El Salvador’s Chivo Bitcoin Wallet Could Be At Risk Of U.S. Sanctions

It has been three months since bitcoin became a legal tender in El Salvador, and all the bitcoin transactions occur through the Government official wallet called “Chivo Wallet”. At first, it seemed everything was good, but lately there have been concerns about the people who are behind this business..

What is Cristosal and what is its implication to the case?

Cristosal is an non-governmental organization (NGO) and a non-profit founded by anglican bishops Justo Martin Barahona and Richard Bower, their objective is to promote justice, human rights, and democratic societies in Central America, through strategic litigation, monitoring of human rights and care for victims of human rights violations, according to their official website.

On December 8th, Zaira Navas, a lawyer and member of Cristosal presented a case of identity fraud to the General Prosecutor of the Republic of El Salvador on behalf of 131 people whose identities were compromised by opening an account in Chivo Wallet and withdrawing the $30 incentive provided if you register in the app.

“Accounts are opened, they take out the bonus of $30 and then they close it again so that it opens again” Zaira Navas said.

Navas and other lawyers of Cristosal also presented the case to the Constitutional Chamber of the Supreme Court of Justice. This is the second time that Cristosal has filed the same case of identity fraud to the General Prosecutor of the Republic of El Salvador, it has been one and a half month since they introduced the first claim and they haven’t been summoned or informed, Navas commented.

Why does Cristosal think the U.S. could impose sanctions on Chivo Wallet?

Last week the U.S. Department of Treasury applied sanctions, under the Magnitsky Act, to close officials to president Nayib Bukele, including Carolina Recinos, chief of staff and director of one of the companies which owns Chivo Wallet, among others, according to a local news report.

After this news, President Nayib Bukele, said on twitter “These daily accusationsseem absurd.” “It is clear that the United States Government does not accept collaboration, friendship or alliance.” in order to defend his close officials.

Navas claimed that after seeing the connection between Carolina Recinos and Chivo Wallet, the U.S. could be targeting Chivo Wallet in the U.S. because of lack of transparency and it could be linked to corruption. According to Milena Mayorga, Salvadoran ambassador in the U.S., just in November more than $32 million remittances entered to El Salvador through Chivo Wallet.

Cristosal has received more than one thousand complaints of identity fraud. It is not certain that the U.S. could impose sanctions over Chivo Wallet, but according to the facts, it appears there would be no other way.