The Salvadoran government has moved to prevent users of its Chivo digital wallet from gaming the app’s price freeze feature to glean risk-free profits through arbitrage.
On Tuesday, Chivo’s Twitter account announced that wallet users will be unable to see the reference price provided for trades executed using the price freeze feature — which allows traders to retain the Bitcoin (BTC) price quoted by the app for up to one minute.
Chivo tweeted that opportunistic traders have been using the price freeze feature to scalp for arbitrage across other cryptocurrency trading platforms globally during periods of significant price volatility for Bitcoin. The frozen price feature gave traders an opportunity to take advantage of price gaps in other exchange rates while quickly using the Lightning Network to move assets, Chivo explained.
“The ‘scalping’ carried out consisted of taking advantage of the fact that Chivo kept the rate frozen for 1 minute and taking advantage of that minute to compare the rate with other exchanges and see if the price of Bitcoin went down or up.”
Despite high-frequency scalping comprising a legal form of trading, Chivo describes traders who used Chivo’s frozen prices to arbitrage against real-time exchanges as being extracting potentially “endless” profits through “fraud.”
Looking forward, Chivo plans to remove the price feature and offer real-time price references for Bitcoin traders using its app.
Related:El Salvador ranks third in global Bitcoin ATM installations, data finds
On Sept. 7, El Salvador enacted its controversial Bitcoin Law recognizing BTC as legal tender nationwide.
Despite critics highlighting the low rates of digital and blockchain literacy among Salvadorans in the run-up to the law taking effect, the legislation appears to have fostered widespread Bitcoin adoption across the country.
Salvadorans now appear to be exchanging their United States dollar savings for BTC at an accelerating pace, with President Nayib Bukele sharing that Chivo had recorded 24,076 remittance requests worth more than $3 million on Thursday.
On Oct. 10, the Salvadoran government also announced its plans to invest part of the $4 million worth of profits from Chivo’s Bitcoin trust to construct a new veterinary hospital in the local capital of San Salvador.
If Bitcoin becomes legal tender in a massive country like Brazil, it would be monumental. However, is that plan really on the table? Here are the facts: 1.- A bill to regulate cryptocurrencies was discussed and approved in Brazil’s House of Representatives, but it still has a long way to go before it becomes law. 2.- The bill’s author, deputy Aureo Ribeiro, said in a recent interview that he wants cryptocurrencies to be legal tender in the country.
Related Reading | Ether EFT Gets Approval From Brazilian Securities Regulator
The question is, are the two facts connected? That’s what we’re here to explore.
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Will Bitcoin Be Legal Tender In Brazil Soon?
That was the headline the whole crypto-media ran with. Their minds connected fact one with fact two and their articles almost wrote themselves. It was only logical. Sadly for their credibility, they were wrong. The second fact is only Aureo Ribeiro’s thoughts and wishes, but those ideas are not present on the bill. The bill aims to regulate cryptocurrencies and wants exchanges and other service providers to register.
In a Twitter thread, Brazilian journalist Saori Honorato clears things up leaving nothing to the imagination. “the bill DOES NOT make any mention of bitcoin becoming a legal tender in Brazil. This bill has been in development since 2015 and giving bitcoin the status of ‘legal tender’ is something that has never even been considered in Brazil.” In fact, a search onthe bill itselfreveals that it doesn’t mention “Bitcoin” once. Enough said.
2) The recent statement of deputy Aureo Ribeiro (the author of the bill) in which he says that brazilians will soon be able to pay at mcdonald’s and buy houses with bitcoin is nothing but a personal opinion. Don’t get confused.
— Saori Honorato (@saorihonorato) October 4, 2021
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To sum it all up, it’s a cryptocurrencies-focused bill whose content has been heavily discussed. Is there something new in there?Honorato again, “An extra of the bill is that it determines the increase in the penalty for crimes committed using crypto, such as money laundering. If the law is approved, anyone caught laundering money with crypto could get up to 16 years in prison in Brazil.”
What Did Aureo Ribeiro Say To The Press?
Theinterview in question was with Radio Camara, which covers the Chamber of Deputies. It happened after the bill was approved, that might’ve been what originated the confusion. The title says it all: “Regulation of cryptocurrencies will attract new investments to Brazil.” It’s about cryptocurrencies in general. It’s not about Bitcoin in particular. Could this be a case of journalists mistaking one term for the other? Does Aureo Ribeiro know the differences between Altcoins and Bitcoin?
