The Country Making Bitcoin Legal Tender
Posted June 08, 2021
All reports are that the 10,000 people who attended the Bitcoin 2021 conference in Miami, Florida this past weekend had a blast, as one would expect. I’ve attended perhaps four times — two of which were wildly exuberant, while the other two were just a bit depressing.
Any guesses as to the difference? Yep, it’s the magic thing we call the price, that tiny digital symbol that burns so hot into the human brain, then rocks the imagination and soul like few other forces in life.
Smug crypto junkies like to say that it’s the technology — not the price — that matters. Oh, sure.
At Bitcoin events, when prices are up, the music and dancing is glorious. When it’s down, eyes are downcast and people are grumpy. High prices inspire adoption, low prices demoralize. Just the way it is.
Any further guesses on the spirits this year? Keep in mind that this is famously fully open Florida, home of the emancipationist governor Ron DeSantis who defied the ruling elites to open his state. No more lockdowns, he said. He even expressed regret for going along with them in the first place. Being in Miami today is about feeling freedom, and feeling grateful for it.
What about the Bitcoin price? If you follow mainstream media, the last you heard Bitcoin crashed again. Well, this Miami event happens once per year. From June 2020 to June 2021, Bitcoin is up 276%, and the rest of the crypto market along with it. For people in the markets for at least this long, things are mighty fine, and these are times worth celebrating.
A Momentous Speech
Most of the speeches at this event are industry folks pitching products, and everyone knows and forgives that. It’s fine. But some of the speeches are more notable.
The stand-out presentation this year was from President Nayib Bukele of El Salvador. He is the first president in decades to be elected from a third party, in this case called New Ideas in English. He is 40 years old and a huge believer in free enterprise and technology. He is also enormously popular.
President Bukele rocked the house with an announcement. He is introducing legislation that would approve Bitcoin as legal tender for the whole country. Wow!
It would be the first country to do so. It’s a major step, and an obvious one. We are headed to a world of currency competition. Any country serious about economic progress should approve Bitcoin as legal tender. In fact, all countries take the next step: anything anyone wants to use as money is legal tender. In other words, freedom!
Can This Really Work?
In his Bitcoin push, President Bukele is working with the crypto wallet maker Strike. It specializes in friendly ways to use the second-layer technology Lightning, which relies on user networks to live above the main Bitcoin blockchain. This network largely solves a major problem that Bitcoin has faced for years — namely its problems with scaling for mass use.
The more people who crowd the ledger, the higher the fees go, and the slower is the clearing process. This is due to the throttling of the amount of data that are carried on a block, a debate for another time. Regardless, Lightning gets around that by processing transactions off-chain in a trusted network that anyone can use. Thus mainstreaming, scaling, and democratizing money.
It’s all well suited to El Salvador, which has an economy largely based on the use of cash. Most people (70%) do not have bank accounts. Remittances from migrants living outside the country account for 20% of GDP. The companies who process these payments, which can take days, charge as much as 10% off the top just to get money from there to here.
As the saying goes, Bitcoin completely solves this problem. If the legislation goes through, remittances will gradually shift from mediated dollar transfers to unmediated Bitcoin transfers — and back again.
It feels like freedom, doesn’t it? Indeed. To be sure, El Salvador is far from being a bastion of market freedom but perhaps it will take more steps in that direction. In the pandemic, the country was tragically among those that locked down early and hard, long before the virus itself was even a problem. The president saw the error by the summer and opened up fast,, now ranking among those with no stringencies imposed supposedly to control the virus.
Free and Unfree
In general, countries in Latin America deployed controls in 2020 in unpredictable ways. Daniel Ortega of Nicaragua, once branded as a dedicated Communist in the 1980s, absolutely refused to impose any lockdowns at all. We can’t afford them, he sensibly said. Costa Rica had plenty of laws on the books but they were not enforced. Panama was the same. Guatemala, on the other hand, took a brutal approach, unleashing police all around with enforced stay-at-home orders.
Let’s try to make some sense out of why El Savador, of all places, would take this step. The president is only 40 years old, comes from a background of retail commerce, and has a solid education. He is from a third party that is for now mercifully free of corrupt networks, payoffs, and grafting schemery. His popularity (again, for now) enables him to take risks others are unwilling to take. One, for example, cannot even imagine such truly progressive monetary reform to emanate from the US or Europe.
All of which speaks to a larger issue. Precisely where in the world can we find the future of freedom. Consider some of the oddities of 2020.
What countries stayed completely open? Lichtenstein, Tanzania, Nicaragua, and Belarus all deserve medals for defying the lockdowners at the World Health Organization. One is a monarchy, while the others are ruled by people generally regarded as authoritarian or worse. Belarus is often described as a wicked dictatorship — and probably correctly — but its dictator refused to treat his people like lab rights in a science experiment. Good for him.
Other countries that one would assume would defy controls happily jumped right in there with lockdowns, including Bermuda, Caymans, and a whole variety of islands that have heretofore been regarded as freedom havens in an unfree world. That dramatically changed in 2020 as expats found themselves trapped in their homes and unable to travel.
It was the same in the US. Who could have imagined that the only state with near-zero restrictions would be South Dakota or that it would be Florida and Wyoming that would point the way back to sanity for many other states?
Meanwhile, the highly educated, beautifully civilized, and intelligently secular elites of Massachusetts and Connecticut imposed draconian rules on its workers and peasants that lasted longer than any other state.
Where can we look for pro-freedom reforms and opportunities in the years ahead? Barring some dramatic political upheaval in the US or Europe (and that is not something entirely to rule out), I would place my bets on the poorer developing nations such as Nicaragua, El Salvador, or Tanzania.
These are places that are willing to take more risks, lack the bad kind of legacy infrastructure that holds back the “first world,” and are raising up a new generation of leaders who will consider new ideas.
P.S. We all know Bitcoin, but I believe there is another opportunity emerging as we speak, one that is potentially way more lucrative. In fact, it has the potential to generate trillions of dollars! I recently went on camera and discussed a couple of these opportunities to tap into that trillion-dollar potential. Click here to watch now.