El Salvador: How secure is the ″Chivo Wallet″ application, the bitcoin wallet? | Policy | D.W.

Just over four months after adopting bitcoin as the official currency and thus becoming the first country in the world to do so, the Salvadoran government continues to be criticized for the lack of transparency, trust and security offered by state investments in cryptocurrencies.

During the presentation of your project BitcoinCity -a city without taxes that will work with this cryptocurrency-, President Nayib Bukele assured his compatriots and crypto investors that “bitcoin will save the world.” All this, despite the fact that institutions such as the International Monetary Fund (IMF) have publicly expressed their concerns about the risks of the irruption of cryptocurrencies in the public policies of the Central American country.

El Salvador l Präsident Bukele verkündet Bitcoin-City

Salvadoran President Nayib Bukele presenting his “Bitcoin City” project.

El Salvador would have suffered millionaire losses

Recently, the American financial advisory company Bloomberg estimated that the Salvadoran government has acquired at least 1,391 bitcoins with state funds since September 7. As long as you have held these cryptocurrencies, Bloomberg calculated that El Salvador has suffered a 14% loss, equivalent to $11 million, as the value of bitcoin has fallen by 40% since the beginning of November.

“Bukele is taking an extraordinarily risky path by betting on the rising price of bitcoin to finance his state budget. So far, this has gone wrong,” Christian Ambrosius, a political scientist and expert on Central America at the Free University of Berlin, told DW.

“With the current price of bitcoin, the government should have lost a lot of money. And even if the value rises again in a few weeks or months, this does not change the high speculative risk to which the country is exposed,” he added.

Recent problems with “Chivo Wallet”

In addition, in recent weeks, some media reported that several people had denounced on Twitter that the bitcoin balance they had in the “Chivo Wallet” application had disappeared, with values ​​ranging from 100 to 16 thousand dollars.

The “Chivo Wallet” is the official bitcoin and dollar digital wallet of the Salvadoran government, which allows you to send and receive these currencies without commission. According to several of the complainants, the irregular transactions are in the name of Chivo SA de CV, which is the company that develops the application.

Government intervention or cybercrime?

These events have raised speculation about the control that the Government has to intervene in the “Chivo” wallet and manage the money of Salvadorans.

“First of all, cryptocurrencies are extremely safe. What is sometimes not so safe is the behavior of users (and companies) when they use them,” Fabricio Tota, director of Mercado Bitcoin, a Brazilian broker, told DW. provides brokerage services for the purchase and sale of cryptocurrencies.

“There’s a saying in crypto: ‘It’s not your keys, it’s not your coins.’ ‘Chivo’ is a custodial wallet. That means bitcoin’s security keys are controlled by the developer of ‘Chivo,’ the Salvadoran government. “So yes, it is technically possible to start a transaction as if it were legitimate. But we cannot say what is happening around these rumors. They are just possibilities,” added Tota.

For his part, Ambrosius does not believe that “there has been manipulation by the government, because the damage to its image would be very great.” It considers it more likely that there have been “technical failures or system errors, given the short time for the introduction of the ‘Chivo’ application and the technical challenges that it entails. It is also conceivable that external attacks (hacking) are responsible for the disappearance of the funds”.

El Salvador Protest in San Salvador gegen Bitcoin

Protests in El Salvador against bitcoin, the Chivo wallet and the president, Nayib Bukele.

Transparency of money in El Salvador

Until now, and despite the fact that the Salvadoran president is usually very active on social networks to silence his critics, the Bukele government has not commented on the problem that occurred with the “Chivo Wallet”, which fuels questions regarding government transparency. It is also not known how much and how he pays for cryptocurrencies, nor does he report where they are.

In September 2021, the local press revealed that the Bukele government was using public funds to subsidize two -private- gasoline companies through Chivo SA. of CV. At that time, and to encourage the use of the state application, Bukele offered 30 dollars for registering in the application – which includes the delivery of biometric data – and a reduction in the price of fuel for users who paid in bitcoin using the ” Goat Wallet”.

“This is problematic because, through ‘Chivo’, public money is given as a form of subsidy only to certain private gas stations, which contradicts the principle of equal treatment and transparency in the use of public money. However, Bukele nor has he shown much interest in budget transparency and the responsibility of public spending,” concluded Ambrosius.

(th/er)

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