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Five keys about the implementation of bitcoin in El Salvador




Stock photo of bitcoin.  EFE / EPA / WALLACE WOON
Stock photo of bitcoin. EFE / EPA / WALLACE WOON

El Salvador will be next Tuesday the first country in the world to give legal tender to bitcoin, for better or for worse, depending on the sector that values ​​it.

The Salvadoran president, Nayib Bukele, seeks to hook the project to its popularity among the population, which resists and rejects the cryptoactive, according to various surveys, and also demands more information.

Sectors, such as the opposition, who express their mistrust and criticize the use of public funds in an initiative that is not entirely clear are added to the equation.

Said trust will be regulated by the Law of Creation of the Bitcoin Trust, which was approved with the votes of 64 of 84 deputies in Congress and did not have the votes of the opposition.  EFE / Rodrigo Sura / Archive
Said trust will be regulated by the Law of Creation of the Bitcoin Trust, which was approved with the votes of 64 of 84 deputies in Congress and did not have the votes of the opposition. EFE / Rodrigo Sura / Archive

The official currencies in El Salvador, according to the Monetary Integration Law, are two: the US dollar and the colón, but the latter does not circulate anymore.

These are the five keys to understanding its implementation:

1. THE BITCOIN IS MANDATORY

The Legislative Assembly, with a large pro-government majority, approved the Bitcóin Law in June, the objective of which is “The regulation of bitcoin as legal tender, unrestricted with liberating power, unlimited in any transaction and to any title that public or private natural or legal persons require to carry out.”

The regulation, which contains only 16 articles, was approved with exemption from paperwork and without further parliamentary debate, which means that it did not go through a prior analysis in Congress.

FILE PHOTO: El Salvador's President Nayib Bukele speaks during a press conference in San Salvador, El Salvador, on June 6, 2021. REUTERS / José Cabezas / File Photo
FILE PHOTO: El Salvador’s President Nayib Bukele speaks during a press conference in San Salvador, El Salvador, on June 6, 2021. REUTERS / José Cabezas / File Photo

Bukele did not announce to Salvadorans his intention to adopt cryptocurrency, but revealed it through a video at a conference of “bitcoiners” held in Miami (USA).

The law, which was approved just four days after the announcement of the president, indicates that “every economic agent must accept bitcoin as a form of payment when it is offered to him by whoever acquires a good or service.”

Its use is mandatory, although President Bukele has indicated that it will be left to the option of Salvadorans.

The law mandates its mandatory nature, but the president qualified this aspect, which was harshly criticized on June 24, with a play on words.

Alejandro Martinez, owner of Perronas Pizzas, shows his cell phone that he uses to accept Bitcoin payments at his business in Apopa.  REUTERS / Jose Cabezas
Alejandro Martinez, owner of Perronas Pizzas, shows his cell phone that he uses to accept Bitcoin payments at his business in Apopa. REUTERS / Jose Cabezas

Bukele affirmed that economic agents are obliged to accept bitcoin, but not to receive it. The solution to this semantic or legislative problem will be given by the government “Chivo Wallet”.

2. HOW WILL IT WORK?

The Government will launch the aforementioned electronic wallet on Tuesday in the iOS and Android application stores.

The key between accepting and receiving bitcoin, according to Bukele’s explanation, lies in the “automatic and instantaneous convertibility” of the crypto asset to dollars.

A skater walks past a Chivo Wallet ATM in the Plaza El Salvador del Mundo in San Salvador.  REUTERS / Jose Cabezas
A skater walks past a Chivo Wallet ATM in Plaza El Salvador del Mundo in San Salvador. REUTERS / Jose Cabezas

That is, businesses will have to accept bitcoin but through the “Chivo Wallet” they can decide whether to keep the cryptocurrency or automatically change it to dollars.

There are 150 million dollars that the Legislative Assembly approved to the Government to create a trust (fund) to support these transactions.

The doubts: What will the Government do with those bits of bitcoin? Will you keep them? Will you sell them to get dollars back? What backs the virtual dollars of the wallet?

Archive image.  A cyclist passes a graffiti that says: "Bitcóin equals Bukele's business (a reference to the President of El Salvador, Nayib Bukele)".  REUTERS / José Cabezas
Archive image. A cyclist passes a graffiti that reads: “Bitcóin equals Bukele’s business (a reference to the President of El Salvador, Nayib Bukele).” REUTERS / José Cabezas

The Bitcoin Law does not say anything about it.




