El Salvador removes BTC freeze price feature from Chivo app to crack down on arbitrage scalpers
El Salvador’s government has made a move in preventing the country’s Chivo users from gaming the digital app’s price freeze feature to glean risk-free profits through arbitrage.
On October 19, the official Twitter page of Chivo announced that the wallet’s users would no more be able to see the reference price that is provided for trades that are executed through the price freeze feature. The Chivo app’s price freeze feature enables traders to retain the Bitcoin prices quoted by it for up to one minute.
Chivo had also tweeted that several opportunistic traders have been using the feature for scalping for arbitrage across other crypto trading platforms globally during periods of considerable price volatility for Bitcoin.
The frozen price feature allows traders the opportunity to reap the advantage of price gaps in other exchange rates while simultaneously using the lightning network to move assets.
Despite high-frequency scalping that comprised a legal form of trading, Chivo has described traders who used its frozen prices to arbitrage against real-time exchanges as those extracting potentially “endless” gains through “fraud.”
Moving forward, the Chivo app plans to remove this particular price feature and instead, offer real-time price references for Bitcoin traders on its app.
On September 7, the country had enacted its own controversial Bitcoin Law that recognized it as a legal tender.
Despite the critics presenting low rates of blockchain and digital literacy among the Salvadorans as the law is taking effect, the Bitcoin Law appears to have facilitated widespread adoption of Bitcoin in the country.
Citizens currently appear to be exchanging their USD savings for Bitcoins at an accelerating pace. President Nayib Bukele had recently shared that Chivo had recorded 24,076 remittance requests (worth over $3 million) on October 14.
On October 10, the country had also announced its plans of investing a portion of the $4 million worth of profits from the Chivo’s Bitcoin trust for constructing a new veterinary hospital in the local capital of San Salvador.