El Salvador’s Bitcoin Law establishing the world’s most popular cryptocurrency as legal tender faces a host of opposition within the country and beyond, while at the same time garnering plenty of support outside its borders.
One of the fiercest opponents of bitcoin is the country’s most important leftist party, FMLN, which in June filed a lawsuit before the Supreme Court of Justice arguing the law is unconstitutional.
The creator and main proponent of the law is El Salvador’s president, Nayib Bukele, who founded and heads Nueva Ideas, a center-right political party.
FMLN parliamentary coordinator Jaime Guevara said the reason for filing the lawsuit was the public’s “resounding rejection” of the bitcoin law, based on polls showing that 65% of Salvadorans surveyed were against the bill.
Indeed, from the time the Law passed through now, Bukele has had to face several populist demonstrations against it in the streets. The most recent one occurred on Tuesday, the day the law was enacted, with an estimated 1,000 people marching in San Salvador, according to Reuters. Protesters burned a tire and set off fireworks in front of the Supreme Court building.
FMLN’s lawsuit went unanswered and on Sept. 5, the FMLN filed the lawsuit again, calling the bitcoin law unconstitutional and lacking support.
Meanwhile, on Tuesday, El Salvador’s Chamber of Commerce and Industry asked its 200+ members – 90% of which are small and medium-sized businesses – not to use bitcoin because of its volatility.
“There is not a single person I have talked to that tells me they are going to keep the bitcoins. Everyone is going to seek to convert them to dollars immediately and deposit them in a bank in the financial system,” said Jorge Hasbún, president of the Chamber, in a Twitter space organized by local newspaper elsalvador.com.
“The recommendation we are giving to the members is that, understanding their profile and their business model, they should not think about speculating with the money they need for payroll and to pay bills. They should transfer it to dollars because they pay salaries in dollars and that is the way it should be and should continue to be done,” Hasbún added.
Bukele’s plan has also faced opposition at the regional level. Before the law was implemented, the Guatemala-based Central American Institute for Fiscal Studies (ICEFI) argued that it should be repealed.
Ricardo Castaneda, ICEFI’s coordinator for El Salvador and Honduras, said on Sept. 2 that adequate time should be taken to conduct technical studies on the implications of adopting the law.
“From the ICEFI, we consider that the best thing to do is to repeal it,” Castaneda said.
At a global level, the International Monetary Fund (IMF) was one of the heavyweights that expressed its concerns with the Bitcoin Law after it was passed, issuing a statement in June that “adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis.”
The IMF added that it was “following developments closely and will continue our consultation with authorities.”
The IMF warned more recently, saying the law could add to bitcoin’s price volatility. Bukele cheekily thanked the organization for providing an opportunity for El Salvador to buy more bitcoin at a discount on Tuesday.
“Thanks for the dip @IMFNews. We saved a million in printed paper,” Bukele tweeted after El Salvador bought 150 more bitcoins following the drop in its price.
Support for Bukele
Much of the support for El Salvador’s plan has come from bitcoin enthusiasts outside the country.
One of the supporters is Jack Mallers, CEO of payments platform Stripe, when he announced Bukele’s bitcoin plan in June at the Bitcoin 2021 conference in Miami. Mallers said then his company was working with Bukele to implement the plan.
“As of now, El Salvador is set to be the first bitcoin country,” Mallers said at the time, “and the first country to make bitcoin legal tender and treat it as a world currency and have bitcoin on their reserves.”
Michael Saylor, CEO of MicroStrategy, which has been amassing huge amounts of bitcoin on its balance sheet, said in June that what is happening in El Salvador “is the future model of the 21st century digital economy.”
At the institutional level, the Honduras-based Central American Bank for Economic Integration (CABEI) began working with El Salvador to assist it in the implementation of bitcoin as a legal tender.
El Salvador’s decision is something “innovative that creates many spaces and opportunities,” CABEI’s president, Dante Mossi, said at then, adding that a technical advisory group was going to be created.