The quote that everyone ran withcomes from Livecoins, whose article says that it refers to a Bitcoin Law:
“We want to separate the wheat from the chaff, create regulations so that you can trade, know where you are buying, know who you are dealing with. And have this asset to buy a house, a car, go to McDonald’s to buy a hamburger, it will be a currency in the country as it happens in other countries.”
Is Ribeiro talking about Bitcoin or cryptocurrencies in general? It’s hard to tell. One thing’s for sure, though, he’s not affirming nor guaranteeing until the last sentence. And even that one can be interpreted as wishful thinking.
On the Radio Camara site, they only mention Bitcoin once and it’s to clarify what cryptocurrencies are. “Cryptocurrencies, of which Bitcoin is the best known,” they say. Describing the interview, they tell us that it’s actually about regulation and control.
“The congressman emphasizes that the text prevents the formation of financial pyramids by groups that commit fraud with the purchase and sale of virtual assets, by determining that every operator is registered with economic sector bodies, with inspection by the Activities Control Council Financial (Coaf).”
Nobody is talking about freedom money. Nobody is talking about Bitcoin.
BTC price chart for 05/10/2021 on Cexio | Source: BTC/USD on TradingView.com
Conclusion: Who’s Confused?
Of the consulted sources, only Livecoins mentioned a Bitcoin Law. Did they confuse all the crypto journalists? Or did they confuse themselves? Who’s the one that doesn’t know the difference between Bitcoin and all the other cryptocurrencies? Is it Aureo Ribeiro or is it the press? The language barrier prevents us from going deep and figuring all of these details out, but Saori Honorato answers the most important question, “the bill DOES NOT make any mention of bitcoin becoming a legal tender in Brazil.”
6) And now what? Last week, the bill was approved by a special committee of the Chamber of Deputies and now goes to the Chamber’s Plenary. If approved by deputies, it advances to the Senate to be discussed once more and, if approved, goes for the president.
— Saori Honorato (@saorihonorato) October 4, 2021
Since she was the most reliable source of information, let’s finish this by quoting her about the future of the bill. “Last week, the bill was approved by a special committee of the Chamber of Deputies and now goes to the Chamber’s Plenary. If approved by deputies, it advances to the Senate to be discussed once more and, if approved, goes for the president.“
Related Reading | Why Bitcoin Declared Legal Tender Could Have Major Implications Beyond El Salvador
Those are the facts. We separated the wheat from the chaff.
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El Salvador’s move to embrace Bitcoin has ruffled the feathers of bond investors, with yields spiking as investors signal uncertainty for the emerging economy.
A Sept. 8 report published by Bloomberg notes the yield curve on El Salvador’s bonds has recently inverted, meaning bonds with short-term maturities are now yielding more than is due from the instruments. It stated:
“That’s generally considered a bad sign as it means investors see shorter-term debt as riskier, and most yield curves will slope upwards given the inherent uncertainty of pricing things over the longer-term.”
Ben Emons of Medley Global Advisors emphasized that El Salvador’s bonds lost significant ground “on the first day of its new Bitcoin Law,” describing the market action as “an unwelcome sign that the wide use of Bitcoin may have major implications” for the emerging country.
Emons doesn’t appear to be alone in his assessment, with Bloomberg’s data showing that El Salvador’s bonds began moving toward inversion in June — the same month during which the country’s parliament passed President Nayib Bukele’s controversial Bitcoin Law recognizing BTC as legal tender.
Related:El Salvador’s largest bank partners with Flexa for Bitcoin payments
However, El Salvador’s move to recognize Bitcoin as legal tender is not the sole force exerting bearish pressure on the country’s bond market.
Other pundits have emphasized Bukele’s sudden ousting of the country’s constitutional tribunal in May as a major source of negative sentiment regarding El Salvador’s economic outlook, with Bukele having fired the country’s attorney general and top judges.
Since May, the spread between El Salvador’s government bonds and comparable U.S. Treasuries had widened by 77% as of August 12. Bukele’s inability to secure a deal with the International Monetary Fund has also impacted the outlook of El Salvador’s bond market.
While El Salvador’s Bitcoin Law took effect on Sept. 7, the rollout for the government-issued “Chivo” digital wallet saw widespread complaints of technical issues from citizens.
