{"id":50264,"date":"2021-09-28T07:00:00","date_gmt":"2021-09-28T04:00:00","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=50264"},"modified":"2025-09-02T17:10:33","modified_gmt":"2025-09-02T14:10:33","slug":"satoshis-worst-nightmare-or-a-financial-revolution-what-bitcoin-legalisation-in-el-salvador-could-mean","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/satoshis-worst-nightmare-or-a-financial-revolution-what-bitcoin-legalisation-in-el-salvador-could-mean\/","title":{"rendered":"Satoshi\u2019s Worst Nightmare or a Financial Revolution: What Bitcoin Legalisation in El Salvador Could Mean"},"content":{"rendered":"<p>In early June, El Salvador\u2019s president Nayib Bukele spoke at the Bitcoin 2021 conference, where <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvador-plans-to-grant-bitcoin-legal-tender-status\">announced<\/a> his intention to legalise digital gold. A few days later, the parliament <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvador-passes-bill-recognizing-bitcoin-as-legal-tender\">adopted<\/a> the corresponding law, and on 7 September it <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvador-legalises-bitcoin-as-government-buys-550-btc\">took effect<\/a>.<\/p>\n<p>El Salvador became the first state to accord Bitcoin the status of an official currency. Opinions among ForkLog experts surveyed <a href=\"https:\/\/u1f987.com\/en\/news\/experts-weigh-bitcoins-impact-on-el-salvadors-economy-it-cannot-get-worse\">were divided<\/a>: some do not exclude that this step could attract investment to the country, while others predict capital outflows.<\/p>\n<p>Some members of the community saw the event as a major victory for the industry and said that the experiment <a href=\"https:\/\/u1f987.com\/en\/news\/charles-hoskinson-predicts-bitcoin-will-be-recognised-by-other-countries-following-el-salvador\">may attract<\/a> other regions.<\/p>\n<p>There is also a sharply polarised view. Cryptocurrency analyst Mr. Whale described Bitcoin as a \u201cTrojan horse\u201d for the Salvadoran government, and what happened as \u201cSatoshi\u2019s worst nightmare.\u201d<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">By using <a href=\"https:\/\/twitter.com\/hashtag\/Bitcoin?src=hash&#038;ref_src=twsrc%5Etfw\">#Bitcoin<\/a> as a Trojan horse, El Salvador\u2019s government has now gained full control over their citizens funds.<\/p>\n<p>Don\u2019t be fooled by the maxi\u2019s and moon boys supporting this authoritarian nonsense.<\/p>\n<p>What\u2019s happening in El Salvador is Satoshi\u2019s worst nightmare. <a href=\"https:\/\/t.co\/nyxphnbFvm\">pic.twitter.com\/nyxphnbFvm<\/a><\/p>\n<p>\u2014 Mr. Whale (@CryptoWhale) <a href=\"https:\/\/twitter.com\/CryptoWhale\/status\/1439456645378084864?ref_src=twsrc%5Etfw\">September 19, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Using Bitcoin as a Trojan horse, the Salvadoran government has gained full control over the funds of its citizens. Don\u2019t be fooled by the maximalists and biased investors supporting this authoritarian nonsense. What happened in El Salvador is Satoshi\u2019s worst nightmare,<\/p>\n<\/blockquote>\n<div class=\"wp-block-text-wrappers-keypoints article_keypoints\">\n<ul class=\"wp-block-list\" id=\"block-4af85175-ea63-4b0c-8360-3324ca8e9263\">\n<li>El Salvador is a small, densely populated country in Central America. Almost a quarter of its GDP comes from remittances. For some households, these inflows account for up to 50% of total income.<\/li>\n<li>Residents have already felt the consequences of one monetary reform \u2014 the government abandoned the national currency in favour of the US dollar. Salvadorans regard dollarisation as a failure, arguing that the gains accrued mainly to elites and financial institutions.<\/li>\n<li>Despite all the advantages of cryptocurrency, the opaque actions of the Bukele administration have raised many questions about the real aims of Bitcoin\u2019s legalisation.