El Salvador Forced Through Its Bitcoin Law by Any Means Necessary

El Salvador’s Bitcoin Law went into effect on Tuesday. 

Bitcoin’s loudest advocates have celebrated the country’s total embrace of Bitcoin, claiming the cryptocurrency will usher in a new era of financial freedom for the Salvadorans. President Nayib Bukele ceremoniously purchased 400 Bitcoin, worth a little more than $20 million, for El Salvador to usher in the new law.

But not everybody is celebrating—or praising Bukele. 

Salvadorans living there say the new Bitcoin Law has already brought out the worst in the President’s already well-documented authoritarian tendencies. 

“[The government] has harassed big business and small business alike. They've sent government agents to inspect businesses to ensure they are following labor regulations just because C-level executives have said negative things about the [Bitcoin] law,” one local business person told Decrypt on the condition of anonymity.

This is the story about El Salvador that Bitcoin maximalists don’t want you to read. 

Bitcoin mandatory for merchants in El Salvador

Last month, President Bukele insisted Bitcoin would not be forced on anyone.

“If someone wants to continue loading cash, not receive entry bonus, not win over customers who have Bitcoin, not grow your business and pay commission on remittances, you can keep doing it,” he tweeted. 

But that’s not quite true. A short clause in the legislation itself shows that acceptance of Bitcoin is—and will be—compulsory. 

New Poll Finds El Salvador Still Doesn’t Want Bitcoin

Most Salvadorans do not want to accept Bitcoin as legal tender, according to an August poll by the Central American University (UCA).  A total of 67.9% of 1,281 people surveyed said they disagree—or strongly disagree—with Bitcoin becoming legal tender in the country. Under a third of respondents (32%) said they agree with the decision to a certain extent.  “What we can see in this survey, in addition to this broad rejection of Bitcoin as legal tender, is that for the first time we found a signif...

“Every economic agent must accept Bitcoin as payment when offered to him by whoever acquires a good or service,” reads Article 7 of the Bitcoin Law. 

“It crushes my soul to see Bitcoin maximalists around the world cheering this when, if they actually sat down and read the law and regulations, it is completely opposite to everything they preach,” the local businessperson told Decrypt. 

President Bukele’s legal counsel is doubling down on their position too. 

In an interview on Frente a Frente, a Salvadoran news program, Javier Argueta said that business people who do not use the Chivo wallet—which will facilitate Bitcoin transactions in El Salvador—will be subject to sanctions. He later retracted his statement. 

Bitcoin by any means necessary

The forced adoption of the world’s leading cryptocurrency has also sparked hefty criticism among citizens. Bukele’s government has been swift to silence these critics too.

Six days ago, police arrested Mario Gomez, a vocal critic of Bukele’s Bitcoin Law. Law enforcement alleged the activist was being investigated over allegations of financial fraud, but the police failed to produce an arrest warrant at the time. 

Anti-Bitcoin Law Activist Arrested in El Salvador

Police in El Salvador today arrested, without charge, cryptocurrency and computer systems specialist Mario Gomez, a vocal critic of the country’s newly passed Bitcoin Law, according to local reports. El Salvador’s controversial Bitcoin Law, spearheaded by President Nayib Bukele, makes Bitcoin legal tender in the country, on par with the U.S. dollar, and compels most merchants to accept it as payment. Gomez, the founder of tech incubator Hackerspace, is among the more high-profile Salvadorans who...

“The police doesn’t have to take anyone to court. They just scare one of the vocal dissidents with kidnapping him a couple of hours or a couple of days,” a second local businessperson told Decrypt on the condition of anonymity. 

“The police kidnapped Mario. He was ‘arrested’ without a judicial order,” they added.

Gomez’s legal counsel, Otto Flores, reportedly said it was “not clear why Mario was handcuffed...and was taken away by the police without knowing what he is being accused of,” adding that the arrest was “arbitrary.” 

El Salvador and authoritarianism

Though the crypto community has embraced the central American country, Bukele doesn’t quite fit the mold of the freedom-seeking leader Bitcoin enthusiasts have championed.