In an interview with local media, Javier Argueta, the legal counsel to the Presidential House of El Salvador, clarified the obligations of businesses the day before the country’s controversial Bitcoin Law recognizing BTC as legal tender took effect.
The legal counsel to the President of El Salvador has stated that businesses are mandated to accept Bitcoin from customers — but they are able to choose whether or not they will receive BTC or U.S. dollars once the transaction is settled.
According to a rough translation, Agueta emphasized that it is mandatory for businesses “to have the electronic wallet” to receive Bitcoin, however “In the transaction […] you have the will to receive Bitcoin or dollars, that is why it is voluntary.”
“If I buy you 1,000 shirts that cost $200 and I’m going to pay you in Bitcoin, you have the wallet, but in the transaction, when you do it, you have the will to receive Bitcoin or dollars, that is why it is voluntary.”
The official added that businesses which refuse to accept BTC will be operating in violation of local regulations. ElSalvador.com’s story states: “According to Argueta, all businesses are obliged to make the transaction in Bitcoin and despite the fact that neither the law nor the regulations clearly state it, if the business does not accept it, it is exposed to referrals of infractions to the Consumer Protection Law.”
#ElSalvador | Según Javier Argueta, asesor jurídico de Capres, todos los empresarios que no hagan uso de la billetera Chivo y se nieguen a hacer la transacción con #Bitcoin se enfrentan a legislaciones como Ley de protección de consumidor; se harán remisiones.
— elsalvador.com (@elsalvadorcom) September 6, 2021
The government’s Chivo wallet allows users to process transfers in both BTC and U.S. dollars. The wallet is maintained in partnership with Mexican crypto exchange Bitso — which says it is working with California-based crypto-friendly bank Silvergate facilitate transactions denominated in USD.
The app also allows merchants to automatically convert the Bitcoin they receive into dollars.
Related:McDonald’s now accepts Bitcoin, but only in El Salvador
The clarification comes as local businesses are pushing back against language contained in the Bitcoin Law that states merchants “must” accept Bitcoin as a means of payment, with representatives of the private sector pushing for the legislation to be reworded.
Where did BitGo come from? In all of this time covering El Salvador’s Bitcoin Law, the name wasn’t in the picture. Now, all of a sudden,Forbes claimsthat BitGo’s technology is behind the controversial Chivo wallet. How and when did this happen? Or, more importantly, is this real news or a paid piece to take advantage of the “historic moment for cryptocurrency adoption.”
Related Reading | NewsBTC Crypto Trading Course. For FREE.99
Not to be conspiratorial, but Forbes’ tone through this whole piece has a press-release-feel to it.
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“For months, El Salvador has kept many of Chivo’s details under wraps with the nation’s 40-year-old president, Nayib Bukele, teasing the wallet’s launch onTwitterjust last week. However, Forbes has learned El Salvador appears to have tapped cryptocurrency unicorn BitGo to provide Chivo’s wallet infrastructure and security platform, making the Palo Alto, Calif-based startup the nation’s exclusive hot-wallet provider in a historic moment for cryptocurrency adoption.”
What’s all this about “cryptocurrency unicorn BitGo” and “the nation’s exclusive hot-wallet provider in a historic moment”? Is this the appropriate vocabulary for a legacy media publication like this one? The most worrying sentence, however, is “Forbes has learned El Salvador appears to have tapped…”They’re not committing to anything here. It “appears” this way, but nothing is certain.
BTC price chart for 09/07/2021 on Bitstamp | Source: BTC/USD on TradingView.com
What Does BitGo Say About The Announcement?
Not El Salvador’s government, nor Strike commented on the Forbes piece. They did get a quote from Mike Belshe, CEO of BitGo, who said:
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“Digital assets look so different from what we’ve seen with other types of money, and so people wonder about how [they] fit in, but this is an opportunity to build financial freedom for the people of El Salvador” says BitGo CEO Mike Belshe, speaking from his home in Silicon Valley on Saturday. “The ability to send money in a hurry on a Saturday night, when banks are closed, across the planet and at almost no fees, it’s hard to put into words how empowering that is, and what we’ll see in El Salvador is, people will start figuring it out.”
Did Belshe confirm the news? Is BitGo behind the Chivo App? He talks about “an opportunity to build financial freedom for the people of El Salvador.” So yeah, assuming Belshe was talking about this specific rumor, he seems to confirm the news. Indirectly. In a non-comital way.