<\/li>\n<\/ul>\n<\/div>\n<h2 class=\"wp-block-heading\"><strong>Not the best place for a financial revolution<\/strong><\/h2>\n<p>Between Guatemala and Honduras, El Salvador is the smallest and most densely populated country in Central America, and the region\u2019s only country without Caribbean access. In 2020 its GDP per capita was estimated at $3,798, and the average monthly wage was $375.<\/p>\n<p>Historically, the bulk of the republic\u2019s land was used for growing coffee, which locals call el grano de oro [Spanish for \u201cgolden bean\u201d]. By 1920 this crop accounted for 90% of the country\u2019s exports, and by 1980 the sector accounted for about half of its GDP. Coffee estates still cover about 10% of El Salvador\u2019s territory.<\/p>\n<p>In 1979 a brutal civil war erupted \u2014 Salvadorans were drawn into a proxy conflict of the Cold War between the United States and the USSR. The United States backed the state regime to combat communist rebels, hoping to avoid a Cuban scenario.<\/p>\n<p>The war, stretched for nearly 13 years, ruined an infrastructure that was already underdeveloped. By 1998, the purchasing power of urban Salvadorans was only about a third of what it had been in 1980.<\/p>\n<p>As a result of the conflict, more than 75,000 people were killed and over a million forced to flee their homes. Nearly half of these people moved to the United States.<\/p>\n<p>After the war a new wave of violence swept the country, this time due to clashes among gangs. By 2015 El Salvador had become one of the most dangerous places in the world \u2014 on average a murder occurred every two hours.<\/p>\n<p>It is hard to imagine such a country becoming a hub for a digital monetary revolution. Yet El Salvador, once described as a zone of combat six years ago, is now discussed as a pioneer in financial technology.<\/p>\n<h2 class=\"wp-block-heading\"><strong>The sober lesson of dollarisation<\/strong><\/h2>\n<p>When considering Bitcoin\u2019s legalisation, it is hard not to draw a parallel with dollarisation in El Salvador.<\/p>\n<p>Because of the war, the ensuing gang violence, disasters, and the agrarian sector\u2019s inability to meet a growing population\u2019s needs, El Salvador accumulated a substantial external debt. Even today the state relies on foreign aid, loans and remittances.<\/p>\n<p>In the 1980s, nearly 10% of the population emigrated to the United States. Given that, it is not surprising that remittances now account for about 24% of El Salvador\u2019s GDP. There is even a saying in the country: \u201cOur biggest export is people.\u201d<\/p>\n<p>Remittances from abroad are received by around 70% of Salvadorans. On average people send about $195 a month to loved ones, and for some households these inflows account for 50% of total income.<\/p>\n<p>In 2001 El Salvador abandoned its own currency, making the US dollar the sole legal means of payment. President Francisco Flores announced the reform in November 2000, and 39 days later the law came into force. The country dollarised to 98% in just 18 months.<\/p>\n<p>Unlike Ecuador, which adopted a similar measure in 2000 amid hyperinflation, currency depreciation in El Salvador occurred at a modest pace. Dollarisation helped stabilise key macroeconomic indicators, offsetting the adverse effects of exchange-rate revaluations.<\/p>\n<p>Yet Salvadorans themselves regard Flores\u2019s decision as controversial. In 2002, a survey by the Central American University (UCA El Salvador) found that 62% of respondents said the switch to the dollar had a \u201cnegative effect on their personal economic situation.\u201d<\/p>\n<p>During the currency reform, a fifth of the population could not read, so many faced problems with new price labels. Some traders exploited this, rounding up prices to the nearest column in a practice known locally as causing inflation of up to 25% in some cases.<\/p>\n<p>In the mid-2000s the average wage rose only marginally while food prices rose by more than 14%.<\/p>\n<p>Unlike the poor, the elites and financial institutions gained unambiguously from the dollarisation \u2014 primarily through lower interest rates. In 2002, 70% of all loans in El Salvador were issued by four large banks, while loans to 400 clients accounted for 60% of total lending.