Sigh. Bitcoin BTC, at 3 transactions per second, doesn't have the capacity to support El Salvador's economy. Even if Lightning worked (it doesn't), BTC doesn't have enough capacity to open channels for users at a reasonable cost. Salvadorians will end up forced to use proprietary payment networks denominated in BTC.<p>BTC is not cash anymore, it won't work as such. There are other cryptos that could work, we'll have to see how broadly 'bitcoin' is interpreted.<p>The CGT exemption will be of interest to crypto whales and entrepreneurs and may attract some, but organized crime is a concern given the nature of the asset.
Full copy of the law in English <a href="https://twitter.com/DocumentingBTC/status/1402448396171067392?s=20" rel="nofollow">https://twitter.com/DocumentingBTC/status/140244839617106739...</a>
Perhaps El Salvador has a different definition of legal tender, but if not, this is sucky. Legal Tender is generally a means you cannot refuse for debt repayment. For buying etc. you can accept or refuse just about anything, in most/many places, but for settling debt, legal tender cannot be refused.<p>So I'm just some guy. Someone owes me money and says, nah I'll repay it with Bitcoin. Not only is that mega-volatile, most people have no idea how to use it. Also it's easy to fall for a scam if you don't know how it works.<p>And further, you can typically accept <i>anything</i> as debt repayment if you so like. Cash, art, pretty shells, or indeed, Bitcoin. Making it legal tender actually funnels people into <i>having</i> to accept Bitcoin.
The strictly limited amount of BTC makes this into a land grab. First comers are entitled to the services of the real economy due to their virtue of being first(or lucky to be on the right place at the right tweet).<p>Musk is right on this one: <a href="https://twitter.com/elonmusk/status/1401251430015582209?s=21" rel="nofollow">https://twitter.com/elonmusk/status/1401251430015582209?s=21</a><p>Unlike fiat money, BTC is not an accounting tool for value exchange.<p>Unlike actual land, it doesn’t have any intrinsic value.<p>I’m very curious to see an elite class whose core virtue is based on being an early adopter.
Nayib Bukele's (president of El Salvador) profile on Twitter:<p><a href="https://twitter.com/nayibbukele" rel="nofollow">https://twitter.com/nayibbukele</a><p>Just have a look at it. The profile pic with laser eyes. I wonder how much of this is motivated by personal profit motives.<p>Edit: The biggest thing of this is that every commercial actor MUST accept Bitcoin if a customer wants to pay in Bitcoin. See Art. 7
I know you have the option to convert to USD, but haven't seen yet if there would be any fee to doing so. Also, it might be difficult to get every merchant in the country to be able to accept bitcoin. The other thought I had was if they would start accepting other crypto as well if this works out.
A few points of interest for those that want to dig more:<p>* This is an analysis of what was actually passed. It's a big deal as far as "legal tender" goes: <a href="https://twitter.com/robustus/status/1402456274340442113" rel="nofollow">https://twitter.com/robustus/status/1402456274340442113</a> For an discussion on what "legal tender" can mean, see: <a href="https://www.coindesk.com/el-salvador-bitcoin-legal-tender-koning" rel="nofollow">https://www.coindesk.com/el-salvador-bitcoin-legal-tender-ko...</a><p>* For those that don't know, the US Dollar was El Salvador's previous only legal tender. For a list of some other countries that use USD or are pegged to USD: <a href="https://en.wikipedia.org/wiki/List_of_countries_by_exchange_rate_regime" rel="nofollow">https://en.wikipedia.org/wiki/List_of_countries_by_exchange_...</a> - note of those, the Marshall Islands has previously announced plans for a CBDC (working w/ Algorand) and politicians in Ecuador has also brought up the possibility of introducing Bitcoin as legal tender. Many LatAm politicians (many that have been pegged to USD) have announced support for cryptocurrencies. Perhaps domino theory is back in play? <a href="https://twitter.com/balajis/status/1402279912623464458" rel="nofollow">https://twitter.com/balajis/status/1402279912623464458</a><p>* The plan for the merchant/end-user use case is apparently to use Strike <a href="https://strike.me/" rel="nofollow">https://strike.me/</a> , which is a custodial service built on the Lightning Network - see also <a href="https://www.businesswire.com/news/home/20210605005045/en/Strike-Drives-Bitcoin-Forward-as-El-Salvador-Becomes-World%E2%80%99s-First-Country-to-Adopt-Bitcoin-as-Legal-Tender" rel="nofollow">https://www.businesswire.com/news/home/20210605005045/en/Str...</a> (Technically it's opt-in and you can use any wallet, but I'll just leave this recent thread here as an example of why this isn't really an option: <a href="https://threadreaderapp.com/thread/1376286470256873475.html" rel="nofollow">https://threadreaderapp.com/thread/1376286470256873475.html</a> )<p>* Anyway, that last detail is I believe is getting sidetracked from the main point, which is that as a (to my mind) clear direct consequence/reaction to current US monetary policy, and a shot across the bow of USD's reserve currency status. One doesn't have to look further than the numbers for foreign holding of US Treasury Bills to see how the wind has been blowing: <a href="https://ycharts.com/indicators/increase_in_foreign_holdings_of_us_treasury_bills" rel="nofollow">https://ycharts.com/indicators/increase_in_foreign_holdings_...</a> but of course, you can also listen to much smart people than me opine about this: <a href="https://youtu.be/ScAeHsXIUqI?t=528" rel="nofollow">https://youtu.be/ScAeHsXIUqI?t=528</a><p>(It appears that El Salvador plans hold $150mm USD in a fund that will slowly convert into BTC, assuming price volatility risk for merchants that want USD)
They probably should have spent that $150M reserve fund on pre-mining their own cryptocurrency (and then put it in reserve). That way at least the currency could float on its own terms with respect to the Salvadoran economy.<p>I think the trade-deficit between El Salvador and the rest of the world[0] will mean this is just a gimmick in the end.<p>[0] <a href="https://tradingeconomics.com/el-salvador/balance-of-trade" rel="nofollow">https://tradingeconomics.com/el-salvador/balance-of-trade</a>
It'll be interesting to see how they use BTC specifically for this use case. Looking at <a href="https://ycharts.com/indicators/bitcoin_average_transaction_fee" rel="nofollow">https://ycharts.com/indicators/bitcoin_average_transaction_f...</a> the transaction fee for directly using BTC is $4.6 at the moment. That's obviously not workable for small transactions, so some kind of overlay where the transactions are batched before commit, would be needed.<p>Also the volatility piece will be hard to manage in anything other than instant transactions. If it's legal currency will people have to denominate larger assets (e.g. cars, houses) in BTC and commit to a price where there could be considerable shift before settlement? I know they mention that stability fund in the article but I could see this getting more complex than that.<p>What the policy will be where BTC appreciates before settlement will be interesting too, so in a bull run will a buyer have to hand over the number of coins they committed to, and will the gov. get the excess, or the merchant?