To make things worse, the article ends presenting BitGo as their own marketing material would:
“Founded in 2013, BitGo has grown into one of the biggest cryptocurrency wallet companies in the world, raising more than $70 million in funding from investors including…”
Let’s Remember, What Did Strike Say About The Subject?
Strike’s Jack Mallers has met with the Bukeles, announced El Salvador’s Bitcoin adoption, and the company has an office at Bitcoin Beach. Everyone was assuming that the technology behind the Chivo wallet was going to be Strike’s. However, if we go back tothe interview in which Mallers told the whole story, our sister site Bitcoinist quotes him saying:
“There’s no commercial agreement between Strike and the government of El Salvador.
“In fact, I advised and gave my opinion of the opposite. The economies of scale and network effects associated with open networks are so powerful. Just by plugging in to them you’re going to get the freemarket competition that every country would die for.”
Related Reading | Tomorrow, The Community Will Buy $30 In BTC To Support El Salvador’s Bitcoin Law
Did President Bukele take his advice and went with another company? Can we trust Forbes even if it sounds like a copy-and-pasted press release? Is BitGo’s technology behind the Chivo Wallet? We will know for sure very soon.
Featured Image by Chräcker Heller from Pixabay - Charts by TradingView
Where did BitGo come from? In all of this time covering El Salvador’s Bitcoin Law, the name wasn’t in the picture. Now, all of a sudden,Forbes claimsthat BitGo’s technology is behind the controversial Chivo wallet. How and when did this happen? Or, more importantly, is this real news or a paid piece to take advantage of the “historic moment for cryptocurrency adoption.”
Related Reading | NewsBTC Crypto Trading Course. For FREE.99
Not to be conspiratorial, but Forbes’ tone in this whole piece has a press-release-feel to it.
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“For months, El Salvador has kept many of Chivo’s details under wraps with the nation’s 40-year-old president, Nayib Bukele, teasing the wallet’s launch onTwitterjust last week. However, Forbes has learned El Salvador appears to have tapped cryptocurrency unicorn BitGo to provide Chivo’s wallet infrastructure and security platform, making the Palo Alto, Calif-based startup the nation’s exclusive hot-wallet provider in a historic moment for cryptocurrency adoption.”
What’s all this about “cryptocurrency unicorn BitGo” and “the nation’s exclusive hot-wallet provider in a historic moment”? Is this the appropriate vocabulary for a legacy media publication like this one? The most worrying sentence, however, is “Forbes has learned El Salvador appears to have tapped…”They’re not committing to anything here. It “appears” this way, but nothing is certain.
BTC price chart for 09/07/2021 on Bitstamp | Source: BTC/USD on TradingView.com
What Does BitGo Say About The Announcement?
Not El Salvador’s government, nor Strike commented on the Forbes piece. They did get a quote from Mike Belshe, CEO of BitGo, who said:
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“Digital assets look so different from what we’ve seen with other types of money, and so people wonder about how [they] fit in, but this is an opportunity to build financial freedom for the people of El Salvador” says BitGo CEO Mike Belshe, speaking from his home in Silicon Valley on Saturday. “The ability to send money in a hurry on a Saturday night, when banks are closed, across the planet and at almost no fees, it’s hard to put into words how empowering that is, and what we’ll see in El Salvador is, people will start figuring it out.”
Did Belshe confirm the news? Is BitGo behind the Chivo App? He talks about “an opportunity to build financial freedom for the people of El Salvador.” So yeah, assuming Belshe was talking about this specific rumor, he seems to confirm the news. Indirectly. In a non-comital way.
To make things worse, the article ends presenting BitGo as their own marketing material would:
“Founded in 2013, BitGo has grown into one of the biggest cryptocurrency wallet companies in the world, raising more than $70 million in funding from investors including…”
Let’s Remember, What Did Strike Say About The Subject?
Strike’s Jack Mallers has met with the Bukeles, announced El Salvador’s Bitcoin adoption, and the company has an office at Bitcoin Beach. Everyone was assuming that the technology behind the Chivo wallet was going to be Strike’s. However, if we go back tothe interview in which Mallers told the whole story, our sister site Bitcoinist quotes him saying:
“There’s no commercial agreement between Strike and the government of El Salvador.
“In fact, I advised and gave my opinion of the opposite. The economies of scale and network effects associated with open networks are so powerful. Just by plugging in to them you’re going to get the freemarket competition that every country would die for.”
