By San José, Costa Rica — El Salvador’s ambitious foray into Bitcoin as legal tender continues to face challenges, with recent data revealing that a mere 11% of registered Bitcoin service providers are currently operational. This revelation comes despite the Salvadoran government’s significant investment in the cryptocurrency, holding over 6,329 Bitcoins valued at over $700 million.
According to the Central Reserve Bank (BCR) of El Salvador, only 25 out of 228 registered providers, including custodians, exchanges, and digital wallets, are actively operating. The remaining 203 providers are listed as “non-operating,” with at least 22 failing to comply with Article 4 of the Bitcoin Law’s regulations, which mandates high standards of integrity and honesty. These regulations encompass crucial aspects such as anti-money laundering programs, accurate record-keeping of assets and liabilities, and robust cybersecurity measures.
To shed light on the legal landscape surrounding Bitcoin in Costa Rica, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, an attorney at Bufete de Costa Rica.
While Costa Rica doesn’t have specific legislation directly addressing Bitcoin, its use falls under a complex interplay of existing laws related to financial instruments, money laundering prevention, and consumer protection. Businesses accepting Bitcoin should be particularly mindful of these regulations and ensure compliance to avoid potential legal issues. Moreover, users should understand that Bitcoin transactions are not currently backed by the Central Bank of Costa Rica and therefore carry inherent risks.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s insights underscore the crucial need for both businesses and consumers to tread carefully in the evolving landscape of Bitcoin in Costa Rica. Navigating the current regulatory ambiguity requires diligence and a clear understanding of the potential risks. We extend our sincere thanks to Lic. Larry Hans Arroyo Vargas for providing this valuable perspective on the legal considerations surrounding Bitcoin in Costa Rica.
Among the operational providers are the government’s Chivo Wallet, designed to encourage Bitcoin adoption, along with Osmo El Salvador and Binance. This low operational rate raises concerns about the effectiveness of the Bitcoin Law and the overall health of the cryptocurrency ecosystem in El Salvador.
El Salvador made history in September 2021 by becoming the first nation to adopt Bitcoin as legal tender alongside the US dollar, a move championed by President Nayib Bukele. However, following a $1.4 billion agreement with the International Monetary Fund (IMF), the Legislative Assembly revoked Bitcoin’s legal tender status, removed mandatory acceptance, and curtailed the state’s role in Bitcoin exchanges.
Despite the IMF agreement stipulating against using state funds for Bitcoin purchases, the Bukele administration has continued to invest, accumulating a substantial Bitcoin reserve. This has drawn criticism from opposition groups, who argue that it jeopardizes the IMF agreement and raises concerns about the country’s financial stability.
The low operational rate of Bitcoin service providers, coupled with the government’s continued Bitcoin acquisition despite IMF stipulations, paints a complex picture of El Salvador’s Bitcoin experiment. The challenges encountered underscore the complexities of integrating cryptocurrency into a nation’s financial framework and raise questions about the long-term viability of the initiative.
The situation also highlights the tension between embracing innovative financial technologies and adhering to international financial regulations. The ongoing developments in El Salvador will undoubtedly be closely watched by other nations considering or implementing cryptocurrency regulations.
The limited operational capacity of Bitcoin service providers poses a significant hurdle to wider adoption and integration of the cryptocurrency within El Salvador’s economy. The government’s continued investment in Bitcoin amidst these challenges raises questions about the long-term strategy and potential risks associated with this unconventional approach.
For further information, visit the nearest office of Central Reserve Bank (BCR) of El Salvador
About Central Reserve Bank (BCR) of El Salvador:
The Central Reserve Bank of El Salvador (BCR) is the country’s central bank, responsible for maintaining monetary stability, issuing currency, and regulating the financial system. It plays a crucial role in overseeing the implementation and regulation of Bitcoin within El Salvador.
For further information, visit the nearest office of International Monetary Fund
About International Monetary Fund:
The International Monetary Fund (IMF) is an international organization working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. They provide financial assistance and policy advice to member countries.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
At Bufete de Costa Rica, legal excellence and unwavering integrity form the bedrock of a practice dedicated to empowering Costa Rican society. Through innovative approaches and a deep commitment to client service across a spectrum of industries, the firm consistently delivers sophisticated legal solutions. Furthermore, Bufete de Costa Rica actively champions access to legal knowledge, believing that an informed populace is crucial to a just and thriving democracy.