<\/p>\n<p>Given this experience, it is clear that dollarisation is a painful memory for many Salvadorans. That is why the plan to legalise a digital currency unknown to most of the population culminated in protests, unrest and even arson.<\/p>\n<h2 class=\"wp-block-heading\"><strong>Bitcoin Beach<\/strong><\/h2>\n<p>Official confirmation is lacking, but it may be that the story of Bitcoin\u2019s legalisation began as far back as 2017 in the remote village of El Zonte.<\/p>\n<p>A local nonprofit received a donation in Bitcoin. Not knowing what to do with the cryptocurrency, it turned to a California-born observer, Michael Peterson, who had come to El Salvador for surfing but stayed to do charity work.<\/p>\n<p>An anonymous benefactor sought teams to deploy part of his capital to create a parallel economy with an alternative currency and to address real problems. Peterson was intrigued and took up the project.<\/p>\n<p>The project founder named his poverty-fighting initiative Bitcoin Beach. He pursued the objective by building a closed-loop economy based on Bitcoin.<\/p>\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\">\n<div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"b4H Fireside Chat with Michael Peterson, Bitcoin Beach\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/aYoANlfMTVY?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div>\n<\/figure>\n<p>El Zonte met Bitcoin with skepticism, but as more merchants and individuals joined, scepticism gave way to acceptance. New users discovered not only the asset\u2019s liquidity but also that paying with Bitcoin could be easier than using cash.<\/p>\n<p>In July 2020, Forbes drew attention to Bitcoin Beach, six months after Peterson appeared on Peter McCormack\u2019s What Bitcoin Did podcast. The world learned about the small village in El Salvador. The project also attracted interest from experts including Strike founder Jack Mallers and Square product lead Miles Suter.<\/p>\n<p>In early 2021 Peterson and his Bitcoin Beach colleagues met with El Salvador\u2019s tourism minister. They spoke for several hours about the idea and strategy of adopting Bitcoin as a legal tender.<\/p>\n<p>Officials began visiting El Zonte, showing interest in the project. In April and May a deputy education minister and the tourism minister visited in person. A month later Bukele announced the forthcoming legalisation of digital gold.<\/p>\n<h2 class=\"wp-block-heading\"><strong>&#8220;The Coolest Dictator in the World&#8221;<\/strong><\/h2>\n<p>He is described as a chameleon and an opportunist. On his path to the presidency, the 40-year-old Nayib Bukele switched parties three times.<\/p>\n<p>The future leader of El Salvador was born into a wealthy family that owned OBERMET, a company specialising in advertising. After finishing school, he enrolled at UCA El Salvador but dropped out at 18 and ran the family business. He is also co-owner of Yamaha Motors El Salvador.<\/p>\n<p>In 2012 Bukele was elected mayor of Nuevo Cuscatl\u00e1n from the ruling Farabundo Mart\u00ed National Liberation Front (FMLN). While in office, he focused on youth education and safety.<\/p>\n<p>In 2015 the politician became mayor of San Salvador, but in 2017 he was expelled from the FMLN for libel and for \u201cattempting to split the organisation.\u201d<\/p>\n<p>Leaving the FMLN, he announced the New Ideas movement. Bukele planned to register it as a party and run for president in 2019. However, the Supreme Electoral Tribunal delayed the process, forcing him to abandon the plan.<\/p>\n<p>To contest the elections, Bukele struck a deal with the left-libertarian Democratic Change party, and when its registration was revoked he joined the centre-right coalition in the Big Alliance.<\/p>\n<p>Bukele won in the first round, securing 53% of the vote \u2014 21.3 percentage points ahead of the nearest rival, Carlos Calleh, who held right-wing views. Since taking office in June 2019, his approval rating has hovered near 90%.