3. A BONUS TO ATTRACT USERS

Bukele promised to deliver, with state funds, a bitcoin bonus equivalent to $ 30 to those who download the “Chivo Wallet”, without these being able to be exchanged into dollars.

The deputies also gave the Government another 23.3 million dollars for the “Criptofriendly” project, of which little is known, and 30 million for the delivery of the bonus or incentive.

A skater passes near a Chivo Wallet ATM in the Plaza El Salvador del Mundo in San Salvador.  Chivo is a Bitcoin wallet that the Salvadoran government will launch for the use of Bitcoin as legal tender.  REUTERS / Jose Cabezas
A skater walks past a Chivo Wallet ATM in the Plaza El Salvador del Mundo in San Salvador. Chivo is a Bitcoin wallet that the Salvadoran government will launch for the use of Bitcoin as legal tender. REUTERS / Jose Cabezas

In addition, the country will have a network of 200 ATMs in which Salvadorans who own bitcoin will be able to withdraw dollars in cash.

At the moment it is unknown which company all these ATMs were bought from and their cost.

In mid-June, it was announced that the American company Athena Bitcoin had started with the installation of ATMs, but it is not publicly known if it is the only provider and if it won a tender.

Union members participate in a protest against the use of bitcoin as legal tender in San Salvador, El Salvador.  September 1, 2021. REUTERS / Jose Cabezas
Union members participate in a protest against the use of bitcoin as legal tender in San Salvador, El Salvador. September 1, 2021. REUTERS / Jose Cabezas

4. REJECTION AND DISTRUST

The Salvadoran head of state has promoted the use of bitcoin as a measure to eliminate the payment of commissions for sending remittances from the United States, which support the Salvadoran economy and benefit 1.63 million Salvadorans.

A total of 471,633 households receive these currencies, of which 13,530 are in extreme poverty and 68,874 in relative poverty, according to official sources.

According to the president, there are 400 million that Salvadorans pay abroad each year to send remittances, which in 2020 totaled more than 5,900 million.

"NO TO BIRCOIN": A man participates in a protest against the arrest of cryptocurrency commentator Mario Gómez, and against the use of bitcoin as legal tender, in San Salvador, El Salvador.  REUTERS / Jose Cabezas
“NO TO BIRCOIN”: A man participates in a protest against the arrest of cryptocurrency commentator Mario Gómez, and against the use of bitcoin as legal tender, in San Salvador, El Salvador. REUTERS / Jose Cabezas

However, the majority of Salvadorans show disinterest, rejection and distrust in the use of bitcoin, according to survey results.

According to a survey by the Jesuit Institute of Public Opinion of the Central American University (Iudop), 66.7% of the population believes that the Bitcoin Law should be repealed and 65.2% disagreed that the Government of Bukele uses public funds to finance the implementation of the cryptoactive.

In addition, the study indicates that 78.3% of the population is little or not at all interested in downloading the electronic wallet application on their phones and 71.2% prefer to use the dollar.

A group of young Salvadorans spoke out on Wednesday against the implementation of bitcoin as a currency of exchange and denounced political persecution against critics of the government of Nayib Bukele.  EFE / Rodrigo Sura
A group of young Salvadorans spoke out on Wednesday against the implementation of bitcoin as a currency of exchange and denounced political persecution against critics of the government of Nayib Bukele. EFE / Rodrigo Sura

Two other polls show similar results.

The Ministry of Economy drew up, as a complement to the law, a regulation that will come into force on Wednesday, but at the discretion of the Central American Institute for Fiscal Studies (Icefi), it leaves more doubts because “it does not clarify some elements that the legislation does not explain.” .

5. OTHER CRYPTOMENDS AND THEIR PROJECTS

The Bitcoin Law does not include other cryptocurrencies and their adjacent projects, and the Government has not said anything either.

A man shows a T-shirt during a protest against the use of Bitcoin as legal tender in San Salvador.  REUTERS / Jose Cabezas
A man shows a T-shirt during a protest against the use of Bitcoin as legal tender in San Salvador. REUTERS / Jose Cabezas

According to a specialized site Coindesk, the Salvadoran government has signed an agreement with the Latin American platform specialized in crypto assets Koibanx.

Said agreement would be to generate the capacity in the country to digitally store the official documents of the National Registry Center (CNR) on the Algorand blockchain.

It is unknown if the Government has signed more agreements with other platforms.

(with information from EFE)

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TAMMY SEWELL
Tammy Sewell is our Writer and Social at OICanadian.com. Tammy loves sports, she writes our celebrities news. She spends time browsing through several celebs news sources as well the Instagram. Email: [email protected] Phone: +1 513-209-1700

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