Even as El Salvador's plan to make Bitcoin legal tender takes effect, opposition to the bill lingers.

2021 will almost certainly go down in history as one of the most exciting years for Bitcoin (BTC), considering its recent embrace by billionaires and mainstream institutions, not to mention El Salvador's move to make it official tender.

In the case of El Salvador, it almost appears as though the entire world is watching to see whether the experiment will be a success or a complete failure for the Central American nation.

With the official adoption of Bitcoin as legal cash in El Salvador on Sept. 7, a surge of protests against the decision has raised concerns and ambiguity about how the new law will be implemented.

From the arrest of individuals protesting the Salvadoran government's new rule to the wave of residents denouncing Bitcoin's legal status across the country, the pioneering cryptocurrency is encountering some headwinds.

How Bitcoin got to be considered legal tender

It all began in early June, when Salvadoran President Nayib Bukele tweeted that the country's legislative assembly had passed a bill legalising Bitcoin. The law was scheduled to take effect on Sept. 7 and would allow the country's 4.5 million inhabitants to make Bitcoin transactions in stores statewide.

Bukele stated in his announcement that once a formal bill establishing Bitcoin as legal cash is passed, “Chivo ATMs” — Chivo is the name of El Salvador's official Bitcoin wallet — will eventually be “everywhere” in the country. This would enable El Salvadorans to cash out their Bitcoin holdings without incurring commissions, as is the case with services such as Western Union.

Additionally, Bukele promised citizens that they will not be compelled to use Bitcoin. The 40-year-old president stated in a statement that "someone may always queue at Western Union and pay a commission."

“What if someone is averse to using Bitcoin? [Well,] then, refrain from downloading the app and carry on with your normal life. Nobody is going to take your money,” he stated emphatically.

The initial wave of opposition

Following the news, a group of activists calling themselves the Popular Resistance and Rebellion Block (BRRP) formed in order to voice their opposition to the Bitcoin regulation.

“President Nayib Bukele passed the law making cryptocurrencies legal tender in the country without conducting necessary public consultations,” one activist stated.

While the protest group cited difficulties such as Bitcoin's volatility as reasons for caution, its primary argument is that the law benefits wealthy firms involved in accused money laundering at the expense of corrupt officials.

“Bitcoin is mostly used by large businesses, particularly those with ties to the government, to launder illicit funds,” one protestor stated.

According to a letter from the BRRP organisation, "entrepreneurs who invest in Bitcoin will avoid paying taxes on their gains, and the government will spend millions of dollars on taxes to execute the entire campaign."

Indeed, the law to legalise Bitcoin includes some intriguing provisions, like a zero capital gains tax on BTC. Additionally, the measure granted investors permanent residency by making a three-BTC investment in El Salvador.

Mario Gómez's arrest

As the contentious Bitcoin bill became law on Sept. 7, both supporters and detractors have emerged, with the newest development being Mario Gómez's detention.

According to many local news agencies in El Salvador, Mario Gómez — a computer and cryptography expert who is also an outspoken critic of the government — was arrested and kept for several hours before being released by local police.

Gómez has been known to often express his opposition to the government's move to legalise Bitcoin on social media.

Observers such as Steve Hanke, a Johns Hopkins University economist, characterised Gómez's arrest as an example of a "authoritarian police strategy in operation."

According to Hector Silva, a counsellor in the mayor's office in San Salvador, "the arrest of Mario demonstrates the government's vulnerability in terms of enforcing the Bitcoin law, but confirms something far more hazardous."

“They are willing to use every institution required to silence critical voices,” Silva continued.

Although the police stated that Gómez was held as part of an investigation into financial fraud, news sources indicated that he was seized without a warrant and that an attempt was made to seize his phone and computer.

Protests of citizens

Prior to Gómez's arrest, seniors in El Salvador flocked to the streets to protest the government's plan to pay retirees' pensions using the volatile cryptocurrency.

While speaking with reporters, one demonstrator from the audience — which included veterans, disabled pensioners, workers, and retirees — stated, "we are aware that this coin changes significantly." It's worth fluctuates from second to second, and we shall have no say over it.”

While Bukele has stated that the usage of Bitcoin is optional in the country and that salaries and pensions will continue to be paid in US dollars, the protestors highlighted a general lack of information about the technology.

Additionally, many have claimed that officials have provided little information about the benefits and drawbacks of Bitcoin.

“We have no idea what currency is being used. We have no idea where it originates from. We have no idea whether it will generate profit or loss. We have no idea,” one Salvadoran stated.

Bukele's management responded by stating that the usage of Bitcoin is not required and that necessary training and alternative payment methods will be supplied.

Contradictory views

While President Bukele has an extremely high approval rating, recent surveys on the Bitcoin bill indicate significant opposition to the measure.

According to a recent study performed by El Salvador's Universidad Centroamericana José Siméon Caas, up to two-thirds of respondents favour repealing the law, and over 70% prefer the US dollar over Bitcoin.

International institutions such as the International Monetary Fund have also expressed concern about the macroeconomic, financial, and legal implications of El Salvador's Bitcoin adoption.

Siobhan Morden, head of Amherst Pierpont's Latin America Fixed Income Strategy, stated that "the ambitions for Bitcoin under a more authoritarian leadership will almost certainly exacerbate worries about corruption."

Others, on the other hand, are hopeful that the new rule will eventually benefit Salvadorans, given the country's economy's reliance on remittances sent home by migrants. Remittances to the country totalled $6 billion last year, accounting for a fifth of gross domestic product.

“El Salvador's legalisation of Bitcoin as legal cash provides the government with some flexibility and autonomy in financial matters,” said Alexander Blum, managing director of Two Prime.

Alberto Echegaray Guevara, an artist and entrepreneur, echoed his sentiments, stating, "President Bukele's Bitcoin Law is not only aimed at making international money transfers cheaper and easier for 70% of his unbanked population, but also at establishing a new economic hub and remittances platform in Central America."

According to Adrian Pollard of HollaEx, "it is common for new technology rollouts to have glitches and opposition, but that is precisely why it was made voluntary."

“I'm sure there will be further hiccups along the way for El Salvador, but they will be worth it in the long run. Indeed, I suspect that other South American countries are not far behind and will follow suit,” Pollard concluded.

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