It took 40 years for only 30% of the people living in El Salvador to open a traditional bank account. Still, just 10 days for about 20% of them to open a Bitcoin account by downloading the Chivo app and creating a wallet.
President Bukele’s optimism towards adopting BTC
Nayib Bukele, the President of El Salvador, stated that 1.1 million Salvadorans already use their Chivo wallet. He also added:
“It seems that we will be able to bank more people in 1 month than they did with nationalizations and privatizations of traditional banks in 40 years.”
In a fairly recent tweet, he implied that the numbers are even more significant now.
The population of El Salvador is 6.5 million, about one million of them being under 10 years old, which makes precisely 20% of the population over 10 years old downloaded Chivo – the country’s preferred app that integrates Bitcoin.
It is believed that 70% of the population does not have a bank account. Thus, Bitcoin is a new and innovative way to increase access to the financial markets, effectively bypassing the bank system and its flaws and choosing to switch to digital banking instead.
$30 in Bitcoin is currently offered free of charge to any new user upon signing up on the app and creating a wallet. Chivo, the cryptocurrency app used in Salvador, uses the Lightning Network, which makes efficient transactions free of charge.
Therefore, Salvadorans abroad can now instantly and directly send money back home without going through intermediaries and paying taxes. This is a massive step for the population, especially those who live abroad, just to help their loved ones back home without having to fill up loads of paperwork and go through the banks. Bear in mind that a good percentage of the population did not even own a traditional bank account – so it’s truly a win-win situation.
And on the other end, the receiver can choose to convert Bitcoin into dollars or vice versa directly, USD being the other legal means of payment in the country besides Bitcoin.
The effects of these changes on El Salvador economy
The country’s adoption of crypto should increase the savings and the growth of El Salvador’s GDP, much of which comes from remittances, since much of what would have gone to taxes, but will now remain in El Salvador.
It is estimated that about $400 million can be saved, which can be used for development purposes and much more, as the money goes directly into the economy instead of paying a huge chunk of it on taxes.
The number of users that have signed up on Chivo had doubled since two days ago when it was only 500,000. It is supposed to continue to at least four million, as Bitcoin is now 100% legal in the country. Switching from the traditional banking system, already known to have massive flaws, to a new, modern system – cryptocurrencies might be a brilliant move to boost El Salvador’s economy and much more – as for sure a lot of crypto enthusiasts will now visit the country for travel purposes and to see how the legality of crypto in a country works, in action – the simplicity of paying for a drink or a meal just by using an app on your phone.
It seems that Nayib Bukele, the country’s president, is genuinely trying to take up a considerable burden in an attempt to make El Salvador flourish. The steps that he’s been taking so far have only been doing good for the country itself and the cryptocurrency scheme, as El Salvador has been constantly in the newspapers and the headlines of many articles – and this trend doesn’t seem to be stopping anytime soon.