Connect with us


How El Salvador Is Testing Bitcoin’s Promise of Financial Liberty

SAN MIGUEL, El Salvador — Bitcoin’s proponents dream of a financial system largely free of government meddling. But the first time that cryptocurrency became a national currency, it was imposed on an unwilling population by an increasingly authoritarian ruler using a secretive state-run system.

The surprising announcement last month that El Salvador had adopted bitcoin, the world’s largest cryptocurrency, as legal tender caught its population by surprise, and made the poor, conservative Central American nation an unlikely bellwether of a global technological transformation.

The outcome of the uncharted experiment could help determine whether cryptocurrency delivers the freedom from regulation that its proponents envision — or whether it becomes another tool of control and enrichment for autocrats and corporations.

“We’re now at a turning point in cryptocurrency,” said Lane Rettig, an entrepreneur and former senior programmer at the Ethereum Foundation, an organization that supports the technologies behind Ethereum, the world’s second-largest cryptocurrency. “The same technology of freedom could become part of a new technological dystopia.”

The threat of government and corporate subversion of cryptocurrency’s libertarian roots echoes, in part, the evolution of digital technologies like the internet and social media, Mr. Rettig said. Built on the democratic premise of liberating information and connecting people, these innovations have proved vulnerable to censorship, manipulation by propagandists, and control by profit-driven corporations, he said.

And now, after years of largely ignoring cryptocurrencies, governments around the world are scrambling to respond to the mushrooming $2 trillion industry as it begins to disrupt banking and seep into everyday lives.

In June, El Salvador’s 40-year-old, populist president, Nayib Bukele, announced that he would make bitcoin — a highly volatile financial token operated by a decentralized community of technology entrepreneurs — the national currency, on a par with the current legal tender, the U.S. dollar.

“This will generate jobs and help provide financial inclusion to those outside the formal economy,” Mr. Bukele said in a video address. He also said it would turn the country into an innovation and tourism hub.

The idea stemmed from a social experiment started in 2019 in the Salvadoran surfing town of El Zonte, where grass roots activists used a bitcoin donation to create a community network of cryptocurrency payments. The project, Bitcoin Beach, overcame the residents’ distrust by integrating the currency into everyday lives, using bitcoin to reward students for doing homework and to provide pandemic aid to families.

“Our strategy to create an ecosystem where bitcoin would work is based on two elements: time and trust,” said Luis Morales, a Bitcoin Beach organizer.

Both elements are conspicuously missing from Mr. Bukele’s strategy.

According to a poll conducted by El Salvador’s chamber of commerce, businessmen, international organizations and 93 percent of Salvadoran people opposed the adoption of bitcoin.

Nonetheless, using Mr. Bukele’s control of the country’s congress and courts, on Sept. 7, the government made all vendors legally obligated to accept bitcoin — a move that triggered El Salvador’s largest street demonstration in years and dented Mr. Bukele’s tremendous popular support.

“We all understand that cryptocurrency is the future, but you can’t foster it by forcing everyone to use it,” said Jorge Hasbún, the head of the commerce chamber.

To promote the currency’s use, the government has created a cellphone application — Chivo Wallet — which allows citizens, including many who do not have bank accounts, to send and receive bitcoin-denominated claims, convert them to dollars and withdraw them from special A.T.M.s. It also gave $30 in bitcoin to every Salvadoran who adopts the wallet.

But the app has been plagued by technical failures, and many A.T.M.s ran out of money as people rushed to convert bitcoin holdings into the more stable dollar bills.

The government also said it has set aside $150 million, equivalent to 12 percent of El Salvador’s public investment budget last year, to ensure bitcoin’s free convertibility into dollars. Officials offered no explanation on how they will prevent the use of bitcoin for money laundering, or what would happen if the conversion fund ran out of cash.

Despite shortages of public funds, Mr. Bukele announced in a series of Twitter postings that his government bought about $30 million worth of bitcoin last month. When the cryptocurrency’s price temporarily plunged afterward, he announced new purchases, their purpose unexplained.

Nearly a month after the introduction of bitcoin, it remains unclear where the dollar funds and the bitcoin held by the government, or reflected in Chivo Wallets, are, or what they are worth.

Although all bitcoin transactions carry a code to ensure transparency, Mr. Bukele has treated the bitcoin policy as a state secret. He has classified all information related to Chivo Wallet, which was created with taxpayer funds, but is run as a private enterprise by undisclosed individuals.

