In the case of El Salvador, it almost seems like the whole world is watching this experience to see if it will be a total success or failure for the Central American nation.
On September 7, marking the official implementation of Bitcoin as legal tender in El Salvador, a wave of protests in the country against the move has raised suspicion and uncertainty as to how the new law will be enforced.
From the arrest of individuals critical of the Salvadoran government over the new law to the wave of citizens across the country protesting Bitcoin’s legal status, the seminal crypto faces headwinds.
How Bitcoin Became Legal Tender
It all started in early June after Salvadoran President Nayib Bukele tweeted that the country’s legislature had passed a bill making Bitcoin legal tender. The law was due to be implemented on September 7 and would allow the country’s 4.5 million citizens to make purchases with Bitcoin in stores nationwide.
In his announcement, Bukele said that once an official bill to make Bitcoin legal tender is passed, “Chivo ATMs” – Chivo being the name of El Salvador’s official BTC wallet. – would ultimately be “everywhere” in the country. This would allow Salvadorans to withdraw Bitcoin in cash without incurring commissions on their holdings, as is the case with services such as Western Union.
Additionally, Bukele assured citizens that no one would be forced to use Bitcoin. In a statement, the 40-year-old president said “someone can always line up at Western Union and pay a commission.”
“What if someone doesn’t want to use Bitcoin? [Well] do not download the app and continue living your normal life. No one is going to take your dollars, ”he said.
The first wave of resistance
Following the announcement, a group of protesters called the Popular Resistance and Rebellion Block (BRRP) emerged to protest the Bitcoin law.
“President Nayib Bukele passed the law making cryptocurrency legal tender in the country without proper consultations with the population,” said one activist.
Although the protest group pointed to complexities such as Bitcoin’s volatility as reasons for caution, its main claim is that the law primarily serves large companies linked to alleged money laundering for the benefit of corrupt officials.
“Bitcoin is only used by certain big businessmen, especially those linked to the government, to launder ill-gotten money,” said one protester.
A letter from the BRRP group stated that “entrepreneurs who invest their capital in Bitcoin will not pay taxes on their income and the government will spend millions in taxes to run the entire campaign.”
Indeed, the bill to make Bitcoin legal tender includes some interesting proposals such as zero capital gains tax on BTC. The bill also promised investors permanent residence in the country with a three BTC investment in El Salvador.
The arrest of Mario Gómez
As the controversial Bitcoin bill became law on September 7, supporters and detractors continue to emerge, with the latest event around the law being the arrest of Mario Gómez.
According to several local news outlets in El Salvador, Mario Gómez – a computer and crypto expert as well as a staunch critic of the government – was arrested by local police and detained for a few hours before being released.
Gómez is known to regularly post on social media his opposition to the government’s decision to make Bitcoin legal tender. Observers such as Steve Hanke – an economist at Johns Hopkins University – have criticized Gómez’s arrest as “authoritarian police tactic in action.”
San Salvador City Council Advisor Hector Silva said: “Mario’s arrest portrays the government’s fragility in terms of implementing the Bitcoin law but confirms something even more dangerous.
“They are ready to manipulate all the institutions necessary to ward off critical voices,” added Silva.
Although police released a statement saying Gómez was arrested in connection with a financial fraud investigation, news reports claimed he was arrested without a warrant and an attempt was made to take possession of his telephone and his computer.
Just before Gómez’s arrest, Salvadoran retirees took to the streets to protest, worried the government was using cryptocurrency to pay for their pensions.
Speaking to reporters, one protester from the crowd – which included veterans, retirees, workers and retirees – said: “We know this coin fluctuates dramatically. Its value changes every second, and we will have no control over it.
While Bukele has promised that the use of Bitcoin in the country will be optional and that salaries and pensions will still be paid in US dollars, protesters still pointed out a lack of knowledge of the technology.
Citizens have also complained about the lack of explanation from officials on the pros and cons of Bitcoin. “We don’t know the motto. We don’t know where it comes from. We don’t know if it’s going to make us a profit or a loss. We don’t know anything, ”added a Salvadoran.
In response, the Bukele administration said that the use of Bitcoin is not mandatory and that the necessary training and other alternatives to Bitcoin will be provided.
Although President Bukele enjoys an incredibly high approval rating, recent polls regarding the Bitcoin law show a general lack of support for the measure. A recent poll conducted by the Universidad Centroamericana José Siméon Cañas in El Salvador shows that up to two-thirds of those polled are inclined to repeal the law, and more than 70% prefer the US dollar to Bitcoin.
International institutions like the International Monetary Fund have also warned of macroeconomic, financial, and legal issues caused by El Salvador’s adoption of Bitcoin.
Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont, said that “the plans for Bitcoin under an increasingly autocratic regime will likely only increase concerns about corruption.”
On the other hand, others remain optimistic that the new law will ultimately benefit Salvadorans given that the country’s economy relies heavily on remittances sent by migrants abroad. Last year alone, the country’s remittances totaled $ 6 billion, or one-fifth of gross domestic product.
“El Salvador’s adoption of Bitcoin as legal tender by law gives the country some option in financial matters and sovereignty,” said Alexander Blum, chief executive of Two Prime.
His feelings were echoed by Alberto Echegaray Guevara – an artist and entrepreneur – who said: Central America remittance platform.
HollaEx’s Adrian Pollard told Cointelegraph: “It’s typical for new technology deployments to have bugs and appositions, but that’s exactly why it’s been made voluntary.
“I suspect there will be more bumps along the road for El Salvador, but it will be worth it in the long run. In fact, I believe other South American nations are not far behind and will follow, ”Pollard added.