According to various reports, the Salvadoran government-issued bitcoin wallet Chivo has been freezing wallets and requiring owners to verify the origin of funds. The Bitcoin Beach founder of El Zonte stated that government bitcoin wallet software is flagging and freezing wallets that receive transactions from Wasabi, a non-custodial bitcoin wallet that uses Coinjoin technology to hide on-chain transaction monitoring.
Bitcoin Beach founder says Salvadoran government is “caving in to US pressure to thwart privacy”
bitcoin (BTC) is now legal tender in El Salvador, and the government offers infrastructure services such as bitcoin ATMs and a mobile bitcoin wallet called Chivo. The Chivo wallet has faced criticism in the past, and the International Monetary Fund (IMF) has raised concerns about regulatory oversight of the wallet. Recently, the founder of Bitcoin Beach from El Zonte and other members of the community reported that Chivo’s wallets were being marked and frozen.
“This week a local carpenter we know had his wallet frozen for $1000 transactions,” the Bitcoin Beach Twitter account fixed on April 3. “They asked him to prove the origin of the funds. The friction will drive people back to the traditional banking system. Your banking transactions receive less scrutiny than (bitcoin) transactions. Small normal legitimate transactions that you need to spend hours trying to justify.” In other cheepBitcoin Beach reported that the Chivo software is flagging and freezing wallets receiving Wasabi transactions, and they are apparently “buckling to US pressure to thwart privacy.”
Also, Bitcoin Beach founder Mike Peterson addressed the problem during a live broadcast. “We as bitcoiners need to keep putting pressure on Chivo, on the government, on these people because they are getting pressure from this other direction,” Peterson said. Chivo wallet users who have their funds marked and frozen are reportedly required to provide documentation of the origin of the money. However, not everyone subscribes to the theory that Chivo is blocking Coinjoin transactions originating from Wasabi.
“I have sent post mix coins to Chivo addresses without any problem,” explained the Twitter account Escape to El Salvador. “I’m not saying that the person Mike paid didn’t freeze his account, but there’s just no evidence that they did. Believe it or not, there are a lot of people saying things on the internet without verifying it,” the individual added. Wasabi is a bitcoin wallet that allows users to mix their Unspent Transaction Outputs (UTXO) with others using a technique called Coinjoin. Additionally, blockchain analytics companies like Chainalysis have claimed that Wasabi’s method of mixed transactions can be anonymized or unmixed.
Following Bitcoin Beach’s tweets on the matter, a Twitter account called Peter Pan commented“El Salvador is not winning…” However, the Bitcoin Beach Twitter account disagreed with the claim, insisting, “El Salvador is definitely winning, just bumps in the road. It’s still the easiest place to live on a bitcoin standard by a wide margin.”
What do you think about the situation with Chivo freezing wallets and requesting proof of the origin of the funds? Do you think this is a necessary step for regulatory oversight or do you think it goes against the spirit and fundamental principles of bitcoin privacy? Let us know in the comments section.
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