El Salvador traders defend use of bitcoin

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Karen Hernández, who sells cell phone items in San Salvador, waits every day excitedly for her customers, many of whom pay with bitcoin, the cryptocurrency she says has brought her many benefits. And she does not want to be withdrawn, as requested by the IMF (International Monetary Fund).

“It was a very beautiful experience. [o uso das bitcoins] and increased our sales, took us to another level of commerce,” Hernández, 45, told AFP.

With a cheerful expression, Hernández owns a small cell phone store in the historic center of San Salvador, the capital of El Salvador, where hand-crafted signs announce “we accept bitcoin” through the Chivo digital wallet.

The Chivo “wallet” is the government’s wallet created for bitcoin transactions, which has legal validity since September 7, 2021.

“Education” for bitcoin

Every day, thousands of Salvadorans walk through the capital’s crowded streets, where restaurants, hardware stores, pharmacies and even many informal businesses advertise that they accept cryptocurrency payments.

Located in an old building, Elizabeth Arévalo, 25, works as a saleswoman at a computer supply store, and daily needs to “teach” customers how to use the Chivo wallet so they can shop at her store.

“We give customers a quick guide to using the digital wallet. When they learn, they buy. It’s a win-win issue. We teach them how to use the wallet and they buy,” he explained.
In downtown San Salvador there are two Chivo ATMs guarded by police, and in the middle of the morning few users carry out a transaction or consult one of the Chivo Wallet advisors who are on hand.

But many disagree, like Antonio Molina, who says he doesn’t accept bitcoin payments at his stall, where he sells bananas.

“It doesn’t matter to me whether they take away bitcoin or not, it doesn’t bring any benefit to me. I only work with dollars, I don’t accept bitcoin,” said Molina.

In El Salvador, bitcoin circulates alongside the US dollar, the official currency for two decades.

“Big Risks”

On Tuesday, the IMF called on El Salvador to take bitcoin out of circulation as legal tender, pointing to “great risks” associated with using the cryptocurrency — a blow to President Nayib Bukele, who has enthusiastically promoted it.

The IMF executive board has asked the Salvadoran government to officially stop using bitcoin, citing dangers to “financial stability, financial integrity and consumer protection, as well as potential tax contingencies”.

For merchants like Arévalo, the idea that bitcoin is no longer legal tender is untenable.
“Sales have increased since we accepted bitcoin, and at least here in the store we don’t agree with canceling the use of bitcoin, we are already used to using it and it is a payment option”, he said.
Running around his tech and perfume store in the center of the capital, Juan Carlos Pérez, 40, says he personally uses bitcoin and is “in agreement” with the cryptocurrency.

“There are risks, I know there may be (…) exchange rate vulnerability, [não há] a financial market that is controlling [a bitcoin]. But it’s practical,” Pérez commented while reviewing the Chivo app on his phone.

“Fragility”

The government is discussing with the IMF an agreement worth US$ 1.3 billion (R$ 6.9 billion) to heal its coffers.

“It would be logical for the government of El Salvador to understand the fragility of its situation and that, in the end, everything depends on this agreement with the IMF”, said economist Luis Membreño.

This year, according to Membreño, the government expects to obtain US$ 400 million (R$ 2.1 billion) from the World Bank, US$ 400 million from the IDB (Inter-American Development Bank) and US$ 200 million (R$ 1 billion) from the BCIE (Central American Bank for Economic Integration).

All of these loans are subject to the $1.3 billion deal the government is trying to get with the IMF, says Membreño.

On Tuesday (25), the IMF executive board acknowledged that digital payment methods can contribute to the banking of El Salvador, but asked the government to control them.

meme reaction

On Tuesday night (25), President Bukele reacted to the IMF recommendation with a Simpsons meme that reads: “I see it, IMF. Very beautiful.”

During his tenure, 1,630 bitcoins were acquired with public funds.

Membreño warned that Bukele “will not back down from a personal project of this magnitude.”

Its finance minister, Alejandro Zelaya, limited himself to highlighting on Twitter the part of the IMF communiqué that insists on the importance of promoting financial inclusion.

“It looks like it works to give financial inclusion, but it shouldn’t. The future waits for no one, #Bitcoin,” Zelaya wrote.

Last year, Bukele also announced the issuance of a $1 billion “bitcoin bond”.

Translated by Luiz Roberto M. Gonçalves

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