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"es\" dir=\"ltr\">Nayib Bukele, presidente electo de El Salvador <a href=\"https:\/\/t.co\/S7dgSTOnL9\">https:\/\/t.co\/S7dgSTOnL9<\/a> <a href=\"https:\/\/t.co\/MQoiDFgjGK\">pic.twitter.com\/MQoiDFgjGK<\/a><\/p>\n<p>\u2014 Diario Co Latino (@DiarioCoLatino) <a href=\"https:\/\/twitter.com\/DiarioCoLatino\/status\/1092387155354284032?ref_src=twsrc%5Etfw\">February 4, 2019<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Popularity stems largely from his success in the fight against organised crime. If the war\u2019s end in El Salvador left almost 150 murders per 100,000 people, by 2020 the figure had fallen to 20.<\/p>\n<p>Independent papers like El Faro attribute this to authorities negotiating with gangs, though the Bukele administration denies this, and the public cares about the outcome.<\/p>\n<p>But the problem is that Bukele used his popularity to concentrate power and undermine democratic institutions.<\/p>\n<p>The first alarm bell came in February 2020. Amid a standoff with Parliament over police funding, the president ordered the military to seal off the Legislative Assembly.<\/p>\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\">\n<div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"Nayib Bukele irrumpe con militares armados en el Congreso salvadore\u00f1o\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/_H_78hp-vRE?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div>\n<\/figure>\n<p>In February 2021 Bukele\u2019s party won a crushing majority in Parliament. In May five Supreme Court judges were fired and replaced by Bukele allies. The attorney general investigating corruption in the government was also removed.<\/p>\n<p>In August, Parliament passed a law allowing all judges and prosecutors with more than 30 years\u2019 service or over 60 years of age (about 66% of the judiciary) to be forcibly pensioned.<\/p>\n<p>In September, the Supreme Court allowed the president to seek a second term, even though the Constitution prohibits it.<\/p>\n<p>The US ambassador in El Salvador recently compared Bukele to Hugo Ch\u00e1vez. But Human Rights Watch noted that the late president of Venezuela needed 15 years to consolidate power, whereas Bukele did it in two.<\/p>\n<p>Such comparisons do not seem to bother the politician. In the manner in which he teased the IMF, Bukele dubbed himself the \u201ccoolest dictator in the world.\u201d<\/p>\n<p><script async=\"\" src=\"https:\/\/telegram.org\/js\/telegram-widget.js?15\" data-telegram-post=\"forklog\/21537\" data-width=\"100%\"><\/script><\/p>\n<h2 class=\"wp-block-heading\"><strong>Bukele\u2019s Grand Wallet Gamble<\/strong><\/h2>\n<p>The cornerstone of the Bitcoin integration campaign is a cryptocurrency wallet called Chivo, which in local slang means \u201ccool.\u201d<\/p>\n<p>When the Bitcoin law took effect, it became clear that individuals were not obliged to use the new instrument, but for companies it <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvador-legalises-bitcoin-as-government-buys-550-btc\">became a requirement<\/a>. <\/p>\n<p>The Chivo Bitcoin wallet, launched on 7 September, is meant to solve implementation problems. Citizens can register an account using their phone number and personal <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvador-to-install-200-atms-with-bitcoin-conversion-option\">identification number<\/a>. <\/p>\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\">\n<div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"Como Registrarse y Configurar la Chivo Wallet de El Salvador\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/dMpZvY0UYaU?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div>\n<\/figure>\n<p>With Chivo one can pay for goods and services, convert cryptocurrency to fiat, withdraw cash at <a href=\"https:\/\/u1f987.com\/en\/news\/lightning-network-faster-cheaper-bitcoin-transactions\">Lightning Network<\/a>\u2013compatible ATMs, and transfer funds to other accounts for free. The wallet is also compatible with the Lightning Network, enabling acceptance of transactions from external Bitcoin addresses.