The year 2021 will likely go down in the history books as one of the most interesting years for Bitcoin (BTC), given its recent acceptance by billionaires and adoption by major institutions, not to mention El Salvador’s decision to convert it. in legal tender.
In the case of El Salvador, it almost seems that the whole world is watching this experiment to see if it will be a total success or failure for the Central American nation.
With September 7 marking the official implementation of Bitcoin as legal tender in El Salvador, a wave of protests in the country against the measure has raised suspicions and uncertainty about how the new law will be applied.
From the arrest of people critical of the Salvadoran government over the new law, to the wave of citizens across the country protesting Bitcoin’s legal status, seminal crypto faces some headwinds.
How Bitcoin became legal tender
It all started in early June after Salvadoran President Nayib Bukele announced in a tweet that the country’s legislature had approved a bill that made Bitcoin legal tender. The law was scheduled to be implemented on September 7 and would allow the country’s 4.5 million citizens to make purchases with Bitcoin in stores across the country.
In his announcement, Bukele said that once an official bill to convert Bitcoin to legal tender is passed, “Chivo ATMs” (Chivo is the name of the official BTC wallet for El Salvador) would eventually 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.
Furthermore, Bukele assured citizens that no one will be forced to use Bitcoin. In a statement, the 40-year-old president said that “someone can always stand in line at Western Union and pay a commission.”
“What if someone doesn’t want to use Bitcoin? [Well] Please don’t download the app and continue living your normal life. No one is going to accept your dollars, ”he said.
The first wave of resistance
Following the announcement, a group of protesters called the Bloc de Resistencia y Rebellión Popular (BRRP) emerged to protest against the Bitcoin law.
“President Nayib Bukele passed the law that makes cryptocurrency legal tender in the country without proper consultation with the people,” said an activist.
Although the protest group highlighted 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 only serves some big businessmen, especially those linked to the government, to launder ill-gotten money,” said one protester.
A letter from the BRRP group said that “entrepreneurs who put their capital in Bitcoin will not pay taxes on their profits and the government would spend millions in taxes to run the entire campaign.”
In fact, the bill to convert Bitcoin to legal tender includes some interesting proposals, such as a zero capital gains tax on BTC. The bill also promised investors permanent residence in the country with an investment of three BTC in El Salvador.
The arrest of Mario Gómez
As the controversial Bitcoin bill became law on September 7, both supporters and naysayers continue to emerge and the latest of the law-related events is the arrest of Mario Gomez.
According to various local media outlets in El Salvador, Mario Gómez, an expert in computer science and cryptography, as well as an avid critic of the government, was arrested by local police and held for a few hours before being released.
Gomez is known to regularly post on social media opposing the government’s decision to convert Bitcoin to legal tender.
Observers such as Steve Hanke, an economist at Johns Hopkins University, criticized Gomez’s arrest as an “authoritarian police tactic in action.”
Héctor Silva, advisor to the mayor’s office in San Salvador, said, “Mario’s arrest portrays the fragility of the government in terms of the implementation of the Bitcoin law but confirms something even more dangerous.”
“They are willing to manipulate the institutions that are necessary to remove critical voices,” added Silva.
Although the police issued a statement saying that Gomez was detained as part of a financial fraud investigation, press reports showed that he was arrested without a warrant and attempts were made to take possession of his phone and computer.
The citizen protest
Just before Gomez’s arrest, retirees in El Salvador took to the streets to protest, concerned that the government would use the volatile cryptocurrency to pay their pensions.
Weather speech To reporters, a protester in the crowd, which included veterans, disability retirees, workers and retirees, said: “We know that this currency fluctuates dramatically. Its value changes from one second to the next and we will not have any control over it. “
While Bukele has promised that the use of Bitcoin in the country will be optional and that salaries and pensions will continue to be paid in US dollars, the protesters still highlighted the lack of knowledge of the technology.
Citizens have also complained that there has been very little explanation from officials about the pros and cons of Bitcoin.
“We do not know the currency. We don’t know where it comes from. We do not know if it will bring us profit or loss. We don’t know anything, ”added a Salvadoran.
In response, the Bukele administration has set that the use of Bitcoin is not mandatory and that the necessary training and other alternatives to Bitcoin will be provided.
A recent poll conducted by the José Siméon Cañas Central American University of El Salvador shows that up to two-thirds of respondents are inclined to a measure to repeal the law, with more than 70% preferring the US dollar over Bitcoin.
International institutions such as the International Monetary Fund also warned on macroeconomic, financial and legal issues caused by the adoption of Bitcoin in El Salvador.
Siobhan Morden, Head of Fixed Income Strategy for Latin America at Amherst Pierpont, said that “plans for Bitcoin under an increasingly autocratic regime will likely only compound concerns about corruption.”
On the other hand, others remain optimistic that the new law will eventually benefit Salvadorans given that the country’s economy relies heavily on remittances sent home by migrants abroad. Last year alone, the country’s remittances totaled $ 6 billion, representing a fifth of gross domestic product.
“The adoption of Bitcoin as legal tender by law by El Salvador offers the country some optionality in financial matters and sovereignty,” said Alexander Blum, managing director of Two Prime.
Alberto Echegaray Guevara, an artist and entrepreneur, echoed his sentiments, saying: “President Bukele’s Bitcoin Law is not just trying to make international money transfers cheaper and easier for 70% of your unbanked population, but is also creating a new economic center and a new remittance platform in Central America ”.
HollaEx’s Adrian Pollard told Cointelegraph: “It is typical for new technology deployments to have errors and apposition, but that is exactly why he volunteered.”
“I suspect there will be more obstacles in the way for El Salvador, but it will be worth it in the long run. In fact, I think other South American nations are not far behind and will follow, “added Pollard.