This year, 2021, will most likely go down the history books as one of Bitcoin’s (BTC) most interesting years, due to the recent uptake by billionaires and adoption by mainstream institutions. Also, El Salvador has gone on to make the crypto legal tender.
In the case of El Salvador, it nearly seems like the entire world is watching the experiment to see whether it will become a success or a total failure for the Central American country. With September 7, 2021, making the official implementation of BTC as a legal tender in the country, a wave of protests in the nation against the move has increased suspicions and uncertainty over how this new law will get enforced.
Some of the people are resisting El Salvador’s move to make Bitcoin a legal tender, sighting some lack of education and volatility of Bitcoin. From the arrest of people that are criticizing the Salvadoran government over the new law, to the wave of citizens across the nation protesting BTC’s legal status, the seminal cryptocurrency is facing some headwinds.
How Did Bitcoin Become Legal Tender?
It all started in early June after El Salvador president Nayib Bukele said in a tweet that the nation’s legislative assembly had passed a bill that made Bitcoin legal tender. This law was set to get implemented on September 7 and would see the nation’s 4.5 million citizens able to make purchases with BTC at stores countrywide.
In his announcement, Bukele mentioned that once an official bill to make BTC legal tender was passed, “Chivo ATMs” would eventually be installed ‘everywhere’ in the country. Chivo is the name given to the official Bitcoin wallet for El Salvador.
The ATMs would enable El Salvadorans to withdraw BTC in cash without incurring any commissions on their holdings, as is the case with several services like Western Union. Additionally, Bukele assured the citizens that nobody will be forced to use BTC. In an official statement,t eh 40-year-old president said that:
“Someone can always queue up at Western Union and pay a commission. What if someone doesn’t want to use Bitcoin? [Well] don’t download the app and continue living your normal life. Nobody is going to take your dollars.”
The First Wave Of Resistance
After the announcement, several protestors called the Popular Resistance and Rebellion Block (PRRB) block emerged to protest against the country’s Bitcoin law. One activist stated:
“President Nayib Bukele passed the law making the cryptocurrency legal tender in the country without proper consultations with the people.”
Even though the protest group mentioned the complexities like Bitcoin’s volatility as reasons for caution, their major claim is that the law majorly serves big businesses connected to purported money laundering to the benefit of corrupt officials. Another protestor said:
“Bitcoin only serves some large businessmen, especially those linked to the government, to launder ill-gotten money.”
A letter written by the BRRP group stated that:
“entrepreneurs who put their capital in Bitcoin will not pay taxes on their earnings and the government would spend millions worth of taxes to execute the whole campaign.”
The bill to make BTC legal tender features some interesting proposals like a zero capital gains tax on bitcoin. This bill also promised the investors permanent residency in the nation with a 3 Bitcoin investment in El Salvador.
Mario Gómez Arrested
While the controversial Bitcoin bill became a law on September 7, both detractors and supporters continue to emerge with the latest in events surrounding the law being the arrest of Mario Gomez.
Based on several local news outlets in El Salvador, Mario Gomez, a computer and cryptocurrency expert and an avid critic of the government, was arrested by local police and held for a few hours before getting released.
Gomez has been known to mostly post on social media opposing the government’s decision to make Bitcoin legal tender. Observers like Steve Hanke criticized Gomez’s arrest as an “authoritarian police tactic in action.” Hanke is an economist from Johns Hopkins University.
One counselor of the mayor’s office in San Salvador, Hector Silva, said:
“The arrest of Mario 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 whatever institutions are necessary to push critical voices out of the way.”
Though the police released a statement stating that Gómez was detained as part of financial fraud investigations, news reports alleged that he was arrested without a warrant and a trial was made to take possession of his computer and phone.
Just before Gomez’s arrest, some of the retirees in El Salvador took to the streets to protest, worried about the government using the crypto to pay their pensions. One demonstrator from the crowd, while speaking to reporters, said:
“We know this coin fluctuates drastically. Its value changes from one second to another, and we will have no control over it.”
The demonstrators included disability pensioners, veterans, retirees, and workers. While President Bukele has promised that the use of Bitcoin in the nation will be optional and that pensions and salaries will still be paid in US dollars, the protestors still showed a lack of knowledge of the technology.
Citizens have also complained that there has been a minimal explanation from officials about the pros and cons of Bitcoin. One Salvadoran highlighted:
“We don’t know the currency. We don’t know where it comes from. We don’t know if it’s going to bring us profit or loss. We don’t know anything.”
To respond to that, Bukele’s administration has said that the use of BTC is not mandatory and that essential training and other alternatives to Bitcoin will be offered.
Even though President Bukele enjoys incredibly massive approval ratings, recent polls about the Bitcoin law show a widespread lack of support for the new measure. Another poll that was conducted by El Salvador’s Universidad Centroamericana José Siméon Cañas indicates that up to 67% of the respondents are inclined to a move to repeal the law, and over 70% prefer the US dollar over Bitcoin.
International institutions like the International Monetary Fund (IMF) have also warned about financial, macroeconomic, and legal issues brought about by the decision by El Salvador to adopt bitcoin.
The head of Latin America Fixed Income Strategy at Amherst Pierpont, Siobhan Morden, said:
“The plans for Bitcoin under an increasingly autocratic regime will likely only compound concerns about corruption.”
On the other hand, others are quite optimistic that the new law will benefit the citizens in the end since the nation’s economy is majorly reliant on remittances sent home by the migrants overseas. In 2021 alone, the nation’s remittances totaled $6 billion, accounting for 20% of gross domestic product.
The managing director of Two Prime, Alexander Blum, said:
“El Salvador’s adoption of Bitcoin as legal tender by law offers the country some optionality in financial matters and sovereignty.”
His sentiments were reiterated by an artist and entrepreneur, Alberto Echegaray Guevara, who stated:
“President Bukele’s Bitcoin Law is not only trying to make international money transfer cheaper and easier for 70% of his unbanked population but also creating a new economic hub and new remittances platform in Central America.”
Adrian Pollard from HollaEx also commented:
“It is typical for new technology rollouts to have bugs and apposition but that’s exactly why it was made voluntary.”
“I suspect there will be more bumps along the road for El Salvador but it will be worth it long term. In fact, I believe other South American nations aren’t far behind and will follow.”