“He is playing Russian roulette with public money,” said Ruth López, a Salvadoran lawyer at the nonprofit organization Cristosal, which sued the government over the Chivo Wallet’s financing irregularities.

Mr. Bukele, his ministers of economy and finance, the trade secretary, the attorney general, the head of the congressional economic committee, the financial regulator, the central bank and the state bank financing the bitcoin fund all declined to comment.

On the streets, the policy’s impact has been mixed.

Mr. Bukele says three million Salvadorans, or more than half of all adults, have installed Chivo Wallet, but in reality, the use of bitcoin remains limited. Most fear the cryptocurrency’s extreme price volatility, say they lack technological skills or distrust the government’s intentions.

But the cryptocurrency has allowed at least some Salvadorans without bank accounts to access digital payments, invest savings or boost earnings, and its use is gradually picking up among the youth.

In the provincial city of San Miguel, the Argueta Pérez family said sales of streetwear from their market stalls rose after they put up signs saying they accept bitcoin.

Nearby, Laura Trejo, 29, a student, lined up outside a Chivo A.T.M. to withdraw remittances sent by her uncle, without paying a commission. Next to her, José Ercidio, 50, a vegetable vendor, waited his turn. He said Chivo Wallet had allowed customers to send him small sums, boosting sales.

“It’s a benefit for the poor and humble people,” he said.

Last month Mr. Bukele, in an apparent joke targeting critics, changed his Twitter profile to read, “the coolest dictator in the world.” But, as he rapidly consolidates power and cracks down on opponents, there are growing concerns in El Salvador that Mr. Bukele’s adoption of bitcoin was motivated more by his quest for control — and desire to avoid international pressure — than by his desire for financial inclusion.

As Mr. Bukele has tightened his control on the nation, relations with the Biden administration have deteriorated, making Mr. Bukele increasingly concerned about Washington’s outsized influence on the country’s economy, said two Salvadoran officials familiar with the president’s thinking. They spoke on condition of anonymity to avoid reprisals.

For example, remittances sent by immigrants, primarily from the United States, account for a quarter of the country’s gross domestic product. By building a parallel financial system based on cryptocurrency, Mr. Bukele could bypass the American banking system and keep the remittances flowing into the state-run Chivo Wallet in the event of future economic pressure from Washington, the two officials said.

Other countries already facing sanctions, including Venezuela and North Korea, are believed to have used cryptocurrency to avoid oversight.

“For the government, bitcoin is about having a Plan B,” said Ricardo Castaneda, a Salvadoran public policy expert.

The adoption of bitcoin has also deepened Mr. Bukele’s impasse with international lenders. His talks with the International Monetary Fund over a crucial $1 billion loan have stalled, as the lender became increasingly concerned about the deterioration of the rule of law and bitcoin’s threat to financial stability.

Lack of I.M.F. funding has in turn blocked other traditional sources of funding, complicating Mr. Bukele’s populist spending programs. El Salvador’s bonds fell sharply after the adoption of bitcoin as Wall Street became concerned over Mr. Bukele’s ability to pay existing debts.

The government is now exploring ways to issue sovereign bonds tied to bitcoin and to create new bitcoin with geothermal power. Both moves could create an alternative source of funding that bypasses traditional lenders demanding accountability, experts said.

“What Bukele is doing is not bitcoin, but a centralized, state-run banking system,” said Mario Gómez, a Salvadoran data expert who was detained by police and held for six hours last month on unspecified accusations of financial crimes after organizing social media seminars about cryptocurrency risks. “It is the antithesis of the principles of bitcoin champions.”

Continue Reading
Click to comment

Leave a Reply

Tu dirección de correo electrónico no será publicada. Los campos obligatorios están marcados con *


El Chapo’s Wife Sentenced to 3 Years in Prison

Emma Coronel Aispuro, the wife of the notorious Mexican drug lord best known as El Chapo, was sentenced on Tuesday to three years in prison on charges of helping run her husband’s multibillion-dollar criminal empire and playing a role in his escape from custody after he was captured in 2014.

Ms. Coronel, a former beauty queen who married El Chapo — whose real name is Joaquín Guzmán Loera — in 2007, on her 18th birthday, was arrested at Dulles International Airport, near Washington, in February, two years after her husband was convicted at a trial in New York City and sentenced to life in prison.

