RIYADH: El Salvador on Tuesday became the first country in the world to adopt bitcoin as legal tender, although it suffered teething problems when the government had to unplug a digital wallet to cope with demand.
President Nayib Bukele, who pushed for adoption of the cryptocurrency, called for help from users who had already downloaded the government-backed app, to test if it was now working properly.
“Could you please try to register and post in the comments if there are any errors or if the whole process works fine?” the president wrote on Twitter.
Bukele said using bitcoin will help Salvadorans save $400 million a year on commissions for remittances, while giving access to financial services to those with no bank account.
El Salvador purchased 150 additional bitcoins on Tuesday, Salvadoran President Nayib Buekele said on Twitter.
Bukele said El Salvador was “buying the dip” after prices of the currency dropped sharply on Tuesday morning.
The purchase of 150 bitcoins, worth about $7 million, came after El Salvador bought 400 bitcoins worth around $20 million ahead of Tuesday’s launch.
“El Salvador accepting bitcoin as a legal tender is a significant milestone for both the country and future of cryptocurrencies,” Abdullah Mashat, an analyst on cryptocurrencies, told Arab News.
He said: “Of course, accepting a cryptocurrency has its own unique challenges and that’s something El Salvador will soon discover.”
“This step won’t be the last from sovereign governments and I expect some other progressive governments to follow in order to attract global attention and more foreign direct investments,” Mashat said.
Earlier on Tuesday, Salvadorans trying to download the Chivo digital wallet, which the government has promoted, promising $30 of bitcoin for each user, found it was unavailable on popular app stores. Then Bukele tweeted that the government had temporarily unplugged it, in order to connect more servers to deal with demand.
Bukele blamed Apple Inc., Google and Huawei’s app download platforms for the delay.
"Release him! @Apple @Google and @Huawei," Bukele wrote in one of his tweets, which was accompanied by a red-faced "angry" emoji. The wallet was later available from Huawei.
Prior to Bukele’s tweet, a growing number of users on social media platforms including Twitter and Reddit were calling on people to buy small amounts of bitcoin to support the El Salvador plan, Bloomberg reported.
Nigel Green, chief executive and founder of deVere group said: “It’s almost universally recognized that the future of money is inevitably digital, in some form or another.”
“I believe this is a threshold moment in the evolution of digital currency and that it ushers in the start of a new world as we can expect more nations, especially those with developing economies, to follow El Salvador’s historic lead.”
He acknowledged that there are significant risks associated with the move, including the possibility that El Salvador will run out of dollars and that institutions such as the IMF may not view a country that has adopted bitcoin favorably.
A selloff in cryptocurrencies widened on Tuesday, with bitcoin weakening nearly 4 percent while smaller rival ether fell more than 6 percent.
Bitcoin, the leading cryptocurrency, traded lower on Tuesday, falling by 8.73 percent to $44,771.04 at 6:08 p.m. Riyadh time and Ether slipped by 12.46 percent at $3,156.60, according to data from CoinDesk.