<\/p>\n<p>To popularise the app, authorities <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvador-to-give-each-adult-resident-30-in-bitcoin\">distributed<\/a> $30 in digital gold to every user. To support liquidity, the government also <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvadors-parliament-approves-150-million-bitcoin-fund\">approved<\/a> a Bitcoin fund that <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvadors-government-buys-150-more-btc\">has already purchased<\/a> 700 BTC.<\/p>\n<p>Little is known about Chivo\u2019s implementation. Bitso, a Bitcoin exchange, is the main technical solutions provider for the national wallet. In a conversation with The Block, a Bitso representative said it \u201cprovides custodial services, enabling storage and security functionalities and exchange services.\u201d<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">El Salvador made history by becoming the first country to make Bitcoin legal tender, and today, we\u2019re proud to announce that Bitso is committed to building and developing El Salvador\u2019s vision of Bitcoin by being the core crypto-service provider for Chivo.<br \/>Let\u2019s <a href=\"https:\/\/twitter.com\/hashtag\/MakeCryptoUseful?src=hash&#038;ref_src=twsrc%5Etfw\">#MakeCryptoUseful<\/a> <a href=\"https:\/\/t.co\/2rrTNDdXab\">https:\/\/t.co\/2rrTNDdXab<\/a><\/p>\n<p>\u2014 Bitso (@Bitso) <a href=\"https:\/\/twitter.com\/Bitso\/status\/1435311305687281668?ref_src=twsrc%5Etfw\">September 7, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Bitso also explained how dollars are converted to Bitcoin: users buy BTC, which the government previously acquired from liquidity providers such as Bitso.<\/p>\n<p>A partner of the Mexican exchange in this project was the Californian crypto bank Silvergate. It reportedly \u201cfacilitates Chivo transactions conducted in US dollars.\u201d Bitso uses the Silvergate Exchange Network for real-time payments.<\/p>\n<p>The Bitcoin ATM operator <a href=\"https:\/\/u1f987.com\/en\/news\/athena-to-install-1500-bitcoin-atms-in-el-salvador\">became<\/a> the American Athena Bitcoin. Shortly before Chivo\u2019s launch, a diagram of the wallet\u2019s backend architecture leaked online. Cointelegraph noted that Athena Bitcoin \u201cprovides some frontend services,\u201d though there is no official information about the company\u2019s exact role.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"es\" dir=\"ltr\"><a href=\"https:\/\/twitter.com\/hashtag\/TapudoLeaks?src=hash&#038;ref_src=twsrc%5Etfw\">#TapudoLeaks<\/a>. This is the structure with which the <a href=\"https:\/\/twitter.com\/hashtag\/ChivoWallet?src=hash&#038;ref_src=twsrc%5Etfw\">#ChivoWallet<\/a> will operate, and it\u2019s not a joke. <a href=\"https:\/\/t.co\/N7YCovR3dJ\">pic.twitter.com\/N7YCovR3dJ<\/a><\/p>\n<p>\u2014 El Tapudo (@eltapudosv) <a href=\"https:\/\/twitter.com\/eltapudosv\/status\/1429870227899174912?ref_src=twsrc%5Etfw\">August 23, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Forbes reports that BitGo\u2019s custodial service \u201cprovides the infrastructure for Chivo and the security platform, serving as the exclusive supplier of hot wallets.\u201d<\/p>\n<p>Koibanx, a provider of Blockchain-as-a-Service (BaaS), led the Lightning Network integration. Its ambitions appear to extend well beyond this collaboration. In late August the firm said it would develop in El Salvador a blockchain infrastructure based on the Algorand technology, in a deal with the government.<\/p>\n<h2 class=\"wp-block-heading\"><strong>Too many questions<\/strong><\/h2>\n<p>Salvadorans are heavily reliant on remittances, and adopting cryptocurrency not only reduces costs but speeds up transfers. Traditional payment firms can take days and charge higher fees. Chivo makes transfers nearly free and nearly instantaneous.<\/p>\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\">\n<div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"Chivo demonstration with Thanks Matt Ahlborg (@esiattorney)\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/G-Q-CFirTLU?