She had been in the cross-hairs of U.S. authorities for months. She ultimately pleaded guilty in June to helping Mr. Guzmán smuggle drugs across the U.S. border and make his dramatic flight from a high-security Mexican prison, an operation that involved a self-powered rail cart, a watch outfitted with a GPS device and a mile-long tunnel dug into the shower of his cell.

A dual U.S.-Mexican citizen, Ms. Coronel has, like her husband, long been a figure of public fascination, a role that she has often stoked by her lavish lifestyle and her laissez-faire attitude toward paparazzi. At her sentencing hearing in Federal District Court in Washington, she expressed “true regrets” for her crimes and begged Judge Rudolph Contreras to ignore the fact that she was the wife of an infamous drug lord.

“Perhaps because of this, there is reason for you to be harder on me,” Ms. Coronel said. “But I pray that you do not do that.”

While it is unusual for law enforcement to go after the spouses of drug-world figures, prosecutors at Mr. Guzmán’s trial offered substantial evidence that Ms. Coronel, while still in her 20s, was deeply enmeshed in her husband’s criminal business.

They introduced BlackBerry messages, for instance, that made clear that she had helped Mr. Guzmán conduct his illicit operations, sometimes alongside her own father, Inés Coronel Barreras, who was one of her husband’s top lieutenants and was taken into custody in 2013 in Mexico.

Other messages indicated that Ms. Coronel was intimately involved not only in Mr. Guzmán’s famous 2015 tunnel escape from Altiplano prison in Toluca, Mexico, but also in helping him to evade capture by American and Mexican authorities after a botched raid in 2012 in the Mexican resort town Cabo San Lucas.

At Mr. Guzmán’s trial, his onetime chief of staff, Dámaso López Núñez, told the jury that Ms. Coronel had sought to help her husband escape from prison yet again after he was recaptured in 2016 and returned to Altiplano. According to Mr. López, Ms. Coronel hatched a plot to bribe Mexico’s top prison official, but Mr. Guzmán was extradited to the United States to stand trial before the plan could be carried out.

As part of her plea deal with the government, Ms. Coronel agreed to turn over about $1.5 million in illicit proceeds from her husband’s illegal operations. While she admitted to helping him move at least 450 kilograms of cocaine, 90 kilograms of heroin and nearly 90,000 kilograms of marijuana into the United States over the years, she still received a relatively light sentence in part because her role in smuggling even that amount of drugs made her a “minimal participant” in a much larger criminal enterprise, according to her plea deal.

“The defendant was not an organizer, leader, boss or other type of manager,” Anthony J. Nardozzi, a federal prosecutor, told the court. “Rather she was a cog in a very large wheel of a criminal organization.”

In the wake of Ms. Coronel’s arrest, there was widespread speculation that she — like so many of Mr. Guzmán’s former allies — had decided to cooperate with U.S. authorities against other members of the organization he once led, the Sinaloa drug cartel. But in court papers filed this month, prosecutors said she had helped the government only in the prosecution of her own case.

Ms. Coronel’s lawyer, Jeffrey Lichtman, called the allegations that she had cooperated with the government “garbage,” adding that they had put his client’s life in danger. “I don’t know if she can ever go back to her home in Mexico,” Mr. Lichtman said.

The Sinaloa cartel remains one of Mexico’s most powerful criminal mafias, even in Mr. Guzmán’s absence. It is said to be run by an uneasy alliance of his sons, one of his brothers and his longtime partner, Ismael Zambada García, all of whom have been indicted in the United States.

Continue Reading


U.S. Removes Colombia’s FARC Rebel Group From Terrorist List

WASHINGTON — The State Department removed the Revolutionary Forces of Colombia from its list of foreign terrorist organizations on Tuesday, as many of the group’s former commanders have turned to conventional politics after a decades-long conflict.

In a statement, Secretary of State Antony J. Blinken said the group, known as FARC, had “formally dissolved and disarmed” and “no longer exists as a unified organization that engages in terrorism or terrorist activity or has the capability or intent to do so.”

The move, which drew criticism from several prominent Republicans, is a sign of the Biden administration’s support for a fragile peace deal that the Colombian government signed with the FARC in November 2016. The agreement officially ended a five-decade conflict in which the U.S. military backed the government against a left-wing fueled insurgency that was funded by the drug trade. The fighting left more than 220,000 people dead.

