6 ms·

Bitcoin becomes Legal Tender in El Salvador

122 points by enigami 5y ago

tmarice 5y ago
This is either the best or the worst thing that happened to Bitcoin.
- system2 5y ago
  Or like Cardano/Ethiopia. Just a fluff.
- pinkybanana 5y ago
  I think neither. El Salvador is very small country, and not big economical actor.
  - onion2k 5y ago
    If the idea fails and gets rolled back it will be seen as BTC not working as currency at a national scale, even if the nation is small. Heck, if it doesn't work for a small country then it's less likely to work for a large one.
Cyclone_ 5y ago
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.
- enigami 5y ago
  Agree and somehow if the Government could abstract away all the complexities involved with Storing Bitcoin, Private Keys Management, Fees and Coversion this would be a major step forward
- Hamuko 5y ago
  >Also, it might be difficult to get every merchant in the country to be able to accept bitcoin. How's the Internet infrastructure in El Salvador?
  - deleted 5y ago
    [deleted]
  - el-salvador 5y ago
    * US $30 a month for 20/30Mbps in cities. * Wireless data can be spotty in rural areas due to many hills and mountains. We would need an MVNO for rural areas coverage, as it wouldn't be cost effective for the four mobile networks to place a tower in every rural corner. * Wireless coverage in cities was limited/overloaded for about 5 years due to lack of new frequencies. This was a regulatory issue fixed about 2 years ago and wireless service is finally improving * Some companies stopped providing wired service in rural areas about 15 years ago due to copper theft. Not sure if this has improved
    - Hamuko 5y ago
      Doesn't sound great. I assume that cash is still king, especially in rural areas?
      - el-salvador 5y ago
        The informal system (50% of the workforce) is mostly cash based, while those who have 'formal' jobs get paid in bank accounts which usually include debit cards. Payment in food stalls and small businnesses is mostly cash.
- deleted 5y ago
  [deleted]
mrtksn 5y ago
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). Musk is right on this one: https://twitter.com/elonmusk/status/1401251430015582209?s=21 https://twitter.com/elonmusk/status/1401251430015582209?s=21 Unlike fiat money, BTC is not an accounting tool for value exchange. Unlike actual land, it doesn’t have any intrinsic value. I’m very curious to see an elite class whose core virtue is based on being an early adopter.
- timdaub 5y ago
  The intrinsic value argument is a funny one. What's the idea behind it? Assume you have asset X but then one key assmption fails. Now, is asset X still valuable considering the failed assumption? For land, you can say that even in the case that society collapses it is still valuable. Or is it? What exactly is the assumption that deems BTC's intrinsic value zero and land's value more than zero?
  - solotronics 5y ago
    Land ownership is a totally abstract idea anyways it's just been a thing for longer.
    - mrtksn 5y ago
      Ownership is abstract, there are communities where the concept is rejected but the land has intrinsic value regardless of the claims of those who use it. Capitalist, Communist or Anarchist - the land doesn’t care, it grows the tomatoes the same way.
      - timdaub 5y ago
        Surely if you look via godmode on earth, you can even ascribe intrinsic value to it in the case of complet societal collapse where there's only tribes fighting for tomatoes. But is that a useful view?
Tabular-Iceberg 5y ago
Isn't the whole point of Bitcoin to bypass the entire concept of "legal tender"?
- pinkybanana 5y ago
  There is no centrally defined "point of Bitcoin".
  - crypto-cousin 5y ago
    Sounds like you grasp the key concepts of decentralization :)
- timdaub 5y ago
  no?
- ben_w 5y ago
  I think you’re mixing up “fiat currency” with “legal tender”. The former being “money created and backed by the power of a government” and the latter being “money which a government says courts are required to recognise when offered as payment for a debt”. If we were on the gold standard, gold would be legal tender, even though it isn’t fiat.
solotronics 5y ago
Full copy of the law in English https://twitter.com/DocumentingBTC/status/1402448396171067392?s=20 https://twitter.com/DocumentingBTC/status/140244839617106739...
raesene9 5y ago
It'll be interesting to see how they use BTC specifically for this use case. Looking at https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f... 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. 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. 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?
- vincnetas 5y ago
  This batching is called Lightning network. https://en.wikipedia.org/wiki/Lightning_Network https://en.wikipedia.org/wiki/Lightning_Network
  - raesene9 5y ago
    Sure I'd guess there are multiple options for this, my point was that one (or more) would be needed for this to be practicable for small transactions.
