El Salvador’s national Bitcoin chief has been orange-pilling Argentina – Cointelegraph Magazine
2024.06.26 10:57
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It takes more than 10 hours to fly from El Salvador to Argentina, but Juan Carlos Reyes’ recent flight may be one of the most important of his life.
It may also have global significance, not that Reyes can reveal too much about it at the moment.
The appointed President of El Salvador’s newly created National Commission of Digital Assets (CNAD), Reyes has just returned from Buenos Aires after high-level meetings with Argentina’s securities regulator, the National Securities Commission.
Speaking exclusively to Magazine, he is in a cheery mood, albeit diplomatic, when talking of a potential collaboration between the two Bitcoin-friendly countries.
“El Salvador multinational projects are set by the president; however, our two countries are talking about interesting opportunities and projects for the future. There is a lot of interest in common between our institutions and between the leaders of our nations, so I can say that you should stay tuned,” he says.
El Dr. Roberto E. Silva y Dra. Patricia Boedo se reunieron con el presidente de la Comisión Nacional de Activos Digitales de El Salvador, Juan Carlos Reyes. Abordaron la experiencia de ser el primer país en adoptar el Bitcoin como moneda de curso legal. pic.twitter.com/UVh6dRlrU0
— CNV Argentina (@CNVArgentina) May 23, 2024
Let it not be forgotten that before El Salvador adopted Bitcoin as legal tender in September 2021, it was Argentina that seemed the most receptive and interested in Bitcoin, not least because of the country’s seemingly omnipresent inflation rate.
According to Statista, the peso’s inflation rate for 2024 is a whopping 250% and has been rising annually for the past seven years from 25% in 2017.
In October 2011, under the presidency of Cristina Fernández de Kirchner, Argentina introduced strict currency controls, making it very difficult for citizens to obtain U.S. dollars, the go-to hedge against the Argentine peso’s inflation.
Consequently, alternatives such as Bitcoin were naturally attractive to Argentinians who no longer had the easy option of acquiring dollars and wanted to protect their savings.
This interest in Bitcoin is likely to increase even further after the election victory of the unorthodox Javier Milei in December 2023, who has advocated for radical action to sort out the country’s economy.
Reyes’ visit to Argentina is perhaps the result of Milei’s election win and his meetings with Argentina’s National Securities Commission.
While Argentina seemed the most likely candidate for Bitcoinization, El Salvador grabbed the bull by the horns as it embraced Bitcoin by passing the famed Bitcoin Law in September 2021.
Reyes was orange-pilled in 2013
For CNAD President Reyes, who was introduced to Bitcoin in 2013, it was a mission that he had been on from an early age.
“I have been passionate about computers from the first time I touched one at five years old. I learned basic programming before the age of 10 and have been involved with open-source projects since the 1990s.”
“When I found out about Bitcoin, I immediately fell in love with the technology and could see the potential it had, having closely followed adoption and preaching to anyone that would listen about its transformative powers.”
“Since 2018, I took on a serious position on the technology and started incorporating it into my professional life,” he says.
El Salvador has not historically been known for its progressive approach. When Reyes’ parents emigrated to Canada in 1990, the country had been in external and internal wars for 30 years.
Globally, there is an estimated diaspora of 2.6 million Salvadorans—a huge number from a country of 6.4 million residents — but the country’s change in fortunes brought back Reyes and many others.
“I was very young when I left El Salvador. For me, the chance to come back and be part of the vision our president has set out is a once-in-a-lifetime opportunity to contribute to building the country where I was born.”
“I am grateful that I grew up in Canada, where the culture is more tolerant of diversity, so keeping to our Salvadoran customs was fairly easy. Most of our families are very religious, so praying, going to church and eating pupusas always played a big part in my upbringing as a child.”
For those unacquainted with Salvadoran food, pupusas are griddle cakes or flatbreads made from corn flour. They are a Salvadoran national dish that is apparently best eaten with cheese.
Reyes continues recounting his journey into crypto.
“I studied mining engineering and completed degrees in physics and maths as well as computer science. Later, as a challenge, I completed a master’s degree at Harvard and then started companies and consulting for governments and private industry before coming home to help my countrymen in this new initiative,” he says.
El Salvador’s Bitcoin Law: The good and the bad
There have been considerable upsides to El Salvador embracing Bitcoin, with the South American nation’s almost 6,000 Bitcoin stack benefiting from the surge in Bitcoin prices, as well as a surge of “crypto tourists” who have come to El Salvador to see things for themselves.
