The government of El Salvador is taking measures to ensure that Chivo wallet users do not engage in arbitrage trades for risk-free profits. The government has taken down Chivo wallet’s price feature to prevent these traders from engaging in the said activity.
The announcement was issued on the Chivo wallet Twitter account. It read that the wallet users will no longer see the reference price feed for trades settled using the app’s price freeze feature. This feature allows a trader to hold the price of Bitcoin at the price quoted on the app for not more than 60 seconds.
Traders using Price Freeze Feature to Scalp for Arbitrage
The Chivo Twitter account stated that some traders were taking advantage of the price freeze feature to the scalp for arbitrage on other cryptocurrency trading volumes during significant Bitcoin price movements.
Traders who used this feature had the opportunity to leverage the price gaps on other exchanges and used Bitcoin’s lightning network to make their trades.
“The scalping carried out consisted of taking advantage of the fact that Chivo kept the rate frozen for 1 minute and taking advantage of that minute to compare the rate with other exchange and see if the price of Bitcoin went down or up,” the tweet stated.
High-frequency scalping is a legal trading activity. However, the tweet by Chivo states that the traders who took advantage of the price freeze feature to arbitrage against prices on real-time exchanges. The tweet noted that these traders enjoyed “endless” profits using “fraud.”
Going forward, Chivo is planning to start offering real-time price references to Bitcoin traders who are using the application.
El Salvador’s Bitcoin Law
On September 7, El Salvador implemented the Bitcoin law that allowed Bitcoin to be used as legal tender. However, this law has been met with a lot of criticism from Salvadorans and external parties.
Some of these critics state that Salvadorans lack literacy in digital and blockchain transactions. Despite this limitation, the government went ahead to implement nationwide legislation that advocated for the use of Bitcoin as legal tender.
However, the level of crypto adoption in the US is growing, with many Salvadorans now changing their USD for BTC. President Nayib Bukele stated that on Thursday, Chivo had reported 24,076 remittance requests worth over $3 million.
On October 10, El Salvador stated it would use part of the profits acquired from the Chivo Bitcoin Trust to build a veterinary hospital in San Salvador.
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