The government is taking steps to ensure that Chivo Wallet users in El Salvador do not engage in arbitrage trading to gain risk-free profits. The government has turned off the price feature of Chivo Wallet to prevent these traders from engaging in the aforementioned activities.
The announcement, made on Chivo Wallet’s Twitter account, said wallet users will no longer see reference prices for trades settled using the app’s price freeze feature. The feature allows traders to hold the price of bitcoin at the price quoted on the app for no more than 60 seconds.
Traders using the price freeze feature for arbitrage
Chivo Twitter account
It said that some traders use the price freeze feature to arbitrage on other cryptocurrency trading volumes when Bitcoin prices fluctuate significantly.
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Traders using this feature have the opportunity to take advantage of price differences on other exchanges and take advantage of
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“The arbitrage performed consisted of taking advantage of the fact that Chivo freezes the exchange rate for 1 minute and using that minute to compare the exchange rate with other exchanges to see if the Bitcoin price went down or up,” the tweet stated.
High-frequency arbitrage is a legal trading activity. However, Chivo’s tweet points out that traders who use price freezes to arbitrage against live exchange prices are using “fraud” to make “unlimited” profits.
In the future, Chivo plans to begin providing real-time price references to bitcoin traders using the app.
Bitcoin Law in El Salvador
On September 7, El Salvador implemented the Bitcoin Law, which allows Bitcoin to be used as legal tender. However, the law has been criticized by many Salvadorans and outside parties.
Some critics say Salvadorans lack familiarity with digital and blockchain transactions. Despite this limitation, the government has gone ahead with nationwide regulations advocating the use of
Bitcoin as legal tender
.
However, in the United States, cryptocurrency adoption is growing, and many Salvadorans are now exchanging their dollars for Bitcoin. On Thursday, Chivo reported 24,076 remittance requests worth more than $3 million, President Nayib Bukele said.
On Oct. 10, El Salvador said it would use part of the profits from the Chivo Bitcoin Trust to build a veterinary hospital in San Salvador.
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