But it has not been smooth sailing since El Salvador decided to accept Bitcoin as legal tender, with international bodies fighting the move.
Earlier in 2024, Reuters reported that the International Monetary Fund had recommended removing Bitcoin’s legal tender status during financial support negotiations, citing transparency and economic concerns.
The country’s citizens themselves have also been slow to adopt Bitcoin. According to a recent survey by the Bank of El Salvador, 88% of Salvadorans did not use Bitcoin in 2023 and cryptocurrency payments have declined, with only 1% of remittances made in crypto last year compared to 1.7% in 2022.
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There have been other challenges as well. The state-operated Bitcoin wallet Chivo has been hacked several times, with one exploit exposing the personal data of some 5.1 million Salvadorans.
Reyes acknowledges that the mission to make El Salvador the real-world assets tokenization capital of the world was never going to be easy. Pioneers always get arrows in their backs.
“[The] CNAD didn’t exist until 2023, and I have been in the position for a little over six months. We are a pioneer in regulating digital assets and opening untouched financial markets as we become a digital asset hub recognized around the world.”
What is CNAD in El Salvador?
The CNAD is a government institution that was established in 2023 and oversees the regulation of the digital asset landscape in El Salvador.
It operates as an independent entity as a decentralized, autonomous entity with distinct legal standing and independence.
“[The] CNAD is the single point of entry into the country for financial digital assets; all companies transacting in anything else that is not pure Bitcoin as legal tender require the permission of the commission. Currently, in the world, we are the only country with an independent regulatory body for this matter,” he says.
Reyes (far left) at the “Regulation of the crypto economy: Experience in El Salvador and challenges for Argentina” event. (LinkedIn)
Reyes says that the first milestone was to create a proper and fair regulatory framework balanced with international compliance standards and strong Anti-Money Laundering requirements. Other challenges were to follow.
“The second challenge was the creation of the CNAD team. We looked for the best, youngest, most experienced professionals in the industry and in a short period of time, we created a dream team of 24 members, most under the age of 40.”
According to Reyes, this “dream team” collectively has more than 150 years of financial management experience and 70 years of direct banking regulatory and supervision experience.
Reyes continues:
“The third challenge was to create a healthy and strong ecosystem with Digital Assets Service Providers (DASPs). This has been no easy task. Up until May 2024, the CNAD received, reviewed and analyzed close to 100 applications.”
“Many are still going through the regulation process and are working back and forth with our team to comply with our regulations requirements; however, about a quarter of all applicants have been approved and are already doing business in El Salvador and globally,” says Reyes.
El Salvador offered its first license three months after the country passed the Digital Asset Issuance Law in 2023. To be DASPs, applicants have to be vetted and verified by the CNAD to operate in El Salvador.
Bitfinex Securities El Salvador — a newly established entity belonging to the cryptocurrency exchange Bitfinex — has emerged as the first licensed DASP in the country.
The licensing came on April 11, 2023, exactly three months after El Salvador passed the Digital Asset Issuance Law on January 11, 2023.
Everybody knows about Bitcoin in El Salvador
Reyes accepts that with every new project, there are “a lot of challenges and a tech learning curve,” but points to a positive trend in the economy and education aspects.
“Every person in my country has heard of Bitcoin or knows something about digital finance, something that can’t be said about any other country in the world. We are also seeing more and more investors interested in moving their operations to El Salvador, not just foreigners, also wealthy Salvadorans that miss their homeland and seek a better quality of life.”
He added that there are opportunities to adopt and merge traditional financial institutions with Bitcoin, stating that “Salvadorans can pay debts in a bank with Bitcoin and all Salvadorans can use and receive Bitcoin with the government wallet, and they can choose to have only a dollar balance if desired.”
He concludes that El Salvador is not only the world’s most pro-Bitcoin country, it is also collating data and experiences that will help other countries follow in its wake.
“Yes, there are challenges, but given our journey, we have a lot of lessons to share with other nations and actively share our expertise […] with other countries. We are very happy to do that.”
Time will tell if Reyes’ comments on his recent visit to Argentina included such advice and whether Argentina’s new President will follow El Salvador’s lead, but the whole world will be watching. These are exciting times.
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Monty Munford
Monty Munford writes regularly for the BBC, The Economist and City AM and has been a tech columnist for Forbes and The Telegraph. He also runs a growth and visibility consultancy and has appeared at more than 200 events and conferences, interviewing figures such as Tim Draper, the late John McAfee, Sir Tim Berners-Lee, Steve Wozniak, Kim Kardashian, Guns N’ Roses and many others.
Follow the author @montymunford
