In a striking revelation published by local media outlet El Mundo, only 20 out of the 181 Bitcoin service providers registered with El Salvador’s central bank are currently operational. This alarming statistic indicates that a substantial 89% of these providers are non-operational, having failed to comply with the stringent requirements articulated in the country’s Bitcoin Law.
This law mandates that all service providers maintain rigorous Anti-Money Laundering (AML) programs, accurately document their fiscal assets, liabilities, and equity, and employ tailored cybersecurity protocols pertinent to the nature of their services. The Central Reserve Bank of El Salvador has categorized at least 22 of these non-operational firms as having neglected to adhere to basic obligations necessary for classification as operational.
Despite this disheartening figure, a few firms have successfully met legal requirements. Notable entities include the state-backed Chivo Wallet and companies such as Crypto Trading & Investment and Fintech Américas, which have managed to navigate the regulatory landscape, providing a glimmer of hope amidst a sea of non-compliance.
Understanding El Salvador’s Bitcoin Framework
El Salvador made history in 2021 as the first nation to accept Bitcoin as legal tender alongside the US dollar, an unprecedented move designed to boost economic stability and attract foreign investment. President Nayib Bukele’s ambitious vision positioned Bitcoin as a cornerstone of the country’s economic strategy.
However, the road ahead has not been without its hurdles. Recently, the country entered into a $1.4 billion loan agreement with the International Monetary Fund (IMF), which necessitated a retreat from some Bitcoin-related initiatives. This agreement stipulates that taxes will be paid in US dollars and that public institutions will curtail their utilization of Bitcoin, raising questions about the viability of Bukele’s original plan.
In March, the IMF urged the nation to halt its public sector Bitcoin acquisitions, yet President Bukele has indicated a resolve to continue purchasing Bitcoin, a stance that appears to contradict the terms of the IMF deal.
This conflicting situation has spawned speculation about the potential rescission of Bitcoin’s legal tender status in El Salvador. Notably, Bitcoin activist John Dennehy revealed that a rollback law affecting Bitcoin’s legal standing is expected to take effect on April 30.
In conclusion, the current state of Bitcoin service providers in El Salvador paints a complex picture—one of ambition, compliance challenges, and shifting economic priorities. As the nation navigates its path forward, the implications of its Bitcoin experiment will likely resonate far beyond its borders.
