Picture: BLOOMBERG/PAUL YEUNG
Picture: BLOOMBERG/PAUL YEUNG

Bertila Garcia has set up her snack stall on the same corner in El Salvador’s capital for four decades — never accepting anything other than cash as payment. Even as her country makes history by adopting bitcoin, she has no plans to change.

In September, the Central American country became the first in the world to adopt the cryptocurrency as legal tender, but many ordinary Salvadorans, like Garcia, 65, are struggling to make sense of how the step could affect their livelihoods.

“I don’t understand it. I don’t understand it at all,” Garcia told the Thomson Reuters Foundation, adding that none of her customers had asked to pay in bitcoin since the contentious new law took force on September 7.

Even if she wanted to use the cryptocurrency, Garcia does not own a smartphone and said she had no other way to download the “Chivo” bitcoin app and wallet launched by the government.

So far, about a quarter of El Salvador’s 6.4-million people are using Chivo, the country’s young tech-savvy president, Nayib Bukele, said in a tweet on September 20.

Bukele, 40, says bitcoin will help Salvadorans save about $400m on annual commissions on remittances, but experts cite concerns over data privacy and price volatility, warning that the elderly in particular could be left behind.

Under the reform, businesses must accept payment in bitcoin alongside the US dollar, which has been El Salvador’s official currency since 2001.

On the Pacific coast, some tourists and young restaurant and hotel owners have been using the digital currency for up to three years. Shops in the surfing town of El Zonte — known as Bitcoin Beach — display signs saying “We accept bitcoin”.

Elsewhere, long queues can be seen outside government-installed bitcoin cashpoints where people can exchange their cryptocurrency for dollars, though some may just be waiting to receive a $30 bitcoin bonus for everyone signing up to Chivo.

‘Lab experiment’

Bukele has billed adopting bitcoin as a way to boost economic development by making El Salvador less reliant on the US dollar and increasing access to financial services among people who do not have a bank account.

But ensuring use of the Chivo wallet could prove difficult among older people and those living in rural areas, where there are few cashpoints, limited internet access and an entrenched cash-in-hand culture.

About half of Salvadorans have no internet access, according to the World Bank.

The country’s poorest people and those — like Garcia — who do not own smartphones or have digital literacy skills could also struggle to make the jump, cryptocurrency experts said.

“Bitcoin is not an easy technology to adopt ... especially for old people looking to receive remittances. It will face a lot of obstacles in getting people to adopt it,” said Jean-Paul Lam, associate professor at Canada’s University of Waterloo.

El Salvador’s bitcoin rollout is a “little lab experiment that other countries are watching”, said Lam, who is also a research adviser for Goodlabs Studio, a software company.

The potential multimillion-dollar savings in commissions for remittances sent home by Salvadoran migrants was another pillar of Bukele’s pro-bitcoin campaign.

Remittances from abroad — mainly the US — accounted for more than 25% of the country’s GDP in 2020, according to the World Bank.

In the northeastern province of Morazan, Israel Marquez, 53, said he receives $100 from his brother and a friend living in the US several times per year, but was reluctant to test bitcoin.

“Some people say they’re just going to download the Chivo app to spend the $30 and then they’ll deactivate it. But I haven’t even wanted to do that,” he said from the mainly agricultural province.

Suspicion about bitcoin is widespread in El Salvador, a poll conducted in August by the country’s Central American University (UCA) showed.

Of the 1,281 people surveyed, nine out of 10 said they did not have a clear understanding about the digital currency, while eight in 10 said they had little or no confidence in its use.

During antigovernment street protests on September 15, some demonstrators carried banners reading “No to bitcoin” and one bitcoin cashpoint was set alight.

‘It’s confusing’

Marquez, a small-scale coffee producer, cited bitcoin’s volatility as one of his biggest concerns.

“I don’t understand how a currency increases so much in price ... it’s confusing,” he said.

On September 7, the day bitcoin became legal tender, its value fell by 18%, said George Monaghan, an analyst at GlobalData, a London-based data and analytics company.

“It’s stressful and impedes personal financial planning,” he said.

“Salvadorans are likely not sufficiently familiar, nor comfortable, with online technology to trust cryptocurrencies,” he added.

But even tech-savvy Salvadorans have reasons to question the adoption of bitcoin “practically overnight”, said Julia Yansura at Global Financial Integrity, a US-based anti-graft watchdog group.

She said the speedy adoption meant the government had little time to forge a regulatory framework and safeguard the personal data that users hand over to create their Chivo wallets.

“How will that information be stored, who will have access, and what can it be used for?," said Yansura, the group’s programme manager for Latin America and the Caribbean.

Ultimately the extent to which Salvadorans adopt bitcoin in their daily lives hinges on whether cryptocurrency markets become less volatile, Monaghan said, adding “there’s little the government can do to reduce bitcoin’s volatility”.

In downtown San Salvador, 65-year-old Pedrona de Saldana, who sells sweets and beauty products at a roadside stall, vowed to stick with cash. Like Garcia, she does not have a smartphone.

“I’m not going to use it even if I had another kind of phone,” she said as she accepted two quarters from a customer buying gum.

“I can’t use another currency that I don’t know.”

Thomson Reuters Foundation

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