Last week, for example, El Salvador’s courts ruled that Bukele can serve two consecutive terms, a decision that was slammed as unconstitutional by the United States and other foreign powers. 

Josè Miguel Vivanco, a vocal critic of Bukele’s government, tweeted yesterday that Bukele is dismantling the institutions of democracy faster than Hugo Cháves did in Venezuela. 

“What’s next? If we are guided by the history of Venezuela: censorship of the press, restrictions on civil society, total impunity for human rights violations, arrests of opponents, electoral fraud,” Vivanco said. 

Bitcoin and El Salvador: An Inconvenient Truth

To close out this year’s Bitcoin 2021 conference in Miami, El Salvador’s President, Nayib Bukele, announced that his country will adopt Bitcoin as legal tender.  On Wednesday, the Salvadoran Congress approved his bill to label Bitcoin legal tender. The new law says it is the State’s obligation to facilitate the financial inclusion of its citizens, and that in order to promote the economic growth of the nation, it is “necessary to authorize the circulation of a digital currency whose value answer...

Unfortunately, El Salvador’s slide to authoritarianism is not new, and some of what Vivanco has described has already happened under Bukele’s watch. 

“The path Bukele is marking with his words and deeds passes through all the stages used by populist leaders on their way to the establishment of totalitarian regimes,” Steve Hanke, applied economics professor at Johns Hopkins University, told Decrypt. 

The Economist’s Democracy Index of 2020 defined El Salvador as a “hybrid regime,” meaning the government is only one category above an outright authoritarian regime and well below a full democracy. 

New Round of Protests Against President Bukele's Bitcoin Law in El Salvador

Salvadorans have taken to the streets in protest against the country’s acceptance of Bitcoin as legal tender, which will take place on September 7, 2021.  “No al lavado de dinero corrupto,” signs read during a protest in San Salvador last Friday—which means “no to laundering corrupt money.”  This is not the first time El Salvador has seen protests inspired by President Bukele's embrace of Bitcoin. In July, citizens gathered outside the country's Legislative Assembly to protest the Bitcoin law. "...

The report is littered with poor scores on a variety of political culture assessments, behind which are a highlight reel of Bukele’s heavy-handed political decisions. 

In February 2020, armed soldiers and law enforcement accompanied the president into El Salvador’s parliament. Bukele demanded lawmakers approve his proposal for a $109 million loan that would fund military and law enforcement. 

Amid the COVID-19 pandemic, Bukele has repeatedly shown a disdain for human rights—detaining people arbitrarily in containment centers in conditions that risked their health.

Police were also caught brutally beating an 80-year-old man for allegedly not complying with COVID-19 requirements. Bukele had previously explicitly instructed police to “be tougher with people violating the quarantine,” and that he would not mind if law enforcement “bent someone’s wrist” during an arrest. 

What’s the end game? 

El Salvador’s Bitcoin experiment has been public knowledge for months now, but a lot remains to be seen. 

An investigation by Decrypt showed that Strike—a central partner to El Salvador’s Bitcoin embrace—did not have the necessary licenses to operate legally. To date, Strike has not responded to Decrypt’s request for comment. 

El Salvador's U.S. Bitcoin Partner Strike Lacks Key Licenses

The President of El Salvador, Nayib Bukele, caused a stir this month when he declared his country would become the first in the world to accept Bitcoin as legal tender. To carry out this plan, the country will rely on partners like Chicago-based Zap Solutions Inc., whose digital wallet Strike is already being used by Salvadorans in a coastal town the crypto community has dubbed Bitcoin Beach. Strike has the technology to help El Salvador embrace Bitcoin, but one thing it appears not to have are...

In May, the United States named five of Bukele’s closest aides—including his Chief of Cabinet Carolina Recinos and Regelio Rivas, former Minister for Justice and Public Security—as corrupt. 

As Hanke told Decrypt, Bukele may have gained “substantial notoriety” through his Bitcoin plans, but this “is just one step in Bukele’s much broader scheme, namely, his rush to obtain absolute power.”