- deleted 5y ago
  [deleted]
FreeTrade 5y ago
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. 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. 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.
- dangero 5y ago
  Forget Lightning— Did you know you can transfer Bitcoin from one user to another on Coinbase with zero transaction fees instantly? Any exchange can do the same. Centralized layer two scales just fine for many use cases and is working today.
  - pinkybanana 5y ago
    This. People just assume onchain txes and LN are the only way to scale. In practice centralized scaling via custodials has been there from the very early days.
  - gjulianm 5y ago
    But then why use Bitcoin if you're going to use what is essentially a bank?
    - wereHamster 5y ago
      Ease of access to and exchange with global marketplaces. I can transfer/trade directly from/to El Salvador without any bank being involved in that transaction.
      - willeh 5y ago
        A bank by any other name is still a bank. Sure there is definitely a legal difference such as deposit insurance and access to their lender of last resort. For the customer however it doesn't matter they still need KYC, the cops can still see their transactions, they still have to ask where the money is from, they can still knock on your door and put your hands in handcuffs. Many of the advantages to people in El Salvador with BTC is avoiding extreme inflation in the national currency. However one does well to note that inflation woes in the Atlantic world actually correlated with a partial deflation of the Bitcoin bubble, so if you're in the EU/US bitcoin is an investment when money is cheap, not a hedge for your money becoming cheap.
crypto-cousin 5y ago
Friendly reminder that Bitcoin was originally envisioned to replace central banks and debt-based money. Communities with these interests tend to be very antisemitic.
- sida 5y ago
  This sentence ended in a very unexpected way
- throwawayacc2 5y ago
  Oy vey!
- pharmakom 5y ago
  Friendly reminder to reject anti-semitism and then examine the merits of debt based money.
WA 5y ago
Nayib Bukele's (president of El Salvador) profile on Twitter: https://twitter.com/nayibbukele https://twitter.com/nayibbukele Just have a look at it. The profile pic with laser eyes. I wonder how much of this is motivated by personal profit motives. 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
nly 5y ago
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. 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. [0] https://tradingeconomics.com/el-salvador/balance-of-trade https://tradingeconomics.com/el-salvador/balance-of-trade
nikolay 5y ago
Oh, well - you guys wanna tank your economy even further?
lhl 5y ago
A few points of interest for those that want to dig more: * This is an analysis of what was actually passed. It's a big deal as far as "legal tender" goes: https://twitter.com/robustus/status/1402456274340442113 https://twitter.com/robustus/status/1402456274340442113 For an discussion on what "legal tender" can mean, see: https://www.coindesk.com/el-salvador-bitcoin-legal-tender-koning https://www.coindesk.com/el-salvador-bitcoin-legal-tender-ko... * 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: https://en.wikipedia.org/wiki/List_of_countries_by_exchange_rate_regime https://en.wikipedia.org/wiki/List_of_countries_by_exchange_... - 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? https://twitter.com/balajis/status/1402279912623464458 https://twitter.com/balajis/status/1402279912623464458 * The plan for the merchant/end-user use case is apparently to use Strike https://strike.me/ https://strike.me/ , which is a custodial service built on the Lightning Network - see also 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 https://www.businesswire.com/news/home/20210605005045/en/Str... (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: https://threadreaderapp.com/thread/1376286470256873475.html https://threadreaderapp.com/thread/1376286470256873475.html ) * 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: https://ycharts.com/indicators/increase_in_foreign_holdings_of_us_treasury_bills https://ycharts.com/indicators/increase_in_foreign_holdings_... but of course, you can also listen to much smart people than me opine about this: https://youtu.be/ScAeHsXIUqI?t=528 https://youtu.be/ScAeHsXIUqI?t=528 (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)
microtherion 5y ago
The cryptocurrency equivalent to "Big in Japan".
rich_sasha 5y ago
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. 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. And further, you can typically accept anything as debt repayment if you so like. Cash, art, pretty shells, or indeed, Bitcoin. Making it legal tender actually funnels people into having to accept Bitcoin.
74d-fe6-2c6 5y ago
Is Bitcoin dead or is it just going through a transformation? ... should I stay or should I go?

