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Bitcoin becomes rallying cry for Salvadoran protests against authoritarianism
The cryptocurrency’s promise of subverting state power is being challenged in first nation to adopt it as legal tender
The double-paned glass of the Chivo (Bitcoin) ATM kiosk popped as the flames grew larger, wrapping around the collapsing wall and reaching toward the sky. The crowd, which was festive and loud all day as the protest snaked through San Salvador, watched mostly in silence after a small group smashed the glass wall and lit the furniture inside on fire. On the side of the small building, there was fresh graffiti of El Salvador’s President Nayib Bukele with his signature backward baseball cap, the word ‘Dictator’ scrawled below his image.
On September 7th Bitcoin became legal tender alongside the US Dollar, which was adopted in 2001. Bukele’s announcement of the change in June took almost everyone by surprise and gave the nation just 90 days to prepare. The cryptocurrency’s proponents have long claimed that it empowers the individual at the expense of the state. But Salvadoran protesters say it is yet another example of the abuse of state power, and are adopting it as a symbol for broader fears about the country’s descent into authoritarianism.
Thousands came out in September for the biggest demonstration against Bukele since he became president in 2019. The crowd was diverse, with plenty of university students alongside senior judges who had been informed that week that they would be fired. Everyone over 60 years old was being forced to retire, including nearly one in three judges, allowing Bukele to quickly populate the court with allies.
Jazmin Palacios, 42, had a ‘No al Bitcoin’ sign but when she spoke with Pirate Wire Services she struck a softer tone. “Bitcoin isn’t the problem. I think it can even be a good thing here, but right now it’s a distraction. Bukele tweets so much about Bitcoin so we don’t talk about how he is becoming a dictator.”
Bukele is still wildly popular with an approval rating of 76.4% according to a poll from the Central American University. His supporters point to falling crime rates, an improving economy, and his popular response to the pandemic.
El Salvador has been dominated for decades by the two political parties that emerged from the end of the civil war in 1992. In 2015, Bukele was elected mayor of San Salvador as a member of guerilla-cum-leftist party FMLN, but was expelled while still mayor for speaking out against the president, also in FMLN. Running as a reformist outsider, Bukele created a new party, Nuevas Ideas, (New Ideas) and was elected president in a landslide in February 2019, aged just 37.
Supporters of the Bitcoin law often argue that he is preparing the nation for a changing world and detractors are stuck in the past and reluctant to change.
“Bitcoin isn’t the problem. The problem is how the law was implemented,” said Jose Vela, a 28-year-old political activist who plans to attend Sunday’s protest.
After sweeping legislative elections in February 2021 Nuevas Ideas has a supermajority in congress. This allowed Bukele to announce his intention to create the law and pass it in the same week, with almost no discussion.
“If he really wanted to help people, he would have consulted us first,” Vela continued. “He controls everything and doesn’t ask us what we want. That’s the definition of a dictatorship.”
After the old Constitutional Court was fired and stacked with Bukele supporters--a move that pre-dated the forced retirement of older judges--the court ruled in September that a president can circumvent a constitutional ban on re-election by resigning before election day. This opens up the possibility of Bukele running in the 2024 election.
“Bitcoin exists to separate money from state, and even as we liberate the former, we should remain cautious of the latter,” Alex Gladstein, Chief Strategy Officer for the Human Rights Foundation explained in his in-depth article on Bitcoin adoption in El Salvador.
Even enthusiasts can be confused as to Bukele’s ultimate intentions with Bitcoin. Opposition activists like Vela often express fears over possible money laundering or point out that the government Bitcoin app, Chivo, has been opaque in its operations.
The Bitcoin law mandates that so long as they are capable, all businesses must accept both the US Dollar and Bitcoin, and the government has created the Chivo app to facilitate that. The app holds both and allows users to switch back and forth without any fees. It also allows the buyer and seller to each choose their currency. For example, the buyer can pay in Bitcoin but the seller can accept the value in USD if they choose, the conversion done under-the-hood at no cost.
While around 70% of the population do not have bank accounts, virtually everyone has a cell phone: there is more than one phone per person nationwide. Besides banking the unbanked, Bukele claims Bitcoin adoption will reduce transaction costs on remittances, which make up 24% of the GDP according to the World Bank.
Bukele has tweeted that over 3 million Salvadorans are already using Chivo, which is about half the country and significantly more than citizens with bank accounts.
Chivo was rushed to market, however, and has been buggy with reports of transactions failing and funds disappearing. The biggest concern is the lack of transparency though. “I’m worried that the government might use this to create fake dollars or fake Bitcoin,” Vela said, pointing out that the government has offered no proof that the user’s balances are backed up by anything, even though blockchain technology would make this possible.
The most potent critique of Bukele’s Bitcoin adoption is that he is not actually adopting Bitcoin. While Bitcoin is an open transparent network that gives end-users more control, Chivo is a walled garden that gives the state increased surveillance capabilities.
The motivations behind a government that generally has consolidated power adopting an open monetary network are still unclear. Even if the opposition is correct and Chivo is a clever way to assume more power, not everyone uses Chivo here. There are many businesses that use the Bitcoin network directly and while education remains a significant hurdle more people seem to be realizing that the government app isn’t the only option.
As Gladstein writes, “Bitcoin does not care about one’s intentions. It enables greater liberty and empowerment not by some ambitious humanitarianism but by each participant’s honest self-preservation…Just like “Trojan Horse” computer viruses, Bitcoin will infect authoritarian regimes, appearing helpful at first but proving debilitating over time.”
Disclosure: The author has been holding Bitcoin since 2013.