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div>\n<\/figure>\n<p>According to Bukele, residents annually enrich the remittance system by about $400m, which they could lose. It may be true \u2014 Bitcoin ATMs are popular, and many users employ cryptocurrency specifically for transfers.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Wondering how <a href=\"https:\/\/twitter.com\/chivowallet?ref_src=twsrc%5Etfw\">@chivowallet<\/a> is doing? Going nuts\ud83d\ude80\ud83c\uddf8\ud83c\uddfb<\/p>\n<p>I didn\u2019t count, but there are more than 70 persons in the line, waiting to use one <a href=\"https:\/\/twitter.com\/hashtag\/Bitcoin?src=hash&#038;ref_src=twsrc%5Etfw\">#Bitcoin<\/a> ATM.<\/p>\n<p>It\u2019s not just this ATM. I have seen several.. some with even more people!<\/p>\n<p>Don\u2019t know if they\u2019re here for deposits or withdrawals <a href=\"https:\/\/t.co\/e8Z9sElDMb\">pic.twitter.com\/e8Z9sElDMb<\/a><\/p>\n<p>\u2014 Arnold Hu\u20bfach \u26a1\ufe0f (@st4rnold) <a href=\"https:\/\/twitter.com\/st4rnold\/status\/1440390732628443144?ref_src=twsrc%5Etfw\">September 21, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Yet despite the benefits, the opaque actions of the Bukele administration have given rise to many questions about the reform. It is not clear how much the project cost the country. The government says funds were allocated by the Central American Bank for Economic Integration, but it does not provide a figure.<\/p>\n<p>Nobody knows what the Bitcoin trust will do with the purchased cryptocurrency. If it engaged outside providers to ensure liquidity, why the need for a separate fund? Perhaps to avoid liquidity shortages, but no official position has been given.<\/p>\n<p>Non-governmental organisations have voiced concerns. Cristosal asked El Salvador\u2019s Court of Auditors to audit the Bitcoin Trust\u2019s governance. In response the government launched an investigation.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"es\" dir=\"ltr\"><a href=\"https:\/\/twitter.com\/hashtag\/ElSalvador?src=hash&#038;ref_src=twsrc%5Etfw\">#ElSalvador<\/a> | La Corte de Cuentas de la Rep\u00fablica nos ha notificado la admisi\u00f3n de la denuncia que interpusimos como Cristosal el 10 de este mes, para realizar examen de auditor\u00eda a la ejecuci\u00f3n del fideicomiso Bitcoin. Compartimos fragmento del documento recibido. \ud83d\udc47 <a href=\"https:\/\/t.co\/FXlkrWhCD3\">pic.twitter.com\/FXlkrWhCD3<\/a><\/p>\n<p>\u2014 Cristosal (@Cristosal) <a href=\"https:\/\/twitter.com\/Cristosal\/status\/1438605358457630722?ref_src=twsrc%5Etfw\">September 16, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The government <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvador-to-exempt-foreign-bitcoin-investors-from-taxes\">promised to exempt<\/a> foreign investors from capital gains tax and income tax on Bitcoin transactions. The move could attract further capital, but it will require a payment-tracking mechanism to be implemented.<\/p>\n<p>The tracking mechanism could also be used to monitor citizens\u2019 funds. Moreover, presidential legal adviser Javier Arg\u00fceta openly suggested the possibility of suspending crypto transactions to mitigate volatility.<\/p>\n<p>There are also questions about the <a href=\"https:\/\/u1f987.com\/en\/news\/el-salvadors-president-acknowledged-technical-difficulties-in-implementing-bitcoin-payments\">haste<\/a> with which El Salvador legalised Bitcoin. From announcement to law\u2019s entry into force, only 93 days elapsed \u2014 a little longer than with dollarisation.<\/p>\n<p>The Bukele initiative <a href=\"https:\/\/u1f987.com\/en\/news\/experts-see-threat-to-el-salvadors-credit-rating-from-bitcoin-legalisation\">is hurting<\/a> El Salvador\u2019s credit rating and threatens to derail an IMF agreement. The IMF is expected to provide about $1bn in financial support.<\/p>\n<p>Ethical concerns also remain open: opponents have labeled the currency reform unconstitutional, and some argue that forced integration of digital assets conflicts with crypto-community values.