El Salvador's Bitcoin Law
My thoughts on the recent law passed by Salvadoran Congress making Bitcoin legal tender within the country
It was less than 72 hours after I returned home from the Bitcoin conference in Miami. I had the NBA playoffs on in the background while I scrolled through my Twitter feed, planning to head up to bed in just a few minutes. I saw Nic Carter was hosting a Twitter Space discussing the huge news that capped off Bitcoin Miami 2021: El Salvador's President, Nayib Bukele, would be introducing a bill to Salvadoran Congress that would make Bitcoin legal tender.
The Announcement in Miami
I'll never forget that moment. The conference was coming to end and Jack Mallers comes up on stage for a 'major announcement.' Anticipation was in the air. Jack took the stage and gave an emotional speech about why he founded Strike, the huge remittance problems many developing countries face, and his time in El Salvador. He spoke about how he was encouraged to take Strike to Europe, but he chose El Salvador instead. Europe may have been the better business decision, but the people of El Salvador had a greater need:
About 70% of the population is unbanked
Over 20% of the country's GDP comes from remittances
The fees abroad Salvadorans pay to send money back home can be as high as 50%
As Jack teared up multiple times, the crowd cheered him on. Bitcoiners have come to revere Jack for his energy and passion, and we all knew how important it was for him to share this news with us. Finally, the big news dropped. Jack turned the stage over to President Bukele who video-conferenced in to announce that El Salvador would be the first country to make Bitcoin legal tender. The room, filled with thousands of Bitcoiners, erupted. It was pure electricity. I doubt anybody could even hear the final few comments from President Bukele (I know I couldn't), but everyone knew the significance of that moment.
It was special to be there that day. Reflecting back on that moment and on the conference as a whole, I had a realization. I sat in on as many talks as I could and met tons of fellow Bitcoiners. Still, I don't recall much conversation about price or Bitcoin going "to the moon." Rather, the most discussed topics were about Bitcoin's importance to humanity. Not really caring about the current price or future price targets, I left Miami bullish as ever.
Back to the Twitter Space
When I joined Nic's Twitter Space, I had just finished reading through an English version of the bill after frantically searching the internet trying to find it. I never thought I'd be up until midnight on a Tuesday reading up on Salvadoran legislation, but Bitcoin will do that you.
The sentiment in the Space was generally positive, but there was a degree of uncertainty that came with it. As time passed, more and more of Bitcoin's "heavy hitters" joined the conversation until the speakers included Nic Carter, Anthony Pompliano, Balaji Srinivasan, Caitlin Long, Peter McCormack, Alex Gladstein, and more. The questions being posed were fascinating, but I was already up way later than I had planned. Then, all of a sudden, Nic notices that President Bukele's brother, Yusef Bukele, is in the Space and invites him up to speak. The President's brother was gracious enough to answer a few questions and did so quite candidly. He talked about growing up in El Salvador — how when he and his brother were kids, they had big dreams about who they wanted to be and ambitions about what they wanted to accomplish. Now, he said, many kids have a dystopian view of the future, worrying about what might happen to their country, their family, and the world.
"People who didn’t even elect U.S. leaders are most punished by U.S. sanctions" — Alex Gladstein, speaking on developing, dollarized countries
After spending a few minutes with us, Yusef had to leave. The conversation continued until, again, a surprising guest was spotted in the virtual audience. This time it was Karim Bukele, another Bukele brother and the president's campaign manager. Tired as I was, I couldn't go to bed now. President Bukele's campaign manager let us know the vote was taking place at that very moment. He wasn't on the floor for the vote and was happy to answer more of our questions. Again, I was pleasantly surprised by his candor.
The Guest of the Hour Arrives
Karim Bukele was asked if the president had been contacted by the U.S. and, jokingly, if the opponents of the bill were Ethereum supporters. When we asked him for an update on the vote, he let us know the opposition was speaking, but he never sounded worried about the bill not passing.
