On the day El Salvador adopted bitcoin as legal tender, its president spent the morning providing technical support from his Twitter account after the digital wallet used for transactions was deactivated.
The country’s Chivo wallet – which offers $30 worth of bitcoin free for local users – launched at midnight, but five hours later was disconnected due to a lack of server capacity. Seemingly unfazed, President Nayib Bukele asked for patience, announced that the government had purchased an additional 150 bitcoins, bringing the total holdings to 550 ($26m). Then he retweeted a US bitcoin journalist who had successfully paid for his McDonald’s breakfast using the cryptocurrency.
At one point, Bukele tweeted: “Those of you who have downloaded @chivowallet and are still not registered, can you do us the favour of trying to register and put in the comments if there is any error or if the process works well?”
Later on Tuesday, more than 1,000 people joined a protest in the capital San Salvador, burning tyres and setting off fireworks outside the Supreme Court.
“This is a currency that’s ideal for big investors who want to speculate with their economic resources,” one protestor told Reuters.
Meanwhile, the value of bitcoin plummeted early on Tuesday, from more than $52,000 per coin to $42,000, before recovering about half of that loss, in an example of the volatility that continues to beset the currency.
Critics of Bukele warned that the international media noise generated by the adoption of bitcoin had served to distract attention from the president’s consolidation of political power – and steady erosion of democratic institutions.
“There has been a high degree of improvisation in the rollout of Chivo and a great deal of opacity,” says Ricardo Castaneda, a local economist. “The app asks for access to your microphone and your contacts, which are not needed for a wallet. Bitcoin might be a distraction but given the decision to push ahead with the plan despite popular opposition and the advice of experts, it could also be an important pillar of Bukele’s political project.”
Recent polls have found that two-thirds of Salvadorans opposed the move to adopt the cryptocurrency.
On Friday the Central American country’s top court ruled that the 40-year-old president can run for a second term in 2024, overturning a ruling that prevented re-election for 10 years.
“For those who follow Salvadoran politics closely, this was entirely predictable,” said Carlos López Bernal, professor of history at the University of El Salvador. “Bukele has delivered systematic blows to the constitution and today he controls all three branches of government.”
In February 2020 Bukele ordered troops into parliament to back his military spending plan. As part of his self-styled anti-corruption crusade he removed five judges and the attorney general in May and last week congress approved a reform to fire all judges over 60 years of age. Meanwhile, the government held secret negotiations with the country’s most powerful gangs, and many of the most important decisions are made by an unelected advisers, primarily his brothers and members of the Venezuelan opposition.
“Who does Bukele rule for? For himself and a close group of family and allies,” said López Bernal.
Bukele, a former marketing executive, is the most popular president in Latin America, with an approval rating regularly over 85% since he took power. But that level has dipped in recent weeks to below 75%, primarily due to objections to the bitcoin law.
“The risks of the law are not going to be known immediately. It will take weeks to play out,” says Castaneda. “The hundreds of millions of dollars spent buying bitcoin come from the general budget and could have been spent on health or education. Even those Salvadorans who don’t use bitcoin will pay the price of this experiment.”
Story first published by Mat Youkee on The Guardian