As El Salvador Enacts Bitcoin Law, Locals Remain Confused About Implementation
“One thing is what the president says, and another is what the law establishes.”
El Salvador’s Bitcoin Law takes effect today – and yet, many locals still don’t know how the cryptocurrency works or how they’ll be able to use it.
El Salvador’s Bitcoin Law stipulates that bitcoin must be accepted as a form of payment everywhere in the country. The nation’s legislature passed the bill shortly after President Nayib Bukele introduced it three months ago, but it’s unclear just how much effort the government has put into preparing its populace for the law to take effect.
Jessica Dominguez, the owner of a flower kiosk in San Salvador, said she has not yet had the time to learn about the matter.
“However, in due course I am willing to use bitcoin,” she said, adding that clients have already offered to pay with bitcoin.
Francisco, who asked that his full name not be cited, runs a laundromat in Sensuntepeque, a town located 83 kilometers from San Salvador, and said his business has not yet made arrangements to receive payments in bitcoin.
“In case you need to charge with bitcoin, we will do it with the wallet of a person who works in the establishment,” said Francisco, saying that his interpretation of the law means businesses are required to have the app, despite Bukele saying in mid-August it was not necessary to have one.
“One thing is what the president says, and another is what the law establishes,” he said.
A branch of the hardware store chain Disensa, located in San Salvador, told CoinDesk that for the moment there is a total lack of knowledge about using bitcoin.
“Nobody knows how it will be acted upon. Neither the banks nor the suppliers know anything about it,” an employee said.
In the mass retail sector, the adoption process seems to be different. A branch of Almacenes Siman, a leading retail chain, told CoinDesk that bitcoin will be implemented as a payment method, although there is no definite starting date. One of the branches of Súper Selectos, a supermarket chain, also told CoinDesk that it will use and accept bitcoin.
Then there is the coastal area of El Salvador known as Bitcoin Beach, where there has been more of a willingness to use cryptocurrency among businesses and local residents.
An example of that trend is Olas Permanentes, a beach site in El Zonte that includes a hotel and restaurant managed by Carlos Ortiz Novoa.
“We have been using bitcoin for more than a year now and have had very good additional income through it,” Ortiz Novoa told CoinDesk.
Bukele’s proposal has generated too much uncertainty, according to Francisco.
“I think having established bitcoin as legal tender has not been a good idea. There are too many variables that are intended to be controlled, and that never ends well. The idea should have matured more,” Francisco added.
However, some people already see the benefits of bitcoin for sending remittances to the country, one of the reasons why El Salvador was pushing for the largest cryptocurrency by market capitalization to become legal tender along with the U.S. dollar.
Jose Santaneco, a Los Angeles-based Salvadoran who works in juvenile crime prevention, will begin using Chivo, the government’s crypto wallet, on Tuesday.
“I see the benefit of sending money from my cell phone to my family. I have two family members I send money to, and before this I had to pay two separate fees,” he told CoinDesk.
Santaneco used to send money through MoneyGram and Western Union, which charged transaction fees of up to $18. Then he used Ria Money Transfer, at a cost of $7, and finally Xoom and Boss platforms, both of which cost $4.99 per transaction.
“But I had a lot of problems and once had my account suspended,” he said.
Santaneco’s grandmother, 69, has been learning for months to use a smartphone to communicate with her grandson through social networks to avoid spending on phone calls.
“We know that these electronic remittance services like Chivo can also save us money,” he said.
Although he knows it will be cheaper to transact with bitcoin, Santaneco does not quite understand how the currency transfer ends up being free. He said he will send remittances in dollars through the new wallet.
“I know there is a cost to exchange bitcoin to [the] dollar but not if the government will assume that cost or in what way they make that exchange cost free for us,” he said.
Last week, El Salvador’s government agreed to create a $150 million bitcoin trust to facilitate exchanges between bitcoin and U.S. dollars in the country, according to local media.
“I think there is not enough information from official sources on how bitcoin will work in the country,” said Santaneco, who has money invested in bitcoin that has generated profits.
According to Ortiz Novoa, it will be essential for the population to use the $30 in bitcoin the government is giving each citizen in order for bitcoin adoption to grow. Additionally, easy and simple convertibility to dollars will be very important, he added.
Jorge Colorado, a Salvadoran anthropologist living in New York, also warned about the lack of information locals received about the implementation of the Bitcoin Law.
“The bitcoin thing was presented by Bukele at a meeting of bitcoiners in Miami several months ago. It was a presentation in English. The following day all the information was in English and was [not] communicated to the people [of El Salvador] until many days later, with very little information, almost superficial,” he told CoinDesk.
Colorado has sent financial aid to friends in El Salvador using RIA or Western Union services, and does not plan to use bitcoin to do so, despite holding investments in bitcoin, ether, litecoin and cardano.
He said he was also concerned about how Chivo was built.
“The Chivo wallet contracts are secret, there was no bidding, public money has been used as if it were private money. I cannot support that,” he said.
Colorado believes that to avoid bitcoin volatility the government of El Salvador will at some point use a stablecoin of its own that will maintain parity with the U.S. dollar.
“The government has not been clear with that, but that is what will happen,” he said.
In July, local media published a report that El Salvador’s government was planning to launch a native cryptocurrency that consumers would be able to use to pay for services.
In August, Bukele’s administration announced an agreement with Koibanx, a Latin American asset tokenization and blockchain financial infrastructure company, to develop the country’s blockchain infrastructure on top of the Algorand blockchain.
Koibanx CEO Leo Elduayen noted that Algorand’s blockchain could support a national stablecoin for El Salvador, but said there are no plans for that at the moment.
Colorado also does not trust the quick approval of the bill, which had a qualified majority in the Legislative Assembly, with 62 out of 84 votes.
“The deputies approved the law in an [expedited] manner. I am absolutely sure that none of them understand it,” he added.
He is also concerned that El Salvador could become a center for money laundering.
“Terrorists or international hackers who have received payments in bitcoin could go to the country and get clean dollars,” he added.
“I am afraid that the Salvadoran economy will collapse. The implementation of bitcoin is a very risky bet. The problem is that a mistake is going to be a great tragedy that will cost dearly and affect the lives of many people,” Colorado said.
On the risk of using bitcoin, Dominguez, from her flower shop, said, “In this life everything is a risk, and he who does not risk does not win.”
According to Colorado, journalists who have covered the implementation of bitcoin have been subjected to harassment, attacks and insults from the government. “The very visceral reaction against the press is because the government has big loopholes and hides a lot of things,” he said. He cited the case of Mario Gomez, a computer specialist and active critic of the implementation of bitcoin, who was arrested and released last Wednesday for possible bank fraud.
“He was threatened to be accused of a crime he did not commit, now the prosecutor’s office has ‘recommended’ that he cannot speak in public, nor communicate through social networks, nor give interviews to the media.”
Colorado says he is not afraid to give his name and surname.
“I live outside the country and here at least they won’t come looking for me at night.”
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.