Heavy Taxation on Cryptocurrencies Better Than Outright Restrictions: Crypto Company Founders

AlphaPoint co-founders Igor Telyatnikov and Vadim Telyatnikov shared their views on crypto trends

El Salvador made history on September 7, last year, when it became the first country to adopt Bitcoin as a legal form of tender. However, the journey did not go smoothly for the Central American nation. Frequent technological glitches, a large population unfamiliar with the use of Bitcoin, public outcry, and the ongoing energy crisis prompted international observers to call the test “subjective” “liberalism” of El Salvador was a failure. The situation culminated when the International Monetary Fund (IMF) urged El Salvador to abandon Bitcoin as a legal tender, citing risks to financial stability.

Since day one, frequent glitches in the ‘Chivo’ wallet – from errors to blocked accounts and unauthorized fees to failed transactions – started to act as a major barrier to Greater Bitcoin adoption. ‘Chivo’ wallet is the national app for using bitcoin in El Salvador.

Now, as a remedy, the government of Nayib Bukele of El Salvador has appointed AlphaPoint, a multinational cryptocurrency software company, to support the wallet’s backend and frontend infrastructure’ Chivo’. According to the official press release, AlphaPoint will handle “the entire ecosystem including mobile apps, mobile point-of-sale processing, merchant website portals, back-office software call and admin console”.

In an email interview, AlphaPoint co-founders Igor Telyatnikov and Vadim Telyatnikov – they are brothers – shared their views on the El Salvador project, the future of cryptocurrencies, digital currencies backed by central banks and India’s experimentation with cryptocurrencies.

Your company will manage the new backend for the ‘Chivo’ wallet. What are the challenges and opportunities?

The Telyatnikov Brothers: We see an opportunity in introducing a new generation of financial inclusion to ordinary people. The challenge for us is that 70% of El Salvadorans are unbanked. However, to encourage citizens to use Bitcoin, we are focusing on an intuitive user interface/UX, which will make the ‘Chivo’ wallet easy to use.

This appears to be the first large-scale implementation of the ‘Lightning Network’. Why is this important and how does it affect users and businesses?

The Telyatnikov Brothers: The ‘Lightning Network’ allows Bitcoin to scale for payments around the world. In El Salvador, many purchases are made under $1. Lightning Network allows near-instant transactions with minimal transaction fees, and the country has proven that this new technology works on a massive scale. Chivo Wallet is a public utility that allows interoperability with the local banking system in US Dollars as well as Bitcoin transactions between Chivo wallets or any third party wallets.

Can El Salvador’s crypto-based legal tender model be replicated globally?

The Telyatnikov Brothers: We believe that El Salvador’s model can be replicated in other parts of the world. Dozens of countries have been considering laws around making Bitcoin a legal tender. Some countries are also considering making cryptocurrencies like stablecoins legal tender. For example, Bermuda has made it legal to pay taxes in dollar-backed stablecoins. These technological developments will allow everyone to participate in the financial ecosystem.

India recently announced a 30% tax on crypto transactions. Your decision?

The Telyatnikov Brothers: While a high tax rate is not ideal, it is better to completely restrict transactions that can benefit citizens. When someone says that taxes are levied on transactions, we will assume that they are not illegal transactions. I believe the crypto community in India would welcome clear guidance from the government.

Is the El Salvador trial promising for India? How to solve scalability issues in India?

The Telyatnikov Brothers: We hope the ‘Chivo’ initiative in El Salvador can be a model for countries like India. The underlying technology of the ‘Lightning Network’ – also used for the ‘Chivo’ wallet – is ready for use at scale, even in India. However, facilitating access to 1.3 billion people is a different business than supporting a population of about 6.5 million. In a country like India, the government can focus on core frameworks under which different businesses or municipalities can operate. Government-led initiatives can target specific underserved populations.

Globally, central bank digital currencies (CBDCs) seem to be trending right now. Can you put some light on them?

The Telyatnikov Brothers: CBDC is a virtual currency backed and issued by a central bank. As cryptocurrencies and stablecoins became more popular, central banks realized they needed to provide an alternative. Studies have also shown that CBDCs can speed up economic activity and increase GDP.