El Salvador has doubled down on its plans to support Bitcoin by offering $30 of the digital asset to any adult citizen downloading and registering with the country’s official cryptocurrency app. At the time of writing, $30 was is 0.00093 bitcoin.
The country announced plans to recognize Bitcoin as legal tender earlier this month, passing a 'Bitcoin law' that officially eliminated capital gains taxes on the digital asset and enabled citizens to use it for tax payments.
President Nayib Bukele made the announcement on television late last night as part of an hour-long talk explaining the country's support of Bitcoin to citizens. It will provide the app, called Chivo, on iOS and Android.
"The government is going to give this bonus for two reasons: one, to promote the use of Bitcoin in the economy, and second, so that people have an incentive to use the application and download it," Bukele said.
"What we are trying to do with the Bitcoin law is to connect our country with the rest of the world, attract foreign exchange, investment, and tourism, and boost our economy," Bukele continued.
He hopes to bring more money into the country via Bitcoin, using it as an economic multiplier to funnel tourist funds into the national economy. The app attempts to kickstart the process by creating a critical mass of users who can accept Bitcoin.
Bitcoin has become more of a speculative asset these days as massive swings in value make it difficult to rely on it as a form of exchange. It fell from $35,884 last night to $31,600 this morning.
However, the president hopes that the app's dual-currency functionality will protect users who don't want exposure to that risk.
He explained the app's functionality at length, dwelling extensively on its ability to make and receive payments in US dollars — the standard currency in El Salvador — or Bitcoins. A person might make a payment in Bitcoins using the app, but the recipient can receive the money in dollars.
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Article seven of the Bitcoin law forces everyone to accept Bitcoins as payment, but he argued that articles eight and 12 constrain that mandate. Article eight says the state must provide instant conversion from Bitcoins to dollars. Article 12 says those without the technology to accept Bitcoins are excluded from the mandate.
By offering that conversion, the government appears to be setting itself up as a de facto Bitcoin exchange. The big question is if its dollar conversion service protects citizens from Bitcoin’s volatility, what is the government doing to protect itself from that risk in the long term?
There are no details yet on how the government plans to distribute the $30 in free Bitcoin.
