El Salvador, Central American country on the 7th of September officially adopted Bitcoin as a legal tender.

Kraken reported hours after the announcement that it experienced delayed, cancelled, and failed transactions on its site. Another major bitcoin exchange, Coinbase, announced via its Twitter page that it was experiencing similar issues.

The adoption of Bitcoin in El Salvador has resulted in nationwide protests. Skeptical citizens are currently urging the government to repeal the new law. The country’s President Nayib Bukele has suggested that these citizens continue to use the Dollar instead.

Coinbase reported that the price of Bitcoin fell drastically from $50,000 to under $43,000 in the early hours of September 7th 2021. Reports from CNBC reveal that the El Salvador government-backed digital wallet “Chivo” was not accessible to new users for some time, as their servers could not handle the exponential surge in registrations.

El Salvador is currently the first and only country in the world to adopt Bitcoin as a legal tender. This law makes the bitcoin alongside the dollar the country’s legal tender for transactions.

President Bukele announced the historic moment via a tweet. The move to make Bitcoin a legal tender had been in the works for months. El Salvador eventually passed the legislation in June 2021.

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Adopting cryptocurrency as a legal tender heralds technological sophistication, whereas the country’s populace is not tech-savvy. CNN reported that research by the CEO of Strike, a digital finance company, says that about 70% of the El Salvador “active population” don’t have access to a bank account.

What the country needs are active bank accounts, fewer cash-only transactions and more financial inclusion. Cryptocurrency is notoriously volatile, and this could hurt the country’s economy in case of a swing. Bitcoin price rose historically to over $60,000 in April and later crashed to less than half of its peak value shortly afterwards.

Experts believe that the only meaningful application of the adoption might just be remittances. Philip Gradwell, Chief Economist at blockchain data platform Chainalysis says “Bitcoin isn’t really designed to be a means of exchange so this is an early experiment for the currency”

“I think the main use in El Salvador is really going to be around remittances and people using it to save some wealth and really perhaps just to be some competition to the dollar in the country.” Time will tell how the adoption of bitcoin in El Salvador will affect its economy and its people.

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