In El Salvador, blockchain technology goes beyond cryptocurrencies

By Fátima Romero

The adoption of Bitcoin as a legal tender in El Salvador in September 2021 grabbed attention.

Still, its use is almost nil, as the University Institute of Public Opinion of the Central American University (Iudop) showed in a recent survey.

At the same time, its risks have been a cause for alert by different organizations inside and outside the country.

And two US senators, James Risch of Idaho and Bob Menendez of New Jersey introduced “a bill to require reports on the adoption of cryptocurrencies as legal tender in El Salvador” on May 11.

The legislation appeared to be a second attempt to pass the Cryptocurrency Liability Law in El Salvador, which Risch introduced in February 2022, a few months after the Bitcoin Law went into effect.

Among the bill’s allegations is that the decision could “weaken economic and financial stability and empower malicious actors.”

Nevertheless, President Nayib Bukele’s cryptocurrency promotion, especially on his social networks, continues to interest crypto market players.

For example, Fold, a Bitcoin rewards company, announced a few days ago that it would establish an office in El Salvador to serve as a base for operations in Latin America.

But beyond cryptocurrencies, technology entrepreneurs in the country are looking to maximize how blockchain can be used to make processes more efficient or develop new services.

USE OF BLOCKCHAIN IN SALVADORAN BANKS

The blockchain landscape in banking was part of the topics discussed at Fintech Americas 2023, recently held in Miami.

Koibanx CEO and co-founder Leo Elduayen moderated a panel that included two industry leaders in El Salvador.

“We should not see blockchain as an exotic component that can only be used with cryptocurrencies, but understand that it is a technology that serves for more common use cases such as purchases and transfers,” said Carlos Emilio Miguel, CTO of the fintech Niu, a private sector wallet developed in El Salvador.

Niu, backed by Banco Cuscatlán and Visa, allows users to manage their money digitally and make and receive transactions through a simplified process.

ELECTRONIC PAYMENTS

In the Central American country, there are around 25 fintechs, according to the Superintendencia del Sistema Financiero (SSF), most of which are oriented toward financial inclusion.

Such is the case of Serfinsa, a provider of electronic payment processing services, which is exploring blockchain technology hand in hand with Koibanx to launch the first interoperable network of digital payments through QR codes, known as “Quick Pay” in the country.

At the forum in Miami, Leandro Guini, CEO of Serfinsa, explained that this network allows financial institutions of all types, such as banks, financial cooperatives, digital wallets, fintechs, and neobanks, as well as users and merchants, a much simpler payment experience.

Blockchain technology “allows us to solve problems in a different way, to solve use cases that with other technology would take more development,” said Guini.

RETHINKING THE BANKING WORLD

Founded in 2015, Koibanx is a pioneering fintech company providing blockchain infrastructure for the Latin American financial system.

It provides asset transaction and tokenization services to the banking and financial sector in Argentina, Colombia, Mexico, El Salvador, and Uruguay.

“Today, we can digitally represent an asset from the banking world on the blockchain, whether it is a commodity or raw material, a security, an instrument or money itself,” Elduayen explained.

Specifically in El Salvador, the blockchain tokenization and payments platform offers different services to banking entities and governments to interconnect the traditional financial world with Web3, allowing the transaction of any type of asset with current regulatory licenses.

At the close of the debate, Elduayen insisted on highlighting the “practically infinite” possibilities offered by using blockchain in the financial sector.

“It is interesting to highlight the typical question of whether you can run a, b, or c without blockchain, and the answer is yes, but with more time and money.”

“Now, when a technology like blockchain is available, why not take advantage of it?” he said.

With information from Bloomberg

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