The first day of bitcoin in El Salvador ended in disaster. Protests, burned tires and a threatening fall in the value of cryptocurrencies

You may not be surprised that countries south of the United States and Mexico have significant economic problems. In this context, Venezuela and its typical hyperinflation are most mentioned in this context, which also makes thousands of banknotes practically unusable, because basic raw materials cost even more due to shortages and dysfunctional supplies.

However, Salvador’s 6.8 million people also have problems, the area of ​​which does not reach even half of the area on which Slovakia, for example, is spread. The country is according to the World Bank in the curtain behind Uruguay in the ranking of income inequality throughout Latin America and the Caribbean.

And just as Venezuela tends to have a hard currency in the form of the US dollar in stores, El Salvador even recognized it as its official currency in 2001. Only in June of this year, however, President Bukele and his the government voted in the legislaturethat the country will put the cryptocurrency bitcoin at the same level as the dollar. Yes, as the first country in the world to be enthusiastically embraced by crypt fans around the world.

El Salvador has become the first country in the world where bitcoin is legal tender

As we wrote on Tuesday, September 7, that is on the day the option to pay with bitcoin actually took effect, Proponents of the move said it would reduce the cost of sending money to El Salvador from abroad, mostly from the United States (where many family members of poor Salvadorans undoubtedly live and work). However, there were also concerns about money laundering and tax evasion, as transfers between crypto-wallets are virtually untraceable to the state.

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President Nayib Bukele even said that anyone who withdraws the state digital wallet will receive a starting credit of $ 30 (about 25 euros), although up to 70% of the population was against the introduction of cryptocurrency. There is no need to get too close to how ordinary technically less skilled residents even understand how a crypto or blockchain works. Only 4.8% correctly defined it as a cryptocurrency.

Reality of the first day… as expected disaster

According to SITA, on the first day he indicated what bitcoin had caused. There were protests from the angry population and technological mistakes, which also had a global impact and caused a fall in the value of the cryptocurrency, which had been above $ 50,000 for a few days. The intelligence informed about it portal BBC. Today, bitcoin sold for less than $ 43,000.

As Salvadoran opposition politician Johnny Wright Sol said, one of the poorest countries in Latin America lost $ 3 million immediately. El Salvador bought itself bought 400 bitcoins, at that time an amount totaling $ 20.9 million.

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“It was a very bad day for President Nayib Bukele, his government and the bitcoin experiment. Most people know very little about cryptocurrencies. However, we know that it is a very volatile market, which has certainly been shown today. “ stated opposition politician Wright Sol.

In early June, the Salvadoran parliament approved legislation that will allow this digital currency to be used in any transaction. It came into force on Tuesday. All companies and establishments will thus have to accept payments in bitcoins, with the exception of those that do not have the necessary technology. Under the new legislation, however, they will not be able to force anyone to pay in bitcoins. The situation can be compared to the advent of the euro in Slovakia, when it was also possible to pay in both currencies and traders had to accept them.

TASR / AP Photo/Salvador Melendez

What’s next?

With the possible increase in the value of bitcoin, of course, El Salvador can reverse the initial loss of three million dollars and still earn. However, it remains a huge unknown how it wants (in itself not a very well-functioning state) to control, for example, VAT or other taxes, which it now collects in the usual way. The fact that Apple does not offer the Chivo application, ie the state digital wallet, in its App Store at all also contributes to the chaos. It is therefore only available to people with Android, but even their onslaught did not withstand the onslaught on the first day and fell.

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According to the BBC, the problems were solved during the day and it was possible to pay with bitcoin at Starbucks or McDonald’s, for example. The government continues to say that bitcoin will save up to $ 400 million a year on bank transfer fees when sending money from abroad. However, the BBC estimates that this figure is overestimated and the reality will be 170 million.

More than 1,000 protesters gathered in front of the country’s highest court, who also burned tires or set fireworks.

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