122 points by enigami 5y ago

tmarice 5y ago

This is either the best or the worst thing that happened to Bitcoin.

system2 5y ago
Or like Cardano/Ethiopia. Just a fluff.
pinkybanana 5y ago
I think neither. El Salvador is very small country, and not big economical actor.
- onion2k 5y ago
  If the idea fails and gets rolled back it will be seen as BTC not working as currency at a national scale, even if the nation is small. Heck, if it doesn't work for a small country then it's less likely to work for a large one.

Cyclone_ 5y ago

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.

enigami 5y ago
Agree and somehow if the Government could abstract away all the complexities involved with Storing Bitcoin, Private Keys Management, Fees and Coversion this would be a major step forward
Hamuko 5y ago
>Also, it might be difficult to get every merchant in the country to be able to accept bitcoin. How's the Internet infrastructure in El Salvador?
- deleted 5y ago
  [deleted]
- el-salvador 5y ago
  * US $30 a month for 20/30Mbps in cities. * Wireless data can be spotty in rural areas due to many hills and mountains. We would need an MVNO for rural areas coverage, as it wouldn't be cost effective for the four mobile networks to place a tower in every rural corner. * Wireless coverage in cities was limited/overloaded for about 5 years due to lack of new frequencies. This was a regulatory issue fixed about 2 years ago and wireless service is finally improving * Some companies stopped providing wired service in rural areas about 15 years ago due to copper theft. Not sure if this has improved
  - Hamuko 5y ago
    Doesn't sound great. I assume that cash is still king, especially in rural areas?
    - el-salvador 5y ago
      The informal system (50% of the workforce) is mostly cash based, while those who have 'formal' jobs get paid in bank accounts which usually include debit cards. Payment in food stalls and small businnesses is mostly cash.
deleted 5y ago
[deleted]

mrtksn 5y ago

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). Musk is right on this one: https://twitter.com/elonmusk/status/1401251430015582209?s=21 https://twitter.com/elonmusk/status/1401251430015582209?s=21 Unlike fiat money, BTC is not an accounting tool for value exchange. Unlike actual land, it doesn’t have any intrinsic value. I’m very curious to see an elite class whose core virtue is based on being an early adopter.

timdaub 5y ago
The intrinsic value argument is a funny one. What's the idea behind it? Assume you have asset X but then one key assmption fails. Now, is asset X still valuable considering the failed assumption? For land, you can say that even in the case that society collapses it is still valuable. Or is it? What exactly is the assumption that deems BTC's intrinsic value zero and land's value more than zero?
- solotronics 5y ago
  Land ownership is a totally abstract idea anyways it's just been a thing for longer.
  - mrtksn 5y ago
    Ownership is abstract, there are communities where the concept is rejected but the land has intrinsic value regardless of the claims of those who use it. Capitalist, Communist or Anarchist - the land doesn’t care, it grows the tomatoes the same way.
    - timdaub 5y ago
      Surely if you look via godmode on earth, you can even ascribe intrinsic value to it in the case of complet societal collapse where there's only tribes fighting for tomatoes. But is that a useful view?

Tabular-Iceberg 5y ago

Isn't the whole point of Bitcoin to bypass the entire concept of "legal tender"?

pinkybanana 5y ago
There is no centrally defined "point of Bitcoin".
- crypto-cousin 5y ago
  Sounds like you grasp the key concepts of decentralization :)
timdaub 5y ago
no?
ben_w 5y ago
I think you’re mixing up “fiat currency” with “legal tender”. The former being “money created and backed by the power of a government” and the latter being “money which a government says courts are required to recognise when offered as payment for a debt”. If we were on the gold standard, gold would be legal tender, even though it isn’t fiat.

solotronics 5y ago

Full copy of the law in English https://twitter.com/DocumentingBTC/status/1402448396171067392?s=20 https://twitter.com/DocumentingBTC/status/140244839617106739...

raesene9 5y ago

It'll be interesting to see how they use BTC specifically for this use case. Looking at https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f... 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. 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. 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?

