El Salvador's Bitcoin adoption might become a nightmare for the government

The year 2021 turned out to be quite monumental for Bitcoin after El Salvador became one of the first countries to adopt Bitcoin as legal tender, allowing the cryptocurrency to be used in any form of transaction, starting from buying a cup of coffee to paying taxes. This bold move was largely celebrated by the international Bitcoin community but has also received skeptical criticism from others. Since its adoption as a legal tender, crypto experts have been cynical about its reception on a national level and its impact on the traditional financial world, amid concerns that it could bring instability and unnecessary risk to the country's fragile economy. Salvadoran President Nayib Bukele is a tech-savvy millennial who has always been promoting the increased adoption of digital currencies. But, currently, it seems like this step has largely been a mistake because El Salvador's move to adopt crypto as legal tender is already misfiring. 

It is quite common knowledge that Bitcoin was originally created to be a form of money outside government control, but using Bitcoin as a government-issued currency possessed some obvious drawbacks, since cryptocurrency is also widely used for terror financing and money laundering, and is highly volatile in nature. Hence, adopting cryptocurrencies remained difficult and unyielding in the first place itself. Moreover, building a new payment system takes time, especially on a national level. Legal and financial organizations require to run pilot programs and projects to assess the difficulties that could arise after its full-time implementation and to also understand and receive feedback from the country's citizens. 

According to some reports, it is quite unfortunate to realize that almost a majority of 91% of Salvadorans opted for dollars and not Bitcoin. Near about, 200 ATMs and 50 consulting centers from the government's official digital wallet app– Chivo, were installed around the country where users could deposit and withdraw money without paying commissions. Users joined for the US$30 signup bonus, but they either spent it or cashed it out and, reportedly, did not use Chivo again. The system completely failed to check identification details for new users, including their photos, and relied solely on their national identity card number and date of birth, and after this followed an influx of identity fraud cases to steal signup bonuses. His initiative to adopt crypto to fight and eradicate the country's financial problems were not properly followed through, and instead, the country witnessed some of the largest street protests against the compulsory Bitcoin implementation that continued throughout October 2021. 

President Bukele's plan to introduce Bitcoin bond

Only six months after El Salvador became the first country in the world to adopt a digital currency as a legal tender, the government started scrambling for funds to repay and refinance expiring debt. Its sovereign bonds have fallen apart in the past year as Salvadoran crypto investors were worried that the budget deficit is insupportable. This 10-year 'Bitcoin bond' initiative is the key element that the government is trying to impose to meet these financial demands. 

Recent reports have revealed that investors have committed a half-billion dollars to El Salvador's upcoming Bitcoin bond. Almost half of the amount raised will be used to buy more Bitcoins to meet the existing demands, while the rest for funding the geothermal-powered Bitcoin City that the President plans to build near Conchagua volcano; hence the nickname, Volcano Bonds.

Is it the end of the Bitcoin era in El Salvador?

Given the fact that most of the national citizens did not compulsively wish for Bitcoin as legal tender, the ones who are not as digital savvy might run the risk of forgetting passwords, and as nearly most of El Salvador's population might not get access to the internet in the first place, it might seem quite obvious El Salvador will fail in its attempt to legalize Bitcoin. But if it does, the country will not only reign as the Bitcoin leader of the world but also bring a myriad of new opportunities for the Bitcoin cryptocurrency.