The year 2021 will probably go down the history books as one of Bitcoin’s (BTC) most interesting years, given its recent uptake by billionaires and adoption by mainstream institutions, not to mention El Salvador’s move to make it legal tender.
In El Salvador’s case, it almost seems as if the whole world is watching this experiment to see whether it will be a success or a total failure for the Central American nation.
With Sept. 7 marking the official implementation of Bitcoin as a legal tender in El Salvador, a wave of protests in the country against the move has roused suspicions and uncertainty over how the new law will be enforced.
From the arrest of individuals criticizing the Salvadoran government over the new law, to the wave of citizens across the country protesting Bitcoin’s legal status, the seminal crypto is facing some headwinds.
How Bitcoin became legal tender
It all began in early June after Salvadoran president Nayib Bukele announced in a tweet that the country’s legislative assembly had passed a bill making Bitcoin legal tender. The law was set to be implemented on Sept. 7 and would see the country's 4.5 million citizens able to make purchases with Bitcoin at stores nationwide.
In his announcement, Bukele said that once an official bill to make Bitcoin legal tender was passed, “Chivo ATMs” — Chivo being the name of the official BTC wallet for El Salvador — would eventually be “everywhere” in the country. This would allow El Salvadorans to withdraw Bitcoin in cash without incurring any commissions on their holdings, as is the case with services such as Western Union.
Moreover, 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 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,” he said.
The first wave of resistance
Following the announcement, a group of protestors called the Popular Resistance and Rebellion Block (BRRP) block emerged to protest against the Bitcoin law.
“President Nayib Bukele passed the law making the cryptocurrency legal tender in the country without proper consultations with the people,” one activist said.
Although the protest group highlighted complexities such as Bitcoin’s volatility as reasons for caution, their main claim is that the law mainly serves large businesses linked to alleged money laundering to the benefit of corrupt officials.
“Bitcoin only serves some large businessmen, especially those linked to the government, to launder ill-gotten money,” one protestor said.
A letter from the BRRP group said 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.”
Indeed, the bill to make Bitcoin legal tender includes some interesting proposals such as a zero capital gains tax on BTC. The bill also promised investors permanent residency in the country with a three BTC investment in El Salvador.
The arrest of Mario Gómez
As the controversial Bitcoin bill became a law on Sept. 7, both supporters and detractors continue to emerge with the latest in events 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 an avid critic of the government — was arrested by local police and held for a few hours before being released.
Gómez has been known to regularly post on social media opposing the government’s move to make Bitcoin legal tender. Observers such as Steve Hanke — an economist from Johns Hopkins University — criticized Gómez's arrest as an “authoritarian police tactic in action.”
Hector Silva, a counselor of the mayor’s office in San Salvador, 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,” added Silva.
Although the police released a statement saying that Gómez was detained as part of a financial fraud investigation, news reports claimed that he was arrested without a warrant and an attempt was made to take possession of his phone and computer.
The citizens' protest
Right before Gómez's arrest, some retirees in El Salvador took to the streets to protest, worried about the government using the cryptocurrency to pay their pensions.
While speaking to reporters, one demonstrator from the crowd — which included veterans, disability pensioners, workers and retirees — said, “we know this coin fluctuates drastically. Its value changes from one second to another, 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 United States dollars, the protestors still highlighted a lack of knowledge of the technology.
Citizens have also complained that there has been too little explanation from officials about the pros and cons of Bitcoin. “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,” one Salvadoran added.
In response, Bukele’s administration has stated that the use of Bitcoin is not mandatory and that necessary training and other alternatives to Bitcoin will be provided.
Although President Bukele enjoys incredibly high approval ratings, recent polls concerning the Bitcoin law show a widespread lack of support for the measure. A recent poll conducted by El Salvador's Universidad Centroamericana José Siméon Cañas shows that up to two-thirds of respondents are inclined toward a move to repeal the law, and more than 70% prefer the U.S dollar over Bitcoin.
International institutions like the International Monetary Fund have also warned about macroeconomic, financial and legal issues brought about 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 compound concerns about corruption.”
On the flip side, others remain optimistic that the new law will eventually benefit Salvadorans given that the country’s economy is heavily reliant on remittances sent home by migrants overseas. Last year alone, the country’s remittances totaled $6 billion, accounting for a fifth of gross domestic product.
“El Salvador’s adoption of Bitcoin as legal tender by law offers the country some optionality in financial matters and sovereignty,” said Alexander Blum, managing director of Two Prime.
His sentiments were echoed by Alberto Echegaray Guevara — an artist and entrepreneur — who said, “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 told Cointelegraph, “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,” added Pollard.