vincnetas 5y ago
This batching is called Lightning network. https://en.wikipedia.org/wiki/Lightning_Network https://en.wikipedia.org/wiki/Lightning_Network
- raesene9 5y ago
  Sure I'd guess there are multiple options for this, my point was that one (or more) would be needed for this to be practicable for small transactions.
deleted 5y ago
[deleted]

FreeTrade 5y ago

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. 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. 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.

dangero 5y ago
Forget Lightning— Did you know you can transfer Bitcoin from one user to another on Coinbase with zero transaction fees instantly? Any exchange can do the same. Centralized layer two scales just fine for many use cases and is working today.
- pinkybanana 5y ago
  This. People just assume onchain txes and LN are the only way to scale. In practice centralized scaling via custodials has been there from the very early days.
- gjulianm 5y ago
  But then why use Bitcoin if you're going to use what is essentially a bank?
  - wereHamster 5y ago
    Ease of access to and exchange with global marketplaces. I can transfer/trade directly from/to El Salvador without any bank being involved in that transaction.
    - willeh 5y ago
      A bank by any other name is still a bank. Sure there is definitely a legal difference such as deposit insurance and access to their lender of last resort. For the customer however it doesn't matter they still need KYC, the cops can still see their transactions, they still have to ask where the money is from, they can still knock on your door and put your hands in handcuffs. Many of the advantages to people in El Salvador with BTC is avoiding extreme inflation in the national currency. However one does well to note that inflation woes in the Atlantic world actually correlated with a partial deflation of the Bitcoin bubble, so if you're in the EU/US bitcoin is an investment when money is cheap, not a hedge for your money becoming cheap.

crypto-cousin 5y ago

Friendly reminder that Bitcoin was originally envisioned to replace central banks and debt-based money. Communities with these interests tend to be very antisemitic.

sida 5y ago
This sentence ended in a very unexpected way
throwawayacc2 5y ago
Oy vey!
pharmakom 5y ago
Friendly reminder to reject anti-semitism and then examine the merits of debt based money.

WA 5y ago

Nayib Bukele's (president of El Salvador) profile on Twitter: https://twitter.com/nayibbukele https://twitter.com/nayibbukele Just have a look at it. The profile pic with laser eyes. I wonder how much of this is motivated by personal profit motives. 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

nly 5y ago

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. 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. [0] https://tradingeconomics.com/el-salvador/balance-of-trade https://tradingeconomics.com/el-salvador/balance-of-trade

nikolay 5y ago

Oh, well - you guys wanna tank your economy even further?

lhl 5y ago

A few points of interest for those that want to dig more: * This is an analysis of what was actually passed. It's a big deal as far as "legal tender" goes: https://twitter.com/robustus/status/1402456274340442113 https://twitter.com/robustus/status/1402456274340442113 For an discussion on what "legal tender" can mean, see: https://www.coindesk.com/el-salvador-bitcoin-legal-tender-koning https://www.coindesk.com/el-salvador-bitcoin-legal-tender-ko... * 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: https://en.wikipedia.org/wiki/List_of_countries_by_exchange_rate_regime https://en.wikipedia.org/wiki/List_of_countries_by_exchange_... - 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? https://twitter.com/balajis/status/1402279912623464458 https://twitter.com/balajis/status/1402279912623464458 * The plan for the merchant/end-user use case is apparently to use Strike https://strike.me/ https://strike.me/ , which is a custodial service built on the Lightning Network - see also 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 https://www.businesswire.com/news/home/20210605005045/en/Str... (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: https://threadreaderapp.com/thread/1376286470256873475.html https://threadreaderapp.com/thread/1376286470256873475.html ) * 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: https://ycharts.com/indicators/increase_in_foreign_holdings_of_us_treasury_bills https://ycharts.com/indicators/increase_in_foreign_holdings_... but of course, you can also listen to much smart people than me opine about this: https://youtu.be/ScAeHsXIUqI?t=528 https://youtu.be/ScAeHsXIUqI?t=528 (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)

microtherion 5y ago

The cryptocurrency equivalent to "Big in Japan".

rich_sasha 5y ago

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. 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. And further, you can typically accept anything as debt repayment if you so like. Cash, art, pretty shells, or indeed, Bitcoin. Making it legal tender actually funnels people into having to accept Bitcoin.

74d-fe6-2c6 5y ago

Is Bitcoin dead or is it just going through a transformation? ... should I stay or should I go?