Sunday, May 15

In El Salvador, the fervent defenders of bitcoin

Karen Hernandez, who sells phone accessories in San Salvador, finds many advantages to payments by her customers in bitcoins and does not want her country to abandon cryptocurrency as legal value, as advocated by the IMF. But other Salvadorans are less enthusiastic.

The use of bitcoin, legal in the Central American country since September 7, 2021, “has been a very, very good experience, it has allowed us to increase our sales and taken us to another commercial level” , ignites the 45-year-old trader.

“We accept bitcoins” recalls a sign in front of his small shop located in the historic center of San Salvador.

Bitcoin payments in El Salvador are made through the “Chivo wallet”, a digital card set up by the government specifically for bitcoin transactions. And many businesses, restaurants, even informal stalls, indicate that they accept payments in cryptocurrency.

Elizabeth Arévalo, 25, works in a store that sells computer equipment and every day she “teaches” customers how to use the Chivo card.

“When they learn how to use it, they make purchases. It’s a win-win. We teach them how to use the Chivo and they buy from us,” she told AFP.

– “Only the dollar” –

“There are risks, I know there may be (…) volatility, there is no financial market that controls bitcoin. But it is practical”, judge Juan Carlos Perez, another 40-year-old merchant, who sells perfumes and small tech products.

But not all Salvadorans are so enthusiastic. Antonio Molina, who sells food on the street, does not accept payment in bitcoins. “I only work with the dollar”, legal tender in El Salvador for more than twenty years, “the bitcoin I do not accept it”, he says.

The International Monetary Fund on Tuesday urged El Salvador to remove bitcoin as legal tender and warned it of “significant risks associated with its use for financial stability, financial integrity and consumer protection.”

A serious setback for President Nayib Bukele, a fervent promoter of cryptocurrency and who had attracted all eyes by making his country of 6.5 million inhabitants the first in the world to adopt this cryptocurrency thirteen years after its creation.

Under his government, 1,630 bitcoins were thus acquired with public funds and the head of state announced the issue of one billion dollars of “bitcoin bonds”.

At the end of November, he also indicated that he wanted to build “Bitcoin City”, a new city powered by the energy of a volcano and financed by cryptocurrency debt.

– In negotiations –

But at the same time, the IMF had warned El Salvador of the risks associated with cryptocurrency volatility.

After starting 2021 around $20,000, bitcoin soared to over $60,000 before experiencing sharp reversals. It hit a six-month low of $32,970 on Monday.

The Salvadoran president reacted to the financial institution’s recommendations by posting an ironic “meme” from The Simpsons on social media.

The Minister of Finance, Alejandro Zelaya, contented himself with emphasizing on Twitter the part of the IMF press release insisting on the importance of stimulating “financial inclusion”.

But this exhortation comes as the Salvadoran government is in negotiations with the international institution in Washington for a loan of 1.3 billion dollars to clean up its debt.

“Logic would dictate that the government of El Salvador understands the fragility of its situation and that everything goes through this agreement with the IMF,” warns economist Luis Memberño.

The government hopes in particular to obtain a loan of 400 million dollars from the World Bank, 400 million from the Inter-American Development Bank (IDB) and 200 million from the Central American Bank for Economic Integration (BCIE), recalls the economist.

And all these loans “depend” on the agreement with the IMF, he insists.

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