el salvador became the first country to authorize bitcoin as legal tender, along with the dollar.
but how does it work? Here are some keys to understanding President Nayib Bukele’s plan, which came into force on Tuesday.
Reading: Como funciona el bitcoin en el salvador
1. What is the “chivo” electronic wallet?
As bitcoins do not physically exist, they are stored in digital applications that are downloaded to the mobile phone and function as electronic wallets.
The one from El Salvador is called “chivo” (synonym of chévere, bacán), and to use it you must have a Salvadoran document. businesses must present a tax identification number and a legal representative document.
The user can configure his goat wallet with an automatic version to dollars. In this way, a company can receive all the payments they process in dollars, even if they are in bitcoins.
The government installed 200 ATMs called “chivo points” throughout the country for deposits and withdrawals.
2. is it mandatory to use bitcoin in el salvador?
The law establishes that “all economic agents must accept bitcoin as a form of payment when it is offered to them by whoever acquires a good or service.”
but if the merchant does not want to receive bitcoins in their account, the “chivo” application converts the amount immediately to its equivalent in dollars.
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for transactions, both parties must have an electronic wallet.
3. what can be paid with bitcoins?
With the wallet you can process payments for services, buy and sell products and make transfers to bank accounts without charging commissions, for example.
even, “all the obligations in money expressed in dollars, existing prior to the validity of this law, may be paid in bitcoins”, the law specifies.
4. How does El Salvador finance the measure?
To promote bitcoin, the government has used 203 million dollars of public funds.
Of this money, 150 million were destined to guarantee the convertibility of bitcoin to the dollar, 23.3 million dollars to finance the project and another 30 million to provide a bonus of 30 dollars to each person who download the goat wallet.
5. Is there citizen support?
A survey by the Central American University (UCA), stated that “seven out of 10 Salvadorans disagree or strongly disagree” with bitcoin.
also 82.8% of the population has little or no trust in bitcoin.
The survey said that 65.2% of the population is not interested in downloading the goat wallet.
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The government has not provided a balance of downloads on the first day of operations.
6. How does Bukele defend the measure?
President Bukele assures that the adoption of bitcoin will contribute to the banking of the population and will generate savings of 400 million dollars in the cost of remittances that Salvadorans abroad send to the country.
remittances represent 22% of el salvador’s gdp.
7. What do economists and international organizations say?
the international monetary fund (imf) observed since June that “the adoption of bitcoin as legal tender raises a series of macroeconomic, financial and legal problems that require a very careful analysis”, he commented IMF spokesman Gerry Rice.
The World Bank and the Inter-American Developed Bank have also expressed skepticism and warned that the measure is risky.
el salvador is already suffering “the impacts of the volatility of the price of bitcoin” that aggravate “the high levels of inequality, poverty, unemployment, migration and violence”, former president of the central reserve bank of el salvador, Óscar cabrera .
8. what do bitcoin fans think?
Bitcoin “is like digital gold, this is where you keep money for a difficult day in the future, this is for your savings account,” Brock Pierce, a cryptocurrency billionaire, told AFP.
although, “I don’t advise you to use this to make your daily payments, to buy the things you need, to put food on the table or pay the rent”, calculate.
“Unfortunately, the issue has become a bit politicized, but what people need to know is that if they don’t want to use bitcoin, they don’t have to. It’s just an added value they have,” estimates American Mike Peterson, pioneer of the use of bitcoin in el salvador.
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