How it started compared to how it goes with the Bitcoin law in 2021

Before June 2021, news about Nayib Bukele probably wasn’t even echoing on the radar screens of many crypto users. Instead, the Salvadoran president made headlines for allegations of corruption and dictatorial behavior after his party’s congressional majority sacked five members of the country’s Supreme Court and its attorney general.

At the Bitcoin 2021 conference in Miami, however, Bukele stunned many attendees and garnered international attention by announcing that he planned for El Salvador to adopt Bitcoin (BTC) as legal tender. Within a week, a qualified majority in the Salvadoran legislature – most of Bukele’s own party – had passed the Bitcoin law, forcing all companies to accept the crypto asset as a method of payment alongside the US dollar.

Bukele’s involvement in the deployment of crypto appeared to extend further than many would have expected from a world leader. The Salvadoran president was already active on social media and presented himself differently from many politicians, often dressed casually in a baseball cap and jeans. Since the Bitcoin law came into effect in September, he has used his Twitter account to announce several purchases of BTC totaling 1,391 BTC, or more than $ 71 million, likely from the National Treasury of El Salvador. He also proposed that the country harness geothermal energy from its volcanoes to mine crypto.

Locally, opposition to the Bitcoin law has manifested itself in the form of public statements by lawmakers unrelated to Bukele’s political party as well as protests in San Salvador. Before the law went into effect on September 7, a group of retirees, veterans, disabled retirees and workers marched through the capital to voice concerns about the volatility of the crypto asset and how the Bitcoin law could potentially affect their pensions. Protesters calling themselves the Popular Resistance and Rebellion Bloc carried banners saying “No to Bitcoin” through the streets to demand the repeal of the law.

Officials outside Bukele’s sphere of influence have also expressed skepticism about the deployment. In June, Victoria Nuland of the US State Department urged El Salvador to “carefully review” Bitcoin to ensure the crypto asset was “well regulated” and “transparent,” and the government offered protection ” against malicious actors ”. The International Monetary Fund issued its own warning in July, saying the consequences of a country adopting Bitcoin as their national currency “could be dire.”

In addition to helping establish the regulatory framework for the adoption of BTC payments, Bukele encouraged efforts to create the infrastructure necessary for Salvadoran traders and ordinary citizens to use crypto. The country is already home to Bitcoin Beach, an area of ​​the village of El Zonte, intended to be an experiment where Bitcoiners can use crypto to pay anything from utility bills to tacos. Authorities have also overseen the installation of hundreds of Chivo ATMs, allowing Salvadorans to withdraw money around the clock without paying commissions on their crypto holdings.

However, one announcement that will likely stand out as the most ambitious of Bukele’s crypto plans in 2021 was about the creation of Bitcoin City, initially funded by $ 1 billion in BTC bonds. The crypto exchange Bitfinex and Blockstream have previously said they plan to support the initiative, which would aim to avoid capital gains, income, property taxes or payroll taxes.

Criticism of Bukele ruling as an authoritarian was necessarily toned down with the rollout of the Bitcoin Law, but the coverage was often associated with his statements about “buying down”, to propose a 24-hour Bitcoin information network and other crypto-related developments in the country. There is little indication that the president has moved beyond self-identification as “the world’s coolest dictator” – a Twitter bio he later changed to “CEO of El Salvador.”

Prior to the passage of the Bitcoin Law, police arrested a resident of San Salvador who spoke out against the country’s adoption of Bitcoin as legal tender. In October, following several protests against Bukele’s policies, the government banned gatherings, saying its actions were aimed at preventing the spread of COVID-19 – however, it still listed sporting and cultural events as exemptions.

“The crypto community that embraces Bukele of all people shows that they need to think a little more. […] This guy is an authoritarian who cannot provide basic services to his citizens, ”said Tommy Vietor, a political commentator for Pod Save the World. “[El Salvador has] one of the highest murder rates in the world. He seems to think that you can get electricity by plugging your Apple charger into a volcano somehow. Don’t try to sell us a technological utopian city powered by a volcano – let’s just start a little smaller.

At the end of 2021, it was still unclear whether the average citizen of El Salvador was reaping many of the Bitcoin Law rewards. Bukele announced in October that animals would benefit from crypto with the construction of a $ 4 million veterinary hospital funded by profits from the country’s Bitcoin trust. However, it is likely that the Latin American nation will still struggle to cope with the volatility of the crypto asset when used as a medium of exchange, as well as to gain the understanding and acceptance of the great public by its population.

James C. Tibbs