On Tuesday, 7th September 2021, El Salvador became the first country in the world to formally adopt cryptocurrency as a legal tender, and this marked a historic day in the life of Salvadorians as it symbolised the dawn of a more digitalized economy.
Earlier in the year, talks were underway to incorporate cryptocurrency as a medium of exchange in El Salvador. The legislative arm of the government voted by a majority (62 out of 84 lawmakers accepted) to make bitcoin a legal tender, Bukele said. In El Salvador, the wallet is called Chivo, which translates as cool in the local dialect.
To encourage skeptic citizens on the use of the digital currency, President Bukele promised every citizen $30 in bitcoin if they sign up for the government digital wallet, and ahead of the launch, El Salvador bought 400 bitcoins, which helped in driving the currency price above $52,000 for the first time since the dip in May 2021.
The launch of the digital currency as a legal tender was not without its challenges as errors and difficulties were encountered by users on the launch date when the Chivo digital wallet became available on the app platforms hosted by Apple and Huawei. The reason was not farfetched, as the attempt by several persons to download the app at the same time contributed to the challenges. President Nayib Bukele, who pushed for the adoption of the cryptocurrency fumed against the tech giants for the glitches encountered by users.
The change means businesses in El Salvador should accept payment in bitcoin alongside the U.S. Dollar, which has been El Salvador’s official currency since 2001 and will remain, as the Chivo is not a replacement for the U.S. Dollar. The government purchased an additional 150 bitcoins on the launch date, worth around $7 million, making a total of 550 bitcoins held by the government of El Salvador. The government hopes that this is an initiative he hopes will boost foreign investment, improve financial inclusion and generate jobs.