<\/p>\n<h2 class=\"wp-block-heading\"><strong>Bukele\u2019s Big Gamble<\/strong><\/h2>\n<p>According to Bukele, the Chivo wallet is used by more than 2 million people \u2014 nearly a third of the population. It is unclear how actively they transact or in what scenarios, but the scale is striking. Four years ago, however, crypto operations could carry up to 15 years in prison.<\/p>\n<p>A former National Security Agency (NSA) employee and Central Intelligence Agency (CIA) contractor, Edward Snowden, said other countries could \u201cfall behind\u201d if they fail to follow El Salvador\u2019s lead. He suggested that pressure would push laggards to acquire cryptocurrency, perhaps as a reserve asset.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Today Bitcoin was formally recognized as legal tender in its first country.<\/p>\n<p>Beyond the headlines, there is now pressure on competing nations to acquire Bitcoin\u2014even if only as a reserve asset\u2014as its design massively incentivizes early adoption. <\/p>\n<p>Latecomers may regret hesitating <a href=\"https:\/\/t.co\/mggfDk4v9z\">https:\/\/t.co\/mggfDk4v9z<\/a><\/p>\n<p>\u2014 Edward Snowden (@Snowden) <a href=\"https:\/\/twitter.com\/Snowden\/status\/1435320690404700168?ref_src=twsrc%5Etfw\">September 7, 2021<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>At Cornell University, scholars partly agree with Snowden\u2019s view. They see the global adoption of Bitcoin as a case of game theory dynamics underlying Nakamoto\u2019s consensus.<\/p>\n<p>Two aspects emerge in the context of Bitcoin\u2019s legalisation:<\/p>\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/ru.wikipedia.org\/wiki\/%D0%94%D0%B8%D0%BB%D0%B5%D0%BC%D0%BC%D0%B0_%D0%B7%D0%B0%D0%BA%D0%BB%D1%8E%D1%87%D1%8D%D0%BD%D0%BD%D0%BE%D0%B3%D0%BE\">the prisoner\u2019s dilemma<\/a>. The science suggests the greatest gain goes to the player who first implements a successful technology. The issue is there is no guarantee of the digital gold\u2019s success.<\/li>\n<li><a href=\"https:\/\/en.wikipedia.org\/wiki\/Coordination_game\">a coordination game<\/a>. When several players share a goal and can coordinate, their chances of success rise significantly. This is about the network effects of a cryptocurrency.<\/li>\n<\/ul>\n<p>Only time will tell whether El Salvador won or lost from legalising Bitcoin. If the country fully harnesses the benefits of the new technology, and the technology proves effective, this experiment could mark the start of a global financial revolution.<\/p>\n<p>Read more Bitcoin news from ForkLog in our <a href=\"\/\/telegram.me\/forklog\" target=\"\u201c_blank\u201d\" rel=\"\u201cnofollow\u201d noopener\">Telegram<\/a> \u2014 cryptocurrency news, rates and analysis.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>El Salvador became the first country to grant Bitcoin official currency status. Some hailed the move as a financial revolution, while others dubbed it Satoshi\u2019s worst nightmare. ForkLog examines what the legalisation of cryptocurrency could mean for the country.<\/p>\n","protected":false},"author":1,"featured_media":50265,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[1144],"tags":[18,1278,36],"class_list":["post-50264","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-longreads","tag-bitcoin","tag-el-salvador","tag-regulation"],"aioseo_notices":[],"amp_enabled":true,"views":"30","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/50264","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=50264"}],"version-history":[{"count":1,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/50264\/revisions"}],"predecessor-version":[{"id":50266,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/50264\/revisions\/50266"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/50265"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=50264"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=50264"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=50264"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}