World Bank has rejected El Salvador’s decision to adopt Bitcoin as legal tender, noting that it would have dire economic consequences. It refused to provide any kind of assistance for the country’s flexible transition to Bitcoin.
Salvadorans, however, do not seem to take into consideration the positions of international financial organizations. According to cryptocurrency analyst Joe Saz, Salvadorans are “indifferent.”
Meanwhile, Bitcoin fundamentalists insisted on encouraging Salvadorans to achieve their financial freedom without being affected by the media hype surrounding their unusual and unconventional move.
Many questions revolving around the Bitcoin cryptocurrency have been recently raised. Can the United States seriously prevent any terrorist activity within the network? How does the US view El Salvador’s recent decision to adopt Bitcoin as legal tender?
Also, what if other countries suffering from economic inflation follow El Salvador’s embrace of Bitcoin? Attention now turns to Nigeria and Panama, which are known for their money laundering activities. There are also some indications that Argentina and several Latin and South American and African countries would embrace Bitcoin. What if Venezuela does so to circumvent US sanctions!
The U.S. and Counter-Terrorism
The world of cryptocurrency is getting harder to figure out with time. It is fortified by the Secure Hash Algorithm-3 (SHA-3). This type of cryptography requires tens of billions of computational hypotheses to break a single arithmetic equation, which is impossible given the current technical capacities.
In 2014, the US Department of Defense declared virtual currencies to be subject to oversight, in light of the increasing danger of using Bitcoin and other cryptocurrencies for terrorist aims.
In 2020, the US said it seized Bitcoin and other types of cryptocurrency from accounts that had sent or received funds using alleged financing schemes for organizations placed on its terror list. ISIS possessed the largest amount of the Bitcoins seized.
It is noteworthy that the US authorities couldn’t breach Bitcoin’s network, but instead controlled its storage areas, most of which were in centralized trading platforms.
Authorities were able to communicate with these platforms to confiscate cryptocurrencies and freeze them. However, what about free and open trading within decentralized platforms, such as the “Uniswap” platform, the “DEXTools” platform, and the “PancakeSwap” platform, that do not not need to authenticate accounts and run over the “web3” network without the possibility of third party intervention?
Decentralized Platforms... Hardest Obstacle
Whoever possesses a digital dollar can open an account on “Binance” or “Coinbase” platforms to buy Bitcoin. In return, the platform can suspend and confiscate the account.
However, there is a new type of platform that operate according to the completely opposite principle of the centralized platforms.
Centralized Platforms require:
- Registering the email or phone number
- Real username
The platform determines the user’s IP.
On the other hand, decentralized platforms do not require:
- An email address
- Information about the user of the trading network
They also do not save the user’s location and have no authority over him.
Decentralized platforms constitute a huge obstacle for the authorities and are continuously developing. In 2019, there was only the Uniswap platform, while there are now more than 30 decentralized trading platforms. They give users superior power that cannot be curbed, and without a third party intervention.
Most of these platforms run on the Ethereum network that supports the “metamask” wallet, which in turn also gives full power to the users. The wallet provides all means of protection for users, as it gives them the authority to control the wallets’ keys, in addition to a huge collection of randomly created passwords that are hard to predict.
Users who prefer decentralized platforms may link the metamask portfolio to their platform to be able to trade freely and without supervision.
The emergence of decentralized platforms makes it more difficult and nearly impossible for governments to pursue criminal acts that occur on cryptocurrency networks.
Despite the obstacles, specialized counter-terrorism authorities can pursue criminal acts in several ways.
In case authorities were able to find out a specific wallet number that is active in terrorist acts, they can monitor its digital terrorist activity by tracking the flow of funds among the wallets.
The Ethereum network and the Binance Smart Chain allow assigning a wallet number on the blockchain and tagging it with a logo specified for terrorist activities.
China, for instance, has its own Ethereum blockchain site to track the flow of digital money from China to platforms abroad and vice versa.
In order to regulate the flow of digital money, the US and European authorities forced the centralized platforms to specify their wallet numbers within the digital currency networks. This method allows authorities to track and arrest the users and suspend the accounts.
