The Bitcoin Gamble in El Salvador Ends with a Difficult Start

As in El Salvador enter its time in bitcoin its sky will shine with the lights of a platoon of drones. “We’re going through an event,” said American cryptocurrency evangelist Brock Pierce. “They’ve done a great Burning Man before. They’ve done one in the Super Bowl. So we brought in the best drone crew in the world, and we’re going to put on a show in the sky.”

A former child artist, and now tech investor and famous Burner, in June Pierce led a delegation of crypto traders in the Latin American country, following the announcement by president Nayib Bukele that El Salvador would use bitcoin as a legal tender, in addition to the US dollar, starting with Sept. 7, 2021. Since then, Pierce has spoken to El Salvador government officials— “I was just phoning the president’s brother,” he said — and to businessmen seeking to face the country to provide novel-crypto requirement. He will now return to El Salvador to attend the big day. “The amount at which they’ve implemented it is even more impressive,” he said. “Like all things, I think it can be less perfect at first. But perfection is the enemy of progress.”

The speed with which the Bukele government took part in this experiment, which kicked off the start of bitcoin in the country just 90 days after parliament passed the law allowing the change, was truly shocking. To the point that one wonders whether the country, and its population, has benefited from higher leadership. Or, at least, from greater transparency.

Important details about how bitcoin’s adoption will play into practice are not yet clear, or have only been revealed in recent days. A The government regulation was released on Aug. 27 established that Salvadoran banks should offer to exchange bitcoin for dollars and vice versa – if done through a government -backed wallet – without charging commissions; the regulation also requires that all companies providing bitcoin-related services register with a government body, and adopt anti-money laundering measures (it is not clear what the penalties will be if they do not do so) .)

“It was done a week and a half before Sept. 7,” said Mario Aguiluz, chief sales officer at IBEX Mercado, a Guatemalan company that sells bitcoin exchange and payment solutions, which also operates in El Salvador. . “We really have to ask if the government is ready. Mixed bag. ”

There is also a lack of information about the government’s own bitcoin wallet, called Chivo. It is known that it will work with 200 Chivo ATM machines where users can exchange their bitcoin for cash, free of commissions (recently economist story reports a five percent fee charged for converting dollars into bitcoins, even if the publisher must use a third-party wallet), and that each Chivo wallet comes complete in the amount of $ 30 bitcoin as a government freebie. What we don’t know is who actually makes the wallet or the ATM machines, and what technology will support it.

According to Chris Hunter, co-founder of bitcoin firm Galoy, such plans change “almost every hour.” Hunter, whose bitcoin payment service in the Salvadoran coastal village of El Zonte has reportedly spurred the project across the country, said the situation was “very fluid” in early September. Just this past week, he was convinced that Chivo would not be able to use the lightning network, a system that significantly speeds up bitcoin transactions, which would otherwise take several minutes to confirm. “Now, it seems very clear to me – if you ask me to make a bet – that it will run until Tuesday,” Hunter said. The El Salvador government did not respond to a request for comment.

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