6 a.m. last Tuesday, President Bukele, who is known for his excessive use of social media, was tweeting frantically about the Chivo wallets servers being down. People joked that he was acting as a national customer service representative for his Bitcoin experiment.
The morning of the rollout, hundreds gathered at Salvador del Mundo, a plaza in the city's center with a Chivo ATM, to protest the policy. As they marched towards the country's legislative assembly, they left behind dozens of workers in Chivo shirts tasked with troubleshooting problems with technology. But tensions reached their peak this Wednesday — as Salvadorans celebrate their 200th anniversary of independence — thousands of protestors chanted, "We don't want your bitcoin" while marching through the streets of San Salvador. A few even smashed and set fire to a Chivo ATM booth.
Bukele, the leader of El Salvador's New Ideas party, is convinced that Bitcoin will transform the country. He promised Salvadorans the policy will help bring a new set of foreign investments into the country and help everyday citizens reduce their banking and remittance fees from their relatives abroad. Bukele is so sure of Bitcoin's advantages, in a quixotic attempt to bolster the country's treasury, he invested $28 million in public funds to purchase around 550 bitcoins. It's a gamble that could help the country fund million-dollar public works projects if bitcoin's value skyrockets — or add to El Salvador's already mounting debt if prices plummet.
But a majority of Salvadorans are skeptical of the new law. And more than a week into El Salvador's bitcoin revolution, its detractors are mounting. After the widespread technological hurdles and nationwide protests, rather than kickstarting the country's crypto-revolution, the policy is exposing the limits of Bitcoin's transformative potential.
The first days of the bitcoin rollout were a hot mess
The week of the rollout, of the twenty businesses I surveyed in the capital, only a handful were accepting Bitcoin. All were international chains: Starbucks, Olive Garden, and McDonald's. Some of the businesses that weren't explained that they were awaiting government training on how to use the cryptocurrency.
I tried to make my first purchase at the McDonald's on the northwest side of Salvador del Mundo, where protestors marched earlier that day. The cashier called her manager to ask to print a QR code that I could scan to pay using my cryptocurrency wallet. I used an app from the popular cryptocurrency company Coinbase (the country's Chivo wallet is only available to Salvadoran citizens), but the payment didn't go through. Neither of them knew how to troubleshoot the problem, so I decided to pay via credit card. As I was eating my egg McMuffin, the manager, determined to figure out the technology, returned with a new code to test out. But it still didn't work.
Dejected, I decided to try my luck outside the capital. I drove two hours outside the capital to Ataco, a quaint tourist town in the mountains known for its colorful murals and artisan goods. But most businesses hadn't even downloaded the app.
Café owner Wilber Herrera was one of the few small business owners in town who planned to use the Chivo app to receive purchases. He wanted to provide an alternative payment method to his patrons and downloaded the app on September 7, but shortly after he was unable to access his account. The next day, he was still receiving a message saying his pin was incorrect. "It's complicated to use and there hasn't been any training for business owners," Herrera said.
Even when transactions work, shop-keepers lose money
A few minutes from the café, 53-year-old shop owner José, who asked to be identified by first name only so he could speak freely about the policy without worrying about government retaliation, decided to become an early adopter. Out of 15 vendors I spoke to in Ataco, he was the only one prepared to accept the payment. "As business owners, we can't close ourselves off to technology," he said.
After browsing the trinkets and artwork, I settled on buying a magnet and a flimsy head scratcher for a total of $5. I pulled out my phone to pay, and the shop attendant, Alba, did the same. She wasn't signed into the account and didn't know her pin number, so she had to get a co-worker to access it. After a few minutes of troubleshooting (Alba had set the app to receive payment in dollars, not Bitcoin), I scanned the code to make my first Bitcoin payment in El Salvador. I was charged $5.07 for the transaction and $0.55 in miner fees through the Coinbase wallet, for a total of $5.62. The business received $4.99.
"I already lost one cent in the transaction," José said. "One cent in a hundred or a thousand transactions, that can affect us. That's the fear that we have." He estimates that he checks the price of Bitcoin at least six or seven times a day to see how much it has changed. Bitcoin itself is extremely volatile and has been known to change in value by as much as 50% in a given day. "When the price is up, we're all happy of course, but when we're losing, no one is."
To take out his earnings, José will have to travel at least 20 minutes to a neighboring town to use the nearest Chivo ATM. But it's more likely that he will go to a Bitcoin ATM in San Salvador's city center, when he makes the two-hour trip every week to make purchases for his shop.
At McDonalds the soft-serve maker was working, the Bitcoin machine wasn't
By last Thursday, more than 20 people were waiting outside the Chivo ATM at Salvador del Mundo for their turn to convert their cryptocurrency into dollars. The government placed these ATMs throughout the country by the time the law was rolled out — whether they worked was another question. At Salvador del Mundo, a handful of Chivo workers were there to answer questions. But the system was malfunctioning, so there wasn't much to do besides wait.
Giovany Sánchez, 24, who runs an online electronics store, had been waiting for about an hour. Sánchez came to the ATM to take out the money he earned through sales in bitcoin from his online store. He had already gone to another Chivo ATM across the city, but it wasn't working either and there were no workers to help. Despite the frustrations, Sánchez still wanted to give the president time to figure out the technical glitches. "A lot of people criticize, but they don't think of the benefits," he said. "If it works well, I think it's a good tool."
Across the street from where Sánchez waited to use the ATM, three businesses that told me they were working on accepting bitcoin on day 1 still weren't able to by the end of the week. I decided to try once more at McDonald's. I scanned the code with two different wallets, but neither recognized it. The cashier, the same from before, seemed to have less patience than during my first failed attempt. "Will you pay with cash or card instead?" she asked. I opened my wallet — the physical one with cash and credit cards — and bought my fries and McFlurry.