In El Salvador, the ardent defenders of bitcoin

The IMF has warned El Salvador of the risks associated with the volatility of cryptocurrencies. (Photo: 123RF)

San Salvador — Karen Hernández, a phone accessories seller in San Salvador, finds many advantages in having her customers pay in bitcoins and does not want her country to abandon cryptocurrencies as legal value, as recommended 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 has taken us to another commercial level,” the 45-year-old turns on. old merchant.

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

Bitcoin payments in El Salvador are made through the “Cartera Chivo”, a digital card created 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 “teaches” customers to use the Chivo card.

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

“Only the dollar”

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

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

The International Monetary Fund on Tuesday urged El Salvador to remove bitcoin as legal tender, warning 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 cryptocurrencies 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 acquired with public funds and the head of state announced the issuance of 1,000 million dollars in “bitcoin bonds”.

In late November, he also indicated that he wanted to build “Bitcoin City,” a new city powered by energy from a volcano and financed with cryptocurrency debt.

To (re)read: our archive on the Keys to cryptography.

In negotiations

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

After starting 2021 with around $20,000, bitcoin shot up 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 networks.

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

But this exhortation comes at a time when the Salvadoran government is in negotiations with the international institution in Washington for a US$1.3 billion loan to clean up its debt.

“Logic would dictate that the government of El Salvador understand 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 (CABEI), recalls the economist.

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


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