Have you heard the good news? Satoshi’s fiduciary light is fast approaching the nation of El Salvador.
Our Constantine in this case is the young and social media savvy (and member of bitcoin class of 2017) President Nayib Bukele, who recently enacted a proposal that would make bitcoin a currency of the kingdom. And like that other historic reformer, this turn to embrace burgeoning (monetary) morality may introduce some pain to those who might not currently be on board. No wonder bitcoin evangelists have opposing views on what should be a major institutional turning point. What role should the state play to encourage bitcoin adoption?
First, the facts. El Salvador – “the Savior” – might not have been the first place most would have suspected to be at the forefront of monetary innovation, but the conditions were right. Many Latin American countries receive a good number of overseas remittances, and El Salvador is no different. It has a sizable population that has no access to financial services, making the process of receiving remittances expensive and difficult. El Salvador is distinguished by the fact that it did not have a state-issued currency, but instead used the good old US dollar.
And El Salvador had previously attracted crypto-utopians (and anonymous investments) to the “Bitcoin Beach” surfing community in El Zonte which uses cryptocurrency for daily transactions. One of those potential bitcoin beachbums was none other than young Lightning Network entrepreneur Jack Mallers, who worked closely with Bukele to draft the law and announced the initiative to receptive sidekicks at this Bitcoin conference. year in Miami.
Here is what it does: Citing the need to create “the conditions necessary to increase national wealth for the benefit of the greatest number of inhabitants” and noting that “about 70% of the population does not have access to financial services traditional ”, the law establishes that bitcoin will have“ unlimited legal tender with liberating power, unlimited in any transaction, and in any capacity that natural or legal persons, public or private, require to carry out ”. Prices can be expressed in BTC, taxes levied in BTC, and exchange rates set by the market. So far, so good.
It’s really good, actually. To date, most countries have been lukewarm at best when it comes to bitcoin. To see a state not only do not trying to crack down on bitcoin immediately, but giving it a big hug instead is remarkable. The fact that the state that does this rules over people who could enjoy some of the greatest benefits of sovereign finance and censorship-resistant payments makes things even more exciting. At a time when powerful central banks seem to be preparing their arrows, who could blame the faithful for their joy?
Then comes article 7: “Any economic agent must accept bitcoin as a means of payment when it is offered to him by the person who acquires a good or a service. This is where some bitcoiners jump on the bandwagon. It’s one thing to allow people to pay taxes in bitcoin or to make it clear that bitcoin transactions are legal and encouraged, they say. It’s another to demand that everyone must accept bitcoin whenever it is offered.
There is an ideological argument. Bitcoiners are often libertarians with the usual spectrum of procedural and ethical values. In one school of thought, individual actions and preferences are not only generally more effective, they are also always more morally correct than the government decree. Even though bitcoin is a good in itself, if it is imposed by immoral means, it becomes a moral evil. Critics of Bitcoin, which are decidedly do not libertarian, have also looked at this apparent hypocrisy.
This is where the logistical problems arise. Suppose every Salvadorian is happy with the new law. Requiring all traders to have working bitcoin processes by September 7, when the law goes into effect, could create headaches.
Maybe traders will scramble to keep up with the date and their systems won’t perform as well as they should. Perhaps a wave of social engineering attacks is opening up El Salvador to major thefts and scams. Perhaps the price of bitcoin suddenly plunges and unnecessarily distracts people from the currency. It’s easy to imagine how things could turn south, and of course Bitcoin critics would have a good day in the field. Worse, it could set back other countries that desperately need monetary sovereignty.
Or maybe, maybe, things will work out after all. Bitcoiners are bitcoiners because they believe that this technology can financially free people from monetary mismanagement and third-party control. If we think bitcoin is such a good thing in and of itself, is it so terrible that a government is putting it on a legal basis with the US dollar?
And maybe, maybe, the law itself isn’t as powerful as it looks. Supporters point out that section 12 of the law has some sort of escape clause. He believes that “those who, as it is obvious and notorious, do not have access to technologies which allow them to carry out bitcoin transactions are excluded from the obligation expressed in article 7”. The law also does not require Salvadorans to hold bitcoins. They can immediately exchange it for another currency like the US dollar. The goal is to use adoption by merchants as a way to create the technological infrastructure necessary to make bitcoinization meaningful.
Awesome! Or not? Reviews counter that the next line effectively negates this since it orders the state to “promote the training and mechanisms necessary for the population to access bitcoin transactions.” Article 8 also provides that the state “will promote the training and mechanisms necessary for the population to access bitcoin transactions.”
It is already doing it: the government is launching a “public option” wallet, called Chivo (“cool” in Salvadoran slang), and will offer $ 30 worth of bitcoin to every adult citizen. Salvadorians will not be obliged to use this wallet, in accordance with article 8, the State cannot “prejudice [the] private sector actions. This is an accessible and tailor-made option for the Salvadoran people. She can immediately trade BTC for USD, as provided by law. If Salvadorans prefer to use another wallet, they can.
The international bitcoin community, mainly in developed countries like the United States, is – like bitcoin – still engaged in these heated exchanges over whether or not “we” should support this law. It is probably confusing for foreigners. Here’s a country that is adopting bitcoin as legal tender (and more), but many bitcoins are just as much, if not more, opposed to the law as bitcoin critics. Do we really think Salvadoran troops will break down the front door of every pupuseria to make sure they accept bitcoin?
It seems unlikely, and for his part President Bukele is touring the sphere of bitcoin influencers to defend the bill. He says you can’t just withdraw Section 7 because it will help kick-start the financial infrastructure needed to create a bitcoin standard that is more than moot from a legal standpoint. He says every piece of the bill is needed to bring bitcoin to his country where 70 percent of people are unbanked at all, a way to “wake up dead capital.” He says he believes in bitcoin and will help his countrymen create and save wealth. In addition, the bill was drafted and passed by qualified majority in the democratically elected legislature (at least in Latin terms). Has anyone checked what Salvadorans think about this?
There is no way around the procedural dilemma of Salvadoran bitcoinization for rights-based libertarians. A politician’s promise will do little to improve matters. And bitcoiners have already been burned by false prophets. But for those of a more consequentialist inclination, such ritualistic impurity poses no problem in itself. Either way, if bitcoin really frees people from government repression, wouldn’t bitcoinization be, even forced, hoist a possible Salvadoran tyranny with his own firecracker?
It’s a metamethodical conversation that touches on tender fault lines that have always existed within libertarian circles, and now bitcoin. As we chat online, the Salvadoran experience continues at a rapid pace. Hope it goes well. The catechumens concerned could have turned to prayer in response to Constantinian excesses. Unless they feel so strongly that they want to engage in external subversion, bitcoiners and critics outside of El Salvador will just have to keep arguing on the internet.