El Salvador officially became the first country in the world to recognize Bitcoin as a legal tender last Tuesday, September 6. However, the rollout was a wreck within a few hours when President Nayib Bukele had to take to Twitter
According to the President's Twitter account, the digital wallet, Chivo, used to process the transactions had stopped working. The wallet was disconnected in order for the server capacity to be increased, reportedly a simple issue.
"We prefer to correct it before we connect it again," Bukele tweeted.
After the hiccup, Bitcoin dropped in value from more than $52,000 to $42,000 per share, before eventually making up about half of that loss. David Gerard, author of "Attack of the 50 Foot Blockchain," told the Associated Press (AP) that "shenanigans" were more likely to blame for the dip in value that the El Salvador stumble.
"Bitcoin basically doesn't respond to market forces or regulatory announcements," said Gerard. "That sort of price pattern, where it crashes hugely in minutes then goes back up again, is usually one of the big guys burning the margin traders."
As the wallet was shut down and dealt with, Burkele continued to encourage citizens to download the Chivo app and provide feedback. As a part of the rollout, El Salvador plans to install 50 Bitcoin attention centers and 200 Chivo ATMs. At least during the early stages, the ATMs are monitored by attendants who can help citizens use the system.
According to the AP, the reception of the system has been mixed, with most people either uninterested or waiting to see what will happen before buying in. A majority of Salvadoran citizens surveyed said that they don't support the government's choice to add Bitcoin alongside the U.S. dollar as the country's recognized legal currencies.
The decision was made in June by the country's Legislative Assembly via its Bitcoin Law. The program is being given technical support by the Central American Bank for Economic Integration. The government will be backing Bitcoin with a $150 million fund. Any citizen who uses the Chivo app can qualify for $30 of credit.
Under the law, all businesses in the country must accept Bitcoin as payment.
The government claims the choice to make Bitcoin a legal currency is meant to attract investments to the country while helping Salvadorans, 70% of whom do not have bank accounts, to save money on transaction fees.
Meanwhile, critics say that Bitcoin will allow the country's criminal elements to flourish, specifically through money laundering, and that the fluctuating value of Bitcoin is likely to cost citizens their savings. Many are calling for the Bitcoin Law to be repealed.