Lawyers are preparing to advise clients on the complexity of dealing with cryptocurrency in Latin America, following El Salvador’s recent decision to make bitcoin an official currency.

The experience that the Central American country rolled out in September with great fanfare has already sparked widespread adoption in the region.

Still, lawyers say bitcoin’s notorious price swings and reputation as a preferred currency for hackers, tax evaders and money launderers are cause for concern.

David Weinstein, a Miami-based litigation associate at Jones Walker who focuses on corporate compliance and white-collar criminal defense, believes cryptocurrency transactions promise more pitfalls than possibilities. Nonetheless, Weinstein, a former assistant attorney with the South Florida District Attorney’s Office, is preparing to counsel clients who want to get started.

“There are people out there who like to be on the cutting edge of technology,” Weinstein said. “I’m not suggesting that I would make it a high priority for any of my clients. I think a better thing to do now is to sit down, to be conservative. “

So far, Weinstein says his research on how best to protect a cryptocurrency transaction has been moot, but he anticipates customer questions and wants to be prepared, comparing the advent of digital currency to invention. of the automobile.

“Being in the first wave sometimes means you win, sometimes you lose big,” he said.

He would advise those who want to get started first to start with a small transaction with a trusted counterpart in El Salvador, while checking the usual regulatory and reporting requirements.

David Martinez, a New York-based Clifford Chance partner specializing in derivative transaction and regulatory issues, is also following with interest the bitcoin experience in El Salvador.

Martinez, an American whose parents immigrated to the United States from El Salvador, says it remains to be seen whether the average Salvadoran will embrace the use of crypto. But he notes that the government’s adoption of the currency raises important institutional questions.

“To the extent that bitcoin offers developing countries alternatives to a centralized framework, it could improve their relative bargaining power,” Martinez said. “It can also have an impact on centralized enforcement mechanisms such as economic sanctions.”

The bitcoin experiment in El Salvador was devised by President Nayib Bukele, a 40-year-old tech-savvy executive who came to power in 2019 promising to end corruption. Bukele, a populist who posts regularly on social media and generates very high approval ratings, has garnered considerable attention around the world.

In September, when he addressed the United Nations General Assembly for the first time, he took a selfie from the podium and told the audience that many more people would see this selfie than listen to his speech. , adding that the internet has changed the world. but the United Nations General Assembly is “stuck in time”. Then, responding to his criticisms, he updated his Twitter bio to read: “The Coolest Dictator Ever.” (He has since updated his biography again. It now reads “Emperor of El Salvador” and he has posted a photo of him dressed as an emperor.)

But much of the attention to Bukele has come as a result of his introduction of bitcoin as legal tender. He presented it as a way to bypass the substantial fees on money transfers that Salvadorans working in the United States send to the country and to bring more financial services to the majority of Salvadorans who have no Bank account.

To start the transition, he set aside $ 30 for every Salvadoran citizen to access through a digital wallet called Chivo, slang for “cool” in the country.

The International Monetary Fund has spoken out strongly against the ongoing cryptocurrency boom in emerging markets, arguing that it threatens already vulnerable financial systems and consumers. In Latin America, digital currencies are increasingly accepted in major economies such as Argentina, Brazil and Mexico.

Several countries seem eager to follow El Salvador’s example. Panama, which is on the blacklist of tax havens in the European Union, is considering a cryptography law that would make bitcoin legal tender. And in the United States, Miami Mayor Francis Suarez is trying to make his city, which serves as a trade hub with Latin America and the Caribbean, the cryptocurrency capital of the world.

But those wary of the growth in cross-border cryptocurrency transactions say this trend could complicate US and EU efforts to tackle money laundering and other crimes.

“Part of the ability of the United States to act as a global executor is that the money ultimately ends up in a US-based bank account,” Weinstein explained.

“If the money no longer ends up in a US-based bank account, and it’s in a cryptocurrency or bitcoin wallet or wallet somewhere, and it doesn’t touch the United States, then the United States has nothing to do to enforce its laws on other nations, ”he said.

Nonetheless, global companies with large practice groups in Latin America are bracing for an eventual radical change. In September, Jones Day hosted a panel discussion on the future of crypto assets in the region at its annual data protection, privacy and cybersecurity symposium in Latin America.

The panel, hosted by Mexico City-based lawyer Guillermo Larrea, who focuses on compliance work in Latin America, noted that while cryptocurrencies and crypto-assets have suffered a regulatory setback around the world, “Latin America seems open, for very different reasons. , to explore new avenues for crypto-assets.

Many in Latin America have experienced sharp exchange rate swings and sudden currency depreciations that can make consumers more open to trying a digital alternative.