Related Reading | Tomorrow, The Community Will Buy $30 In BTC To Support El Salvador’s Bitcoin Law
Did President Bukele take his advice and went with another company? Can we trust Forbes even if it sounds like a copy-and-pasted press release? Is BitGo’s technology behind the Chivo Wallet? We will know for sure very soon.
Featured Image by Chräcker Heller from Pixabay - Charts by TradingView
The day is here. In a few hours, El Salvador’s Bitcoin Law goes into effect. We will have the first real-world example of a whole nation using the hardest money ever created as legal tender. And, how is the Bitcoin community celebrating? Stack sats, obviously. The order is for everyone to buy $30 worth of BTC to commemorate this glorious occasion. Will you participate?
Related Reading | The 411 On “Adopting Bitcoin,” A Lightning Network Conference in El Salvador
The intention is not to move the dial or pump the price. The amount is small enough to guarantee that, even if the event goes viral. Which it seems like it’s doing. The movement started humbly, with a Reddit post in the /r/Bitcoin community that asked a simple question.So… We all buying $30 worth of Bitcoin on Tuesday?At the time of writing, the idea has 8.9K upvotes and 2.2K commentaries.
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Among the comments, some went all-in. “I will buy $3000 tuesday to cover 99 others who arent able to pay.” Others explained away, “Its to show solidarity with our Bitcoin compatriots in El Salvador as they fully adopt Bitcoin as their currency.” And other rightfully criticized, “Sure. Lets just coordinate a 100 mil pump of BTC. Correct me if I’m wrong but this sounds greasy.”
And, sure enough, the idea to back El Salvador’s Bitcoin Law spread to other social networks.
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Bitcoin Twitter Will Support El Salvador’s Bitcoin Law
The plebs work fast. As soon as the idea transcended Reddit and got to Bitcoin Twitter, the memes appeared. This piece of art mixes the classic comedy “Trading Places” with El Salvador’s Bitcoin Law, with gold bug Peter Schiff and Bitcoin hater Nouriel Roubini to achieve hilarious effects:
On the 7th of September #Bitcoin becomes legal tender in #ElSalvador.
Plebs and memers unite!! Like, retweet and buy #BTC on the 7th.#7SeptemberBuyBTC@Nayibbukele#LeyBitcoin#Memepool@MoscowMemetards@MemeFactoryTM#Memetards pic.twitter.com/u3rWWGbItr
— Sir William of Orange Pills (@OrangePillWilly) September 5, 2021
Even MicroStrategy’s CEO and notorious Bitcoin enthusiast joined the party. Michael Saylor did his part to support El Salvador’s Bitcoin Law and spread the word to the sizable audience that follows him.
This worries me more than anything. We are at major retracement levels for the price and Michael saylor is getting retail to buy. If the bear market starts this week I wouldn’t be surprised.
— Golde 🔜 EDCLV2021? (@all41and14alll) September 6, 2021
Of course, this raised suspicion. “Everyone needs to be aware that this could possibly be leading the sheep to their death. Very nerve wracking these narratives are coming out before we hit the HUGE retracement levels,” said one commenter. “A hole. Letting retail buy exactly on the 70.2% retracement to dump on them huh,” said another. “If the bear market starts this week I wouldn’t be surprised,” predicted a third one.
Are they on to something or are they missing something? Michael Saylor strongly stated that MicroStrategy is not looking to sell any of their BTC any time soon, but, people have lied before. Do you know what doesn’t lie, though? Bitcoin. If Michael Saylor and company sell on El Salvador’s Bitcoin Law’s day, people will know. The same thing will happen if they buy.
BTC price chart for 06/09/2021 on Oanda | Source: BTC/USD on TradingView.com
The International Community Will Also Buy $30 Worth Of BTC
Here, we can see a Korean bitcoiner translating the order to support El Salvador’s Bitcoin Law and the community from that side of the world responding below.
[6월24일 엘살바도르는 국민 1인당 30$어치 비트코인을 지급하기로 했습니다.]
이것을 기념하기위하여 300만명의 브라질 커뮤니티에서 다같이 30$를 구매하자고 시작한 이벤트입니다.
