HomeNewsEl Salvador's Bitcoin Bonuses Bilked by Hackers

A month after El Salvador’s government introduced Bitcoin as a national currency, an illegal corner of the new economy has emerged: the widespread theft of the $30 deposits used as an incentive to have citizens open digital wallets.

Authorities are reporting that many Salvadorans have discovered that others used their national identification numbers to steal bonuses provided by the government by registering new Chivo Wallets. Cristosal, a leading human rights organization in El Salvador, has registered some 700 complaints of identity theft, El Diario de Hoy reported on October 14. Other organizations are also receiving similar complaints, including El Diario de Hoy, which received some 200 reports of Chivo Wallet-related identity theft.

SEE ALSO: The Digital Gold Rush - 5 Ways Bitcoin Helps Organized Crime

Several prominent members of civil and business organizations have publicly reported that their personal data was compromised, including lawyer Humberto Sáenz, the president of Acción-Ciudadana, a leading political non-governmental association, and Jorge Daboub, the former president of the National Association of Private Enterprise.

Constitutional lawyer Enrique Anaya revealed on Twitter that he had also been a victim of identity fraud, saying that he had “not downloaded an app with such a bad reputation, and [he] has never thought of using it.”

Many of the victims said they would be reporting the fraud to the Attorney General’s Office. When asked about the wave of identity theft, a spokesman for the agency said an investigation had been opened.

To date, El Salvador President Nayib Bukele has been silent on the issue, instead highlighting the cryptocurrency’s rapid growth throughout the country.

InSight Crime Analysis

While warnings have been raised that Bitcoin’s use as legal tender in El Salvador could stoke financial crime in the country, the pilfering of the $30 bonuses reveals that the government’s proprietary technology – which was rapidly rolled out – is not secure. 

Moreover, authorities are unsure how the identification numbers were obtained, and it’s unclear how much money has been stolen.

Computer scientist Mario Gomez estimated that some $99 million, or about 1,833 bitcoins, have been collected from Chivo Wallet registrations, La Prensa Grafica reported. This equates to between 3.1 to 3.4 million Salvadorans, or about half the population, having signed up – an unlikely scenario, he said.

“I would go as far to say that many registrations in Chivo have been fraudulent,” Gomez wrote on Twitter. “The identity verification system has not worked since day zero, and now we have a level of adoption that is completely outside of reality.”

SEE ALSO: Bitcoin Cryptocurrency Adds to Venezuela Money Laundering Risk

National Police Director Mauricio Arriaza Chicas confirmed the fraud but provided few details, other than saying that specialists are being used in the investigation and that police are seeing an increase in identity theft throughout the country.

Concerns have also been raised that the fraudulently created Chivo Wallet accounts could be used to complete other illegal transactions.

After Bukele announced that the country would adopt Bitcoin as a currency, financial experts and institutions raised alarms that the move could lead to an expansion of financial crimes. A recent report by ratings agency Fitch warned that the introduction of Bitcoin in El Salvador "would increase financial institutions' regulatory, financial and operational risks, including the potential of violating international anti-money laundering and terrorist financing standards."

Institutions, such as the World Bank and the International Monetary Fund (IMF), have also expressed their disapproval of El Salvador’s adoption of Bitcoin due to its threat to the country’s financial integrity, particularly given the country's lack of anti-money laundering and counter-terrorism financing measures.

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