Roughly a month into the grand bitcoin experiment in El Salvador, how it’s going depends on how you look at it.
In the “it’s going gangbusters” camp, we might present as Exhibit A the fast and furious tweets of President Bukele, who said on that social media platform Thursday (Oct. 7), “Since yesterday, Salvadorans are inserting more cash (to buy #bitcoin) than what they are withdrawing from the ATMs. And if we add remittances (almost $2 million per day), the incoming USD QUADRUPLES the outflow. This is very surprising so early in the game.”
Yet Reuters noted this week that “only a fraction” of the businesses in the country have taken bitcoin payments amid the technical glitches that have been a hallmark of the rollout. In anecdotes, consumers told the newswire that the Chivo wallets, in some instances, took consumers’ money to buy bitcoin — but then did not ante up the bitcoin. That comes as Bukele has said that 3 million individuals have downloaded the wallets, which exceeds the initial targets set by the government by 500,000 and represents about half of the nation’s population. But the Salvadoran Foundation for Economic and Social Development reported that 93 percent of companies surveyed across a number of verticals have not been taking bitcoin payments.
The same organization reported that a bit more than 4 percent of consumers used crypto for a very small amount — up to about 5 percentage points’ worth — of their transactions.
So it seems that there is a war of data points brewing. We note that the astounding volatility in the holdings themselves may be parking people on the sidelines of using the cryptos in actual commerce. The chart below bears witness to that sentiment.
In at least some evidence of how consumers may be short-circuiting at least some of the intentions of introducing bitcoin as legal tender (and reducing reliance on cash), elsalvador.com reported that some consumers have been downloading the app to receive the free $30 worth of bitcoin, and then transfer that holding to another person’s wallet, for $25 in cash. In other words, we note, they seem willing to trade the “promise” of crypto for the “surety” of cash in hand.
Other countries are moving ahead with their own initiatives to introduce crypto as legal tender. Brazil’s own efforts come with a host of new regulations and oversight. Legislation that is making its way through the system would do just that. The bill also offers a range of regulations that would boost the fines tied to crypto-related money laundering. Those fines would increase from one-third of the amount of money laundered to two-thirds of the amount. The maximum prison time for those crimes would increase from 10 years to more than 16 years.