Salvadorans show their support for Bitcoin despite criticism from the International Monetary Fund

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Karen Hernandez sells mobile phone accessories in El Salvador and says business has boomed since the country started using Bitcoin as legal tender.

She hopes President Nayib Bukele will ignore calls from the International Monetary Fund to abandon the use of cryptocurrency.

“It was a very, very good experience and increased (our sales). It took us to another level of business,” the 45-year-old trader told AFP.

She owns a small store in the historic center of the capital, San Salvador, where many handmade signs announce “we accept Bitcoin”.

The government has created a digital wallet called Chivo that allows users to make and receive payments with Bitcoin and the US dollar, which the Central American country adopted in 2001 to help provide monetary stability. The price of Bitcoin in India was Rs. 30 lakh at 00:40 a.m. on January 28.

Bitcoin has been legal tender since September 2021.

E-wallet training

In the crowded streets of the capital, restaurants, hardware stores, pharmacies and even street vendors accept payment in cryptocurrency.

Elizabeth Arevalo, 25, works in a computer store in an old building and teaches customers how to navigate the Chivo wallet so they can use it in her store.

“We give customers a little orientation on how to use the wallet…Once they learn how to use it, they buy something from us. It’s a win-win situation,” Arevalo said.

However, not everyone jumped on the bandwagon.

“I don’t care if they drop bitcoin or not, it doesn’t bring me any benefit, I only work with dollars, I don’t accept bitcoin,” said banana seller Antonio Molina.

“Big Risks”

On Tuesday, the IMF called on El Salvador to stop using Bitcoin as legal tender.

IMF board has warned “there are significant risks associated with using bitcoin for financial stability, financial integrity, and consumer protection,” as well as issuing bonds backed by Bitcoin.

Bukele responded on Twitter with a Simpsons meme that read, “I see you IMF. That’s very sweet.”

Since coming to power in June 2019, his government has purchased 1,630 Bitcoins with public funds.

Last year, it also announced new Bitcoin bonds worth $1 billion (about Rs. 7,500 crore).

Juan Carlos Perez, 40, who runs a technology and perfume store in San Salvador, says he uses Bitcoin in his personal and professional life.

“There are risks, I know…the vulnerability of the exchange rate, (not) financial market controlling it. But it’s convenient,” Perez said as he checked the Chivo app on his phone.

‘Fragility’

The Salvadoran government is trying to negotiate a $1.3 billion (about Rs 9,755 crore) loan from the IMF, which it also needs to guarantee other loans.

And his stance on bitcoin didn’t help.

“The logic would be for the Salvadoran government to understand the fragility of its situation,” said economist Luis Memberno.

He said El Salvador’s financial health “revolves around this deal” with the IMF, as he also hopes to secure loans of $400 million (about Rs 3,000 crore) each from the World Bank and the Inter-American Development Bank, and $200 million (about Rs. 1,500 crore) from the Central American Bank for Economic Integration.

All these loans are subject to IMF approval, Memberno said.

Despite its criticisms, the IMF board has acknowledged that the use of cryptocurrencies could expand access to banking services in El Salvador.

Bukele “is not going to back down from a personal project of this magnitude,” Memberno said.

Its economy minister, Alejandro Zelaya, accused the IMF of contradicting itself by opposing bitcoin while claiming that it was in favor of “strengthening financial inclusion”.

“It looks like it (Bitcoin) can provide financial inclusion, but you shouldn’t. The future waits for no one #Bitcoin,” Zelaya wrote on Twitter.

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