Imagine that the economic conditions of the country where you live do not allow you to live a decent life. This situation forces you to move abroad. The wages – to your new country of residence – may not be great, at least at first, but they are probably better than what you would have had in your home country.
However, with a significant part of your pay you will have to support your family in order to survive. So you would certainly not like to give away a percentage ranging from 10% to 33% to the banking institutions in order for the remittance to reach its destination.
The El Salvadorian immigrants
El Salvadorian immigrants in the US don’t have to imagine it. They experience it every day. They have to give a sizeable portion of their wages to companies like Western Union to get the money to its destination.
And what is that destination? Some other Western Union branch, most likely in the nearest town.
The migrant’s wife or parents will have to take a bus to pick up the money – in cash – from a place where gangs are rampant.
El Salvador’s President, Nayib Bukele, has attempted to solve this problem by recognizing Bitcoin as the official currency of the state (along with the dollar) and introducing the Chivo e-wallet. A banking app based on Bitcoin’s Lightning Network technology that everyone can have for free on their mobile phones.
With the new payment system, those living in the U.S. will be able to send dollars or Bitcoin directly to the recipient’s mobile phone, who will receive them from the safety of their home.
Instant, easy, free. If he later wants to convert them into dollar bills, he just needs to go to the nearest dedicated ATM. The ATM will “read” the wallet on his phone (like we put on our debit card) and give him cash.
“The banks may be angry, but they didn’t take care of 70% of our people,” claims the President of El Salvador.
Who are the 70%? Those who lack even basic banking. Until the advent of the government’s Chivo e-wallet, only 1.2 million citizens had accounts in traditional banks. A few months later, over 4 million El Salvadorans have obtained a bank account and enjoy free remittances from abroad.
From theory to practice
However, in practice, one year after the adoption of Bitcoin as an official currency, it turns out that all this is not so easy to implement.
A couple of Italians calling themselves Bitcoin Explorers visited El Salvador and found that Bitcoin acceptance has not progressed. Not many shops accept it as a means of payment. From what they found they were fewer than those that accepted Bitcoin a year ago when they were back in the country.
The big companies snubbed Bitcoin, while the smaller businesses, the family-owned ones, had no problem at all accepting to be paid in the cryptocurrency.
The explanation given by Bitcoin’s inventors was that they were doing it to attract new customers. Those that the larger companies are unwilling or unable to serve.
What was most striking about their trip was that in the smaller places, outside of the capital, people were much more receptive to the idea of transacting with Bitcoin! As one coffee exporter they visited mentioned, Bitcoin makes it easier for them because it bypasses the country’s awful (awful) banking system. They can get paid instantly and much more economically because it bypasses the middlemen.
What is the reason for the distrust of Bitcoin? One major reason is that Chivo doesn’t always work smoothly.
And this discredits Bitcoin because users think that it is the Bitcoin network itself that is problematic in transactions. It’s a problem that President Nayib Bukele will have to solve.
But at least he didn’t face another problem. Some rumors wanted him to have the country’s Bitcoin stored on FTX, but the 41-year-old President denied it.
As Binance’s CZ mentioned in a tweet, he exchanged messages with Bukele on the matter and he assured him that “we don’t have Bitcoin on FTX and have never had any dealings with them. Thank God!”
He even announced later that he would start buying one Bitcoin every day. It should be noted that since adopting Bitcoin as a legal tender, the country has purchased 2,381 Bitcoin, with an average price of $43,357.
Read Also: Nayib Bukele: FTX is the opposite of Bitcoin
And not only that. A new bill brought to the floor by Maria Luisa Hayem Brevé, El Salvador’s Minister of Economy, paves the way for the sale of the first $1 billion worth of 10-year bonds, with a coupon of 6.5%.
Half of this money will be used to buy Bitcoin and the rest will finance the construction of Bitcoin city.
A modern city, a tax “paradise” for investors and companies related to blockchain and crypto activities. It is planned to be built near the Conchagua volcano and powered by cheap and clean sources of geothermal energy from the volcano.
It is not the first advanced technology to be viewed with caution, with distrust. Many have been negative even with the mobile phone. They considered it too expensive, too heavy.
They thought it was a bad idea to be able to be reached from work when they were out. They feared it would be exploited by outlaws to make it easier for them to commit robberies. We know the result. Today everyone uses at least one device, even in the poorest countries.
Where are the skeptics wrong? They do not take into account that every new technology improves afterwards, with one condition: that there is demand.
A technology fails only because of a lack of interest. The same happened with the Internet. Many, even Nobel laureates, doubted its potential. They claimed that there were not enough people with programming skills, that it would be blocked if too many e-mails circulated, that we couldn’t watch videos.
In the end it turned out that as long as there is demand, solutions one way or another can be found. The blockchain space enjoys the good fortune of having attracted strong minds, lots of talent, lots of ambition, innovative investors and a user community numbering in the millions, which is constantly expanding.
Proof of this is that Bitcoin’s Lightning Network technology, the one used by the Chivo wallet, is constantly growing, despite the cryptocurrency’s price plummeting, as we can see in the chart below.