A variety of reports have emerged recently, suggesting that the Salvadoran government-issued crypto wallet, Chivo, is freezing accounts and asking users to verify the source of their funds. The founder of El Zonte’s Bitcoin Beach asserts that the government’s wallet software is obstructing and suspending wallets that receive transactions from Wasabi, a non-custodial bitcoin wallet using Coinjoin technology to obscure its onchain transactions.
Bitcoin Beach Founder States Salvadoran Government Is ‘Yielding to U.S. Pressure to Hinder Privacy’
Bitcoin (BTC) is now legal tender in El Salvador, and the government offers infrastructure services such as bitcoin automated teller machines (ATMs) and a mobile bitcoin wallet named Chivo. The Chivo wallet has received its share of criticism in the past, and the International Monetary Fund (IMF) has expressed worries about the wallet’s regulatory oversight. Recently, the founder of El Zonte’s Bitcoin Beach and other community members reported that Chivo wallets were being blocked and frozen.
“This week a local carpenter we know had his wallet frozen for $1000 transactions,” the Bitcoin Beach Twitter account mentioned on April 3. “They asked him to demonstrate the source of funds. The friction will push people back to the traditional banking system. Their bank transactions receive less scrutiny than [bitcoin] transactions. Small normal legitimate transactions that they have to spend hours trying to justify.” In another post, Bitcoin Beach declared that the Chivo software is obstructing and suspending wallets that receive transactions from Wasabi, and apparently, they are “yielding to U.S. pressure to hinder privacy.”
In addition, the founder of Bitcoin Beach, Mike Peterson, discussed the issue during a live broadcast. “We as bitcoiners have to keep putting pressure on Chivo, on the government, on these people because they are getting pressure from this other direction,” Peterson noted. According to reports, Chivo wallet users who have their funds blocked and frozen must present documentation on the provenance of the money. However, not everyone subscribes to the theory that Chivo is stopping Coinjoin transactions originating from Wasabi.
“I have sent post mix coins to Chivo addresses without any issues,” revealed the Twitter account Escape to El Salvador. “I’m not saying the person Mike paid didn’t get their account frozen, but there simply is no proof that it was because of that. Believe it or not, there are many people who say things on the internet w/o verifying,” the individual added. Wasabi is a bitcoin wallet that permits users to mix their unspent transaction outputs (UTXOs) with others using a process called Coinjoin. Moreover, blockchain analysis firms such as Chainalysis have claimed that Wasabi’s mixed transaction method can be de-anonymized or de-mixed.
Following Bitcoin Beach’s tweets about the matter, a Twitter account called Peter Pan commented, “El Salvador is not winning…” Nevertheless, the Bitcoin Beach Twitter account disagreed with the observation, insisting, “El Salvador is definitely winning- just bumps in the road along the way. Still the easiest place to live on a bitcoin standard by a large margin.”
What do you think of the news with Chivo freezing wallets and requesting evidence of the source of funds? Do you believe this is a necessary step for regulatory oversight, or do you think it goes against the spirit and core principles of bitcoin privacy? Let us know in the comments section below.