이것은 엘살바도르의 지원을 의미합니다. #bitcoin#ElSalvador https://t.co/2I9zZkWPRA pic.twitter.com/QD1ntWevRd
— ATOMIC⚡️ BITCOIN (@atomicBTC) September 6, 2021
It’s curious that the translated tweet, one of the first ones in that social network, talks about a Brazilian Bitcoin Community and that they’re doing it “remembering that Sep 7th is Brazil’s independence Day.” As far as we can tell, they link to the same /r/Bitcoin post we identified as the origin and almost all of the posts there are in English.
Related Reading | Michael Saylor Brings The Thunder To Venezuelan Bitcoin-Only Podcast
It’s also curious that the Satoshi Nakamoney character keeps adding up to the story as it progresses, and ends up declaring.“To be clear: massive #bitcoin buy will happen at 3pm of El Salvador time zone.”
Can you think of anything else in the world bringing people together as much as #Bitcoin is right now?Anything even at any time in your life?
Have you ever felt such benevolence to strangers from different nations, religions and other affiliations as you do toward bitcoiners?
— Tomerrrr Strolight – Slayer of Lies (@TomerStrolight) September 6, 2021
Will this collective action pump the price as El Salvador’s Bitcoin Law goes into effect? Maybe the plebs can’t do it by themselves, but what about doing it with Michael Saylor’s help? Another fascinating activity to monitor tomorrow. Legal Tender day is here.
Featured Image: Bitcoin Day Flyer | Charts by TradingView/a>
With less than a week to go before El Salvador’s Bitcoin Law takes effect on Sept. 7, a majority of citizens surveyed are opposed to government-mandated cryptocurrency adoption.
A survey conducted by the local Central American University’s (UCA) Institute of Public Opinion has found that 70% of Salvadorans believe President Nayib Bukele’s Bitcoin Law, recognizing the cryptocurrency as legal tender, should be repealed.
However more than 90% of those surveyed also admitted they have a poor understanding of cryptocurrency.
The institute recorded a dire public approval rating of just 7.64% for the president — the lowest registered during Bukele’s term so far.
El Salvador’s struggling economy
Attitudes to the Bitcoin Law appear intertwined with worries over the country’s poor economic performance.
The poll found that 45% of Salvadoran citizens believe that poverty and unemployment are the two most urgent problems facing the nation, and 43% believe that the nation’s economy will worsen with the passing of the Bitcoin Law.
According to The World Bank, 22.8% of El Salvador’s population are currently living below the poverty line, while the average annual income in the country is just $3,800. More than two-thirds of Salvadorans do not believe the local economy will improve even with an increase to the minimum wage.
The poll also found that 20% of Salvadorans “openly state that they do not know what a Bitcoin is,” while a further 70% confess to having a poor understanding of cryptocurrency. According to a rough translation, the researchers conducting the survey concluded:
“In other words, nine out of 10 Salvadorans have no clear knowledge of what this financial asset is.”
The findings echo a similar poll taken in July, which found that only 20% of locals approved Bukele’s forthcoming Bitcoin Law.
Bukele govt sprukes BTC
If there’s a sliver of optimism to be taken from the poll, it’s that the latest figures suggest the number of citizens with “no understanding” of Bitcoin has more than halved from July’s figure of 46% — suggesting efforts from the government to increase awareness have had some slight effect.
On August 30, Bukele shared the country’s first state-backed Bitcoin TV advertisement to Twitter, featuring animated tutorials on how the government’s “Chivo” digital wallet can be used to purchase goods and transfer value.
The following day, Bukele tweeted out images of Bitcoin ATMs that are slated for rollout across the country, with the President claiming that 50 physical terminals will be operational on Sept. 7. The President also estimated that the pivot to embrace crypto will save the country $400 million each year in remittance fees.
Los puntos Chivo ayudarán a que la población pueda utilizar @chivowallet.
Esto les dará libertad y seguridad financiera, aparte de recibir beneficios, entre ellos el ahorro de 400 millones de dólares al año en comisiones para enviar y recibir remesas.#Bitcoin #PuntosChivo pic.twitter.com/BtVrKiK5eZ
— Nayib Bukele (@nayibbukele) August 31, 2021
Related:Legislative Assembly of El Salvador approves $150M Bitcoin Trust
To help drum up support for Bitcoin, the government also launched a charitable campaign collecting BTC donations to fund dental treatments for impoverished Salvadorans. The “Bitcoin Smiles” campaign raised 1.02 BTC (roughly $50,000) in total from 797 individual contributions.
