More than 1,000 people took to the streets of San Salvador, El Salvador on Tuesday to protest against the country’s new Bitcoin Law, championed by 40-year-old President Nayib Bukele. The law recognizes bitcoin as legal tender, and is considered a huge gamble for one of the poorest countries in Latin America.
The government of El Salvador launched an official government-run wallet called Chivo to help facilitate bitcoin transactions in the country, but it’s already hit major snags. The Chivo service suffered serious outages on Tuesday, supposedly due to high demand.
“This is a law that came without consultation,” one protester told Reuters on Tuesday.
“It does not consider the interests of the general population. It is a law that has come in without adequate technological infrastructure for it to be used well. It’s a law that forces us to use a currency that is volatile.”
All businesses in El Salvador must start accepting bitcoin this week, provided they have the technology. Salvadorans took to social media on Tuesday to show purchases made in bitcoin at places like McDonald’s and Starbucks, but small businesses are less equipped to handle the cryptocurrency.
While right-wing President Nayib Bukele has promised that wages and pensions will still be paid in U.S. dollars, many people are concerned that the government is gambling away precious resources.
President Bukele announced earlier this week that the government of El Salvador is holding 400 bitcoin, roughly the equivalent of $20.5 million when he made the announcement. As of this morning, that 400 bitcoin is worth just $18.5 million, meaning that the government already lost $2 million in a single day.
Bitcoin’s volatility makes it extremely bad as a currency, but there are countless other problems with the idea of trying to make bitcoin something that people use for everyday purchases. The bitcoin blockchain can only handle about 7 transactions per second at its very best. But Visa can handle about 24,000 transactions per second.
International regulators are concerned about El Salvador’s adoption of bitcoin as legal tender for a number of reasons, most pressingly the fact that the country could become a place where people flock to launder money. Bitcoin is also the payment method of choice for cybercriminals trying to cover their tracks during ransomware attacks.
Aside from the other countless problems with El Salvador’s adoption of bitcoin as a currency, it’s also antithetical to the cryptocurrency’s libertarian roots to have a government running the people’s main portal to their money. Chivo, local slang for “cool,” went down on Tuesday but was reportedly back up and running by the afternoon.
No one knows how well El Salvador’s experiment will work out in one week’s time, let alone a year or a decade. But one thing’s for certain: Everyone interested in the future of money will be following this story very closely as President Bukele ties his nation’s financial future to a “currency” many experts consider to be worthless.