Given its recent adoption by mainstream institutions and uptake by billionaires, 2021 will likely be remembered as one of the most fascinating years in Bitcoin’s history.
It almost seems that the entire world is watching El Salvador’s experiment to determine if it will succeed or fail.
A wave of protests against Bitcoin’s official implementation in El Salvador on Sept. 7 has raised suspicions about how the new law will be applied.
The seminal crypto is in trouble, from the arrests of people criticizing the Salvadoran government’s new law to the protests by citizens across the country about Bitcoin’s legal status.
How Bitcoin became legal tender
The whole thing began in June when Nayib Bukele, the Salvadoran president, announced via Twitter that the country’s legislative body had passed a bill to make Bitcoin legal tender. The law would allow the country’s 4.5million citizens to purchase Bitcoin in stores across the country. It was to be effective Sept. 7.
Bukele announced that after a bill was passed to legalize Bitcoin, Chivo ATMs — Chivo being El Salvador’s official BTC wallet — will be available “everywhere” within the country. This would allow El Salvadorans the ability to withdraw Bitcoin in cash, without paying any commissions.
Bukele also assured that no one would be forced to use Bitcoin. The 40-year-old president stated that anyone can queue at Western Union to pay a commission.
What if someone doesn’t want to use Bitcoin?” You can’t just download the app and go about your daily life as normal. He said that nobody is going to steal your dollars.”
The first wave resistance
A group of protestors known as the Popular Resistance and Rebellion Block, (BRRP), formed to protest the Bitcoin law after the announcement.
One activist stated that President Nayib Bukele passed the law making cryptocurrency legal tender in the country, without consulting the people.
The protest group made clear that Bitcoin volatility was a reason to be cautious, but their main argument is that the law serves only large companies involved in money laundering and corrupt officials.
One protestor stated that Bitcoin was only used by large businessmen, particularly those who are connected to the government to launder ill-gotten cash.
The BRRP group sent a letter stating that entrepreneurs who invest in Bitcoin won’t be taxed on their earnings, and that the government would spend millions of dollars to complete the campaign.
The bill to legalize Bitcoin includes interesting proposals, such as a zero capital gains and tax on BTC. Investors would also be granted permanent residence in the country if they invest three BTC in El Salvador.
Mario Gomez was arrested
The controversial Bitcoin bill was made a law on September 7, and both supporters as well as detractors continued to emerge. The latest event surrounding the law is Mario Gomez’s arrest.
Local news sources in El Salvador claim that Mario Gomez, a crypto and computer expert and a frequent critic of the government, was detained by police and held for several hours before being released.
Gomez is known for posting on social media regularly opposing the government’s decision to legalize Bitcoin.
Steve Hanke, an economist at Johns Hopkins University, criticized Gomez’s arrest as an “authoritarian” police tactic.
Hector Silva, a counselor at the San Salvador mayor’s office, stated that Mario’s arrest shows the fragility and inability of the government to implement the Bitcoin law, but also confirms something more dangerous.
Silva said that “they are willing to manipulate any institutions necessary to push out critical voices out the way.”
While the police stated that Gomez was being held in connection with a financial fraud investigation and released a statement, news reports revealed that Gomez was not arrested without a warrant. Also, an attempt was made at taking his computer and phone.
Protest by the citizens
Retirees in El Salvador protested Gomez’s arrest just before he was arrested. They were concerned about the government’s use of volatile cryptocurrency to pay for their pensions.
One demonstrator, who was representing veterans, disabled pensioners, workers, and retirees, said to reporters that the coin’s value fluctuates dramatically. Its value fluctuates from one second to the next, and we have no control over that.”
Although Bukele promised that Bitcoin use in the country would be voluntary and that all salaries and pensions would still be paid in United States Dollars, protestors still emphasized a lack of understanding of the technology.
Many citizens have complained that officials are not providing enough information about the pros and disadvantages of Bitcoin.
“We don’t know the currency. We don’t know from where it came. It doesn’t know if they will make us money or not. One Salvadoran said that they don’t know everything.
Bukele’s administration responded by stating that Bitcoin use is optional and that training and other options will be provided.
There are mixed opinions
While President Bukele has a high approval rating, recent polls regarding the Bitcoin law reveal a wide lack of support.
Recent polling by El Salvador’s Universidad Centroamericana Jose Simeon Canas has shown that more than two-thirds of respondents favor repealing the law and that more than 70% prefer Bitcoin to the U.S. dollar.
International organizations like the International Monetary Fund warned of potential legal, financial, and macroeconomic problems that could be triggered by El Salvador’s adoption.
Siobhan Morden of Amherst Pierpont’s Latin America Fixed Income Strategy said that the plans to launch Bitcoin under an increasingly dictatorial regime would only increase corruption concerns.
Others remain positive that the new law will ultimately benefit Salvadorans, given that the country’s economy heavily depends on remittances from migrants abroad. The country’s remittances accounted for a fifth gross domestic product and reached $6 billion last year.
Alexander Blum, managing Director of Two Prime, stated that El Salvador’s adoption by law of Bitcoin as legal currency gives the country some flexibility in financial matters and sovereignty.
Alberto Echegaray Guevara, an artist and entrepreneur, echoed his sentiments. He said that President Bukele’s Bitcoin Law was not only designed to make international money transfers cheaper and more convenient for 70% of his population, but also created a new economic hub in Central America and a new platform for remittances.
Adrian Pollard, HollaEx, told Cointelegraph that it is common for new technology rollouts have bugs and apposition. However, that’s precisely why it was voluntary.”
“I think there will be some bumps in the road for El Salvador, but it will pay off in the long-term.” Pollard stated that he believes other South American countries are not far behind and will soon follow.