El Salvador's Chivo Bitcoin Digital Wallet May Not Be So Innocent

Hi everyone and thank you for tuning in. I was looking to make a video to explain why the recent sell off in cryptos occurred but than I ran into something else which is way more important. The Chivo digital wallet issued as of yesterday by the Salvador government can be activated or deactivated whenever the government wants and that alone should be a cause of concern or at least something to think about.

El Salvador officially launched the Chivo digital wallet yesterday, the same day that the law that makes bitcoin the official currency in the Central American country came into force.

According to a report by JPMorgan, daily payment activity in El Salvador could account for ~ 4% of the on-chain volume of transactions on the blockchain network and over 1% of the total value of digital currencies transferred between wallets last year.

Prior to the incident, El Salvador President Nayib Bukele wrote on Twitter on September 6 that El Salvador had bought just 200 extra bitcoins ($ 10.2 million), bringing its total to 400.

The Chivo wallet, translated into slang as "cool", will support free bitcoin and US dollar transactions for both individuals and companies.

However, the launch of the e-wallet did not start with much success. The exchange that manages it turned off the application a few hours after the country became the first in the world to approve cryptocurrency as legal tender.

Chivo has logged out to "increase the capacity" of its servers, with Salvadorians rushing to use the app for the first time on Tuesday.

El Salvador President Nayib Bukele announced that the servers would be down until the capacity problem was properly fixed.

The $ 30 start-up bonus cannot be withdrawn in cash. It can only be used for payments to a merchant who accepts Chivo. Merchants can then redeem it. A black market has already been created that exchanges Chivo "dollars" for dollars, of course at a discount.

Mexico-based Bitso cryptocurrency exchange will provide basic digital currency management services for Chivo. Bitso works with Silvergate Bank - based in California to facilitate dollar trading. The application will support the automatic liquidation of bitcoin transactions in dollars, as well as withdrawals at bitcoin ATMs across the country.

According to legal adviser Javier Argueta, "any business that refuses to use the Chivo Wallet and refuses to trade BTC will be charged for breaches of the law, such as the Consumer Protection Act."

According to the architecture of this wallet, the government has full control, it can activate or deactivate everyone's wallet whenever it wants. This is a travesty if not a tragedy of how a government perceives the value or application of digital currencies.

However, it is not necessary to be a citizen of El Salvador to have access to the application and that the wallet supports payments to both individuals and companies "anywhere in the world".

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???? Disclaimer: Everything expressed in this video is a personal opinion provided for entertainment value only. I am not a professional nor a financial advisor. These are not instructions, suggestions, nor directions as to how to handle your money. Please, always do your own due diligence.