The Salvadoran government took advantage of a sharp drop in Bitcoin to buy even more of it, as the crypto became the official currency in the country on Tuesday.
Criticized for its volatility
Despite strong public reluctance, and criticism from economists and international financial organizations, El Salvador becomes the first country in the world to allow cryptocurrency as a legal tender, on par with the US dollar.
The Bitcoin will allow Salvadorans to save 400 million dollars in bank fees when sending money by the diaspora, especially in the United States, according to the head of state and his government.
Reducing these fees is no small matter for El Salvador, as they represent 22% of the country’s GDP. The challenge is twofold: to use the cryptocurrency and its reduced fees bypassing banking services and to put this money back into the local economy.
However, more than two-thirds of El Salvador’s 6.5 million people are opposing a move by the popular President Bukele for the first time, saying in two separate polls that they want to continue to use the U.S. dollar, El Salvador’s legal tender for the past 20 years, exclusively.
This bitcoin is a currency that does not exist, it is a currency that will not benefit the poorest, but the richest. Who, being poor, can invest, when he barely has enough to eat?” fumed Jose Santos Melara, a veteran of the civil war that tore El Salvador apart from 1980 to 1992 and who demonstrated Friday against the cryptocurrency.
Bitcoin has been criticized for its high volatility. Based on blockchain technology, it depends only on supply and demand. Over the past year, the price of a Bitcoin has risen from less than $10,000 to more than $53,000 in April and in recent days was around $45,000… until dropping to just over $35,000 in a few hours on Tuesday.