Colombia had urged Washington for years to remove the FARC from its official list of terrorist groups, and Mr. Blinken said in his statement that the shift would allow the United States to “better support implementation of the 2016 accord, including by working with demobilized combatants.” Many of the FARC’s former top military commanders are now prominent politicians.

Under the deal, more than 13,000 FARC rebels agreed to lay down their arms in return for more government investment in neglected rural areas. But implementation of the accord has been shaky. Government aid has been slow to materialize in remote areas, and pockets of armed rebels carry on their fight.

After a helicopter carrying Colombia’s president, Iván Duque, was attacked in July, the government arrested 10 former FARC rebels and charged them with attempted assassination and a car bombing at a military base.

Mr. Blinken said two rebel groups formed by former FARC commanders who refused to demobilize were designated terrorist organizations. Segunda Marquetalia and the Revolutionary Armed Forces of Colombia — People’s Army, or FARC-EP, are responsible for armed attacks, assassinations and hostage-takings, he said.

The United States also designated several leaders of the two groups as terrorists.

Some Republicans have criticized the Biden administration’s decision to remove the FARC’s terrorist group designation. After the planned action was first reported last week by The Wall Street Journal, the top Republican on the House Foreign Affairs Committee, Representative Mike McCaul of Texas, called the move “an exercise in appeasement.”

FARC members “have not exercised remorse or acts of contrition for their ongoing narco-terrorism against innocent Colombians & Americans,” Mr. McCaul wrote on Twitter.

“President Biden’s decision to remove the FARC from the State Department’s list of Foreign Terrorist Organizations will embolden terrorist groups throughout Latin America, empower narco-traffickers and pave the way for Castro-chavismo in Colombia,” Florida’s Republican governor, Ron DeSantis, said in a statement.

Continue Reading


Barbados Drops the Queen and Becomes a Republic

In the early hours of Tuesday, at a ceremony attended by hundreds of masked officials, a prince and at least one pop star, the Caribbean island of Barbados became a republic, cutting ties with Queen Elizabeth II and casting off the last major vestige of its colonial past.

The nation swore in its first president, Sandra Mason, a former governor general who had been appointed by the queen. A 21-gun salute rang out as the national anthem played. The red, yellow and navy blue royal flag was lowered — exactly 55 years after the country gained independence from Britain.

“Today, debate and discourse have become action,” Ms. Mason, 72, told the onlookers gathered in the capital, Bridgetown. “Today, we set our compass to a new direction.”

Ms. Mason received a majority vote in Parliament in October to take on the role. In a speech afterward, Prime Minister Mia Mottley said: “We believe that the time has come for us to claim our full destiny. It is a woman of the soil to whom this honor is being given.”

The island nation, a democracy of about 300,000 people, announced in September that it would remove Queen Elizabeth as head of state, the latest Caribbean island to do so. It joined Guyana, which gained independence in 1966 and became a republic in 1970; Trinidad and Tobago, which became independent in 1962 and a republic in 1976; and Dominica, which gained full independence as a republic in 1978.

Australia, Canada, Jamaica, New Zealand and Papua New Guinea are among the nations that still call the queen their head of state. Barbados will remain part of the Commonwealth, a voluntary association of 54 countries with roots in the British Empire.

On Tuesday, thousands celebrated across Barbados as nearly 400 years of British rule ended.

In the audience to witness the uncoupling in Bridgetown was a representative of Britain: Prince Charles, Elizabeth’s eldest son and heir. He received the Order of Freedom of Barbados.

In a speech, Charles delivered a message from his mother, conveying the “warmest good wishes.” He also congratulated Barbadians and said, “From the darkest days of our past, and the appalling atrocity of slavery, which forever stains our history, the people of this island forged their path with extraordinary fortitude.”

“Tonight you write the next chapter of your nation’s story,” he added. “You are the guardians of your heritage.”

Also among the crowd was the global pop star Rihanna. During the ceremony, the singer, who was born Robyn Rihanna Fenty in Barbados, was declared a national hero.

She received the honor, Prime Minister Mottley said, for commanding “the imagination of the world” with her excellence, creativity, discipline and, “above all else, her extraordinary commitment to the land of her birth.”

“May you continue to shine like a diamond,” Ms. Mottley added.

Continue Reading