El Salvadorans took to the streets to protest on Friday against the adoption of Bitcoin as an official currency, a move that made waves in June when lawmakers voted to adopt it as legal tender.
The new crypto law would put Bitcoin on a level pegging with the US dollar, a move that has been criticized by the International Monetary Fund (IMF).
Hundreds of demonstrators – including workers, veterans, and pensioners – marched through the capital San Salvador to voice their concerns about the use of cryptocurrency, especially if in the future it was relied on to pay for pensions and welfare instead of the US dollar.
Protesters held up signs saying “Bukele we don’t want bitcoin” and “No to corrupt money laundering”.
“We know this coin fluctuates drastically. Its value changes from one second to another and we will have no control over it,” Stanley Quinteros, a member of the Supreme Court of Justice’s workers union, told Reuters.
Neighboring central American countries are eagerly waiting to see if El Salvador’s adoption of Bitcoin as parallel legal tender cuts the cost of remittances, an important source of income for millions of people, the region’s development bank said.
El Salvadoran president Nayib Bukele’s congressional allies have already approved legislation giving the cryptocurrency official currency status alongside the US dollar, a world first.
But the move doesn’t officially take effect until September 7.
Bukele has touted Bitcoin adoption as a way to facilitate remittance payments from Salvadorans living abroad.
“Everyone is watching if it goes well for El Salvador and if, for example, the cost of remittances drops substantially … other countries will probably seek that advantage and adopt it,” Dante Mossi, the executive president of the Central American Bank for Economic Integration (CABEI), told Reuters.
Mossi called the plan an “out of this world experiment” geared at increasing financial inclusion in a region where many people lack access to bank accounts or credit cards, and rely on remittances – money sent home from relatives living in the United States.
CABEI, the regional development bank, is giving El Salvador technical assistance on implementing the cryptocurrency, an important show of support after the World Bank declined to help, citing environmental and transparency drawbacks.
Remittances key to Bitcoin adoption
Mossi said the Central American nations that receive the most remittances are those most likely to favour using Bitcoin and underscored that CABEI had a “fiduciary obligation” to support El Salvador in its request for help.
“Guatemala, Honduras and El Salvador are the countries that would have the most to gain if the adoption of bitcoin lowered the cost of sending remittances,” said Mossi.
CABEI participated in a recent meeting of the Central American Monetary Council, part of the Central American Integration System (SICA), where participants asked about El Salvador’s bitcoin plans and showed interest, he added. ¨
The Central Bank of Honduras referred Reuters to a June 11 statement which said the bank does not prohibit, supervise or guarantee the use of cryptocurrencies as methods of payment in the country.
The governments of Guatemala and Honduras did not immediately respond to a request for comment.
Under 1 per cent of the volume of global cross-border remittances are currently in crypto, according to Autonomous Research, but in the future crypto is expected to account for a larger slice of the more than $500 billion (€424 billion) in for annual global remittances.
Bitcoin offers, in theory, a quick and cheap way to send money across borders without relying on traditional channels.
CABEI’s head of investments Carlos Sanchez said the bank’s technical assistance is focused on helping El Salvador design a legal framework for the adoption of bitcoin and to make sure strict international money laundering protocols are adhered to.
The assistance is meant to help El Salvador “navigate waters that have yet to be explored,” said Sanchez. (Euronews/Reuters)