Another huge surprise was to come. This one the biggest of them all. The man himself, President Nayib Bukele, joined us in the Twitter Space. The first thought to cross my mind: "No f*cking way." The president of El Salvador really just joined a Twitter Space with a bunch of Bitcoiners — mid-vote on his bill. You'll notice a theme here: the president was candid in his responses to the questions posed to him. Below is a brief synthesis of my notes on what he shared with us:
Foreigners that invest 3 Bitcoin will gain permanent residency in El Salvador
Government setting up a trust and a government wallet to assist with instant transfers to U.S. Dollars for those who don't want to hold Bitcoin, a separate bill in coming weeks on this matter
Government trust will absorb citizens' risk of Bitcoin declining in value relative to when merchants sell goods and services
Investing in better infrastructure to enable a Bitcoin standard
“This is probably going to be replicated by other countries”
The U.S. and IMF had already reached out to him; he would try not to be pessimistic about financial ridicule from the rest of the globe, but chooses to be optimistic because this will be good for people; "there’s going to be a lot of support for what we’re doing here"
This isn’t just about money, it's about talent, technology, and fresh ideas
Won’t be good for some people with certain financial interests, but it will be good for humanity
To bitcoin beach: you guys demonstrated this is not something for rich people only, but this is good for all people worldwide
"Our future is not imposed upon us, we build our own future"
Oh, and VOLCANO MINING
Eventually, around 2 AM, I just had to call it quits and go to bed (work the next morning was rough). The vote passed with a supermajority, 62 of 84 in favor. I woke up still in awe of what happened the night before and what had transpired over the past few days. El Salvador might be a small, developing country but an entire nation-state has adopted Bitcoin as legal tender. I don't care how small or how poor the country is, that is huge news.
"Super bullish for human rights" — Alex Gladstein
My Take
If you haven't yet, I encourage you to watch Jack's announcement. It'll only take 20 minutes of your time and this video sums up how I've found Bitcoiners to think and feel vs. how the mainstream media paints us. Near the end, he talks about how this might only be a small step for Bitcoin, but a big step for humanity. I mostly agree with that statement. We haven't seen the price of Bitcoin skyrocket since the announcement. But price doesn't tell the whole story.
A poor country whose citizens lack access to banks, who often live day to day — not even paycheck to paycheck — have just been given greater hope for the future. All Salvadorans will need is a smartphone in order to use the Lightning Network for day-to-day transactions and to receive remittances from their family abroad. Per President Bukele, cell phone penetration is high in El Salvador, but the country will need to (and is planning to) invest in better infrastructure to expand internet access and get more phones with cameras/QR codes into the hands of Salvadorans before Bitcoin achieves widespread adoption.
Also, as the U.S. dollar is devalued due to mass money printing efforts in the U.S., Salvadorans aren't getting stimulus checks like many Americans. The people of El Salvador, like citizens of other developing, dollarized countries, don't have a say in who gets elected in the U.S. and they don't have any influence over U.S. fiscal policy. Yet they are subject to the actions of the U.S. central bank, just as Americans are. El Salvador, like many countries in Latin America, has long suffered at the hands of U.S. sanctions, and U.S. economic and fiscal policy. This article by the Center for Economic and Policy Research sums up just some recent examples.
Bitcoin is issued programmatically, on a fixed schedule, and is not controlled by a central bank or third party of any kind. This will make it harder for the developed world to repress people in this developing country. Bitcoin adoption within El Salvador can expand financial inclusivity for its disenfranchised citizens. On top of expanded access to a currency used for day-to-day payments, Salvadorans can finally store wealth now that they are freed from an inaccessible and unstable banking system.
The implications for El Salvador will be huge. Bitcoin-friendly laws will attract foreign investment and top talent in Bitcoin and blockchain technology to the country. The prevalence of Bitcoin within El Salvador will encourage Bitcoin mining, and El Salvador is already making plans to tap into clean, low-cost, renewable energy to make this happen. The news coming out of El Salvador also seems to already be causing a ripple effect across Central and South America. Lawmakers of various countries in Latin America have equipped their profile photos with laser eyes, announcing their support for Bitcoin. Latin America has been harmed either directly or indirectly by the actions of developed countries for a long time. Many Latin Americans are all too familiar with financial and currency crises. I'm a firm believer that Bitcoin represents hope for billions of people all around the world who don't have access to banks or a stable currency. We in the U.S. have a financial privilege (among many other privileges) that most don't. I hope that one day soon the world will wake up to the benefits of Bitcoin. I have a hunch that the news coming out of El Salvador will be just the first of many dominos to fall.
Wrapping Up
For those of you still with me — a huge thanks for reading my first ever newsletter. I've always wanted to write. I guess I hadn't found something that compelled me to do so until now. Aside from this being a creative outlet for me, I hope that you learn something along the way.
In this newsletter, I'll cover all things Bitcoin. I don't plan to cover the basics like what is Bitcoin or how to buy it. There is already a lot of great intro to Bitcoin content out there. Topics I plan to share with you are common misconceptions about Bitcoin, my take on recent Bitcoin news, what makes someone a Bitcoiner, problems Bitcoin can solve, and other things I've learned about this open monetary network. My plan is to write one of these weekly and follow a similar format:
What I learned and how this is contrary to views outside of the Bitcoin community
My personal take on the topic
Links to other pieces of content to read/watch/listen to learn more
Again, thanks for reading. For more takes on all things Bitcoin, follow me on Twitter and subscribe to Why We Bitcoin below.
—Nick