Chivo

El Salvador, which recognized Bitcoin (BTC) as legal tender on June 9, is preparing to distribute bitcoins to citizens to promote its use. The law legalizing bitcoin in El Salvador came into force on September 7, 2021. In his official address, President Nayib Boucle announced that with the participation of the Chivo mobile wallet team, each user registered in the program will receive bitcoins in the amount of $ 30.

Thus, all adult citizens will receive $30 in bitcoin together with the Chivo mobile wallet for iOS and Android, developed by decree of the authorities. In order to receive the cryptocurrency, the user will have to confirm his identity, Bukele announced. The wallet will allow you to send and receive bitcoins, as well as convert them into dollars. Payment for goods via Chivo will be carried out using a QR code. Although this is a small amount, taking into account bitcoin commissions, the use of Lightning Network technology will contribute to the spread of cryptocurrency as a means of payment.

"The application will work wherever there is a mobile network signal. You don't even have to have an active tariff. It will be possible to use bitcoin at will. Anyone who does not want this will not receive bitcoins. If someone receives payment in bitcoin, they will be able to choose automatic crediting in dollars," the president said.

On June 9, the Parliament of El Salvador, during a vote, approved a law that will make bitcoin the official means of payment of the country on a par with the dollar. Opposition politicians are trying to protest the decision, calling the law unconstitutional.

"I don't see what could stop him. This is a law, the government is working 24 to 7, striving to enforce it in 80 days," Bukele said. We have 84 seats in Congress. It takes only 43 to change monetary policy, that is, half and one more. That's the majority, right? If we are talking about the super-majority, we need two-thirds, which is 56 out of 84. We got 63 votes. Who would object to an initiative that helps people and does not cause any harm? Perhaps they are politically motivated."

He also noted that he would defend the decision taken at the vote.

"Let me remind you that bitcoin works by itself and does not depend on what we do. But, of course, what we are doing will help protect the solution and provide additional benefits for citizens."

Analyst Willy Wu expects that thanks to the distribution of bitcoin to the residents of El Salvador, the global user base of the cryptocurrency will grow by 4.5 million people or 2.5% at one point.

The El Salvador experiment

The rapid processes of bitcoin legalization in El Salvador are initiated by the authorities and therefore almost unhindered. However, these initiatives were immediately frowned upon by the IMF. The Fund threatened that because of such a decision, the country may refuse to lend to El Salvador. The World Bank has already refused to help El Salvador in introducing bitcoin into the payment system.

Meanwhile, El Salvador became the first state in the world to legalize cryptocurrency, and its example can be very informative for the global crypto community. Observing the situation in El Salvador, experts will have the opportunity to assess the future prospects of the digital asset.

Now that bitcoin has been officially accepted as a means of payment, all companies will be required to accept it for payment. Accordingly, the role of BTC in the national economy will significantly increase.

The development of the situation will also show how many ordinary citizens will prefer to make a choice in favor of bitcoin, refusing to use the dollar. The problem on the way to mass acceptance of BTC may be its volatility, but it can also bring high profits to bitcoin owners.

In February 2022, the government of the country announced the integration of the solution from AlphaPoint into Chivo. The New York-based startup has improved the wallet's user interface, fixed bugs, and added improved Lightning Network support.

"Thanks to our work with Chivo, we have seen how a significant part of the population has turned to using the app for secure and simple transactions," Vallejo said.

He referred to the work of the National Bureau of Economic Research, according to which 40% of those who downloaded the wallet continued to use it after receiving a $30 registration bonus in BTC.

According to a Bitso representative, 20% of Salvadorans worked with Chivo after they spent the funds issued by the state.

"The main obstacle to the adoption of cryptocurrencies both in Latin America and around the world is education. As we continue to provide Salvadorans with information and tools to better understand and use innovative technologies, we expect an increase in the pace of implementation," Vallejo added.

Recall that a survey by the American organization National Bureau of Economic Research showed the failure of El Salvador in the experiment with bitcoin — 60% of those who downloaded Chivo did not use it after receiving the bonus.