Monero: Source of Terrorism and Freedom
A few months ago, the “Decrypt” website reported that ISIS and other terrorist organizations have just switched from using Bitcoin to Monero.
Why did they do so?
The Monero is highly fortified and has about 20 network developers, only two of whom are known.
Monitoring the transaction using Monero cryptocurrency is the most difficult because its blockchain does not track money and means of their transfer from one user to another. The network uses an encryption algorithm known as the “non-interactive zero-knowledge proofs.”
Monero is also based on the cryptonote protocol, which publishes the signatures of financial transactions for one time only, thus holders of the Monero currency cannot detect the movement between the wallets.
Unlike the Ethereum network, the Monero does not allow determining the value of the users’ wallets.
For example, if user (A) wants to transfer Monero to user (B), he may check if the transfer process is completed but can’t know to which party user (B) will transfer his money.
Users of the Monero network may also benefit from the “subaddress” feature, which allows them to change their public keys after each financial transaction.
The network uses an encryption method to hide the IP address of the device from which the transaction was made, such as a phone or a computer.
Salvadoran Riot… Disturbing
The US has not yet declared its official position on El Salvador’s bitcoin move, while the International Monetary Fund (IMF) described it as “reckless.” Several international reports were issued and expressed regret at El Salvador’s adoption of bitcoin as legal tender.
Salvadoran President Nayib Bukele did not seem cautious in his move, which some consider “incomplete.”
News headlines on the topic were somehow superficial. Journalists were keen to remind El Salvador of its small population and space compared to other world countries, especially that its economy accounts for less than 0.05 percent of the global GDP.
In response, Bukele said he does not want to be a global influencer but rather transform the lives of his people.
“Bitcoin has a market cap of $680 billion dollars,” he tweeted, noting that if one percent of it is invested in El Salvador, that would increase the GDP by 25 percent.
Bukele worked on bitcoin adoption with several developers, including American Jack Mallers, CEO of Zap, which has created an app called Strike, a digital wallet that uses the Lightning Network to enable small payments in Bitcoin at a very low commission.
Mallers has promised to distribute the app in countries suffering from inflation they will never recover from anytime soon.
Several countries have rushed to acquire the Bitcoin, which may reshuffle all the global papers. All international parties are cautiously anticipating the outcomes of El Salvador’s move.
India is expected to follow the Salvadoran lead. According to analysts, the world’s sixth largest economy, estimated at about $10 trillion dollars, will most probably adopt Bitcoin as legal tender and allow its trade within the country and in external commercial transactions.
This would force India to re-arrange its taxation mechanism, especially that it imposes a 13 percent tax on profits obtained from trading in cryptocurrencies.
In Mexico - Bitcoin is Immigrants’ Option
Several reports have indicated that Mexico would most probably follow El Salvador’s embrace of Bitcoin. Many articles report on Mexicans’ experiences with cryptocurrencies.
In the US, the Mexican community trades in Bitcoin the most. Mexican immigrants in the US were the reason behind the extension of the cryptocurrency wave to their homeland.
Mexicans, who constitute a wide range of the working class in the US, receive the minimum wage and are mostly immigrants. They use the Bitcoin and other cryptocurrencies to avoid paying high taxes and commission to transfer their money to their families in Mexico.
The high commission imposed by banks and financial intermediaries, such as “Western Union,” pushes more categories to find radical solutions in managing their funds.
VenezuelA: Sanctions and More
Venezuela is one of the countries that falls under the US sanctions list. The bitcoin mining appeared there in 2019, and the country seems to be very active in this field since then.
The Iranian scenario appears to take place in Venezuela. In Iran, the Revolutionary Guards Corps and China control the mining process. But this doesn’t rule out Iranians’ involvement.
A video had been recently released showing men in Venezuelan military uniforms mining Bitcoin, but it is know that civilians also take part in the process.
The economically deteriorated country suffers an annual inflation of 6500 percent, yet its people resort to bitcoin mining. It is the world’s third country to trade in bitcoin.
President Nicolas Maduro seeks to acquire the hardest currency in the world, to which the dollar lost 99 percent of its value, in order to maintain his rule.
Venezuelans, however, are resorting to the cryptocurrency option after falling victims to Maduro and the US sanctions.