Despite the government’s best efforts, concerns clearly remain. Hundreds of local citizens turned out to protest the law in solidarity with unions and social organizations on Sept. 2.
Sindicatos y organizaciones sociales se pronuncian en contra del Bitcóin, en las afueras del Centro Cultural Cívico Legislativo. pic.twitter.com/C9ftS6OfCD
El Salvador’s Legislative Assembly has passed legislation creating a $150 million dollar Bitcoin Trust and supporting the development of crypto infrastructure and services across the country.
The bill passed on Aug. 31, with 64 officials voting in favor and 14 opposing the trust’s creation. The Trust is designed to facilitate conversion of Bitcoin into U.S. Dollars, and support the roll out of vital technological infrastructure enabling widespread adoption of crypto assets.
The news comes just one week before the country’s controversial Bitcoin Law is set to take effect. The impending legislation will recognize BTC as legal tender across El Salvador and is slated to take effect on September 7th. Currently, U.S. dollars are used as legal tender in the country.
The Development Bank of El Salvador (Bandesal) has been appointed to oversee the trust’s operation
The $150 million will be redirected from the country’s $500 million loan with the Central American Bank for Economic Integration (CABEI). The CABEI loan was originally taken for the purpose of economic recovery for small and medium sized businesses.
Of those funds, $23.3 million is earmarked to support the installation of government-backed crypto ATMs — allowing local citizens to exchange between Bitcoin and USD. $30 million has also been designated to offer incentives to encourage adoption of the Government’s digital wallet, Chivo.
In June, President Nayib Bukele announced the government would airdrop $30 worth of Bitcoin to every Salvadoran adult who downloads the Chivo wallet. However, El Salvador’s current population is 6.5 million, suggesting the government either believes adoption will be lower or has not allocated enough Bitcoin to go around.
Related: Retirees in El Salvador protest against Bitcoin adoption
In related new today asset tokenization and financial infrastructure company Koibanx announced it had signed a deal with the government of El Salvador to develop the country’s digital currency infrastructure with Algorand’s open source block chain at the core.
El Salvador’s Bitcoin Law has been met with some serious criticism and skepticism from international organizations and its own citizenry.
Minister of Economy, María Luisa Hayém Brevé said the government was focused on crypto currency education and using crypto incentives as a means to soothe the high amount of uncertainty within its population.
The central bank of El Salvador, Banco Central de Reserva (BCR), has published draft regulations on how banks should handle Bitcoin.
Two documents were released for consultation on Aug. 17 instructing banks and financial institutions how to offer Bitcoin-related services to their customers.
The first, titled “Guidelines for the Authorization of Operation of the Digital Wallet Platform for Bitcoin and Dollars” (in Spanish), defines BTC as legal tender according to the recently drafted Bitcoin Law which was passed by El Salvador’s legislature on June 9 and will see the country formally adopt the digital asset on September 7.
The second document titled “Technical Standards to Facilitate the Application of the Bitcoin Law” is a longer and more detailed version of the first document.
Financial entities must apply to the central bank to offer digital wallets, the guidelines stated. Applications must detail the type of product being offered, and include target market details, risk assessments, charges to customers, education provisions for customers, and complaint procedures.
Know-your-customer (KYC) verification will be required for all customers though it was unclear whether the national ID card, which is used for basic bank accounts, would suffice for a crypto wallet. Full anti-money laundering (AML) procedures such as transaction monitoring and analysis would also be applied.
Two-way Bitcoin-to-dollar convertibility must be provided and the bank is allowed to charge a fee. According to a translation hosted by Attack of the 50 Foot Blockchain author David Gerard:
“The electronic platform used by the digital wallet administrators must allow the Central Bank access in real time to all information related to the operations carried out, as well as information requested by clients.”
All Bitcoin held by banks and companies must be fully backed as opposed to a fractional reserve. Dollars will be held at the central bank while BTC is held with a custodian, services for which can be contracted out.
Related:What is really behind El Salvador’s ‘Bitcoin Law’? Experts answer
Article 29 of the second document requires the bank or financial institution to warn customers that Bitcoin is volatile, transactions cannot be reversed, and that if they lose their private keys, then they lose the BTC.
There were no provisions for accounting standards or standard government exchange rates for converting Bitcoin into fiat and vice versa.
On August 16, American credit rating agency Fitch Ratings stated that the BTC adoption plan will likely be a credit negative for local insurance companies due to volatility and risk concerns.
