How long before nation states buy bitcoin?

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The president of El Salvador announced today that he is submitting a bill soon to make Bitcoin legal tender there - I saw him announce it on video. Apparently he has a supermajority to pass the bill too (I can not confirm this).

Jack Mallers who has been in El Salvador working on bitcoin adoption there has also said they will hold bitcoin in their reserves, though I did not hear the president say this directly as part of his announcement, but I guess it doesn't seem far fetched if it's legal tender.

Here is a quote from the bill itself:


longer clip including an emotional Jack at the Bitcoin conference in Miami: https://www.youtube.com/watch?v=-Vcgy1wli9k
clip of just the president's announcement: https://www.youtube.com/watch?v=vCtBcKa064s
 
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Mike Peterson's work on the El Zonte / Bitcoin Beach project paying dividends. Hoping to make it down there before Christmas. Mallers involvement has been more recent and with Lightning and Mallers Strike coming along, all the locals are accepting btc payments via mobile app. Strike comes into play for remittances - which accounts for 20% of El Salvadors GDP. Losing an average 10% through WU, Money gram, etc in fees is significant.

The snippet you quoted is directly referencing the Feds money printing. Dollarised countries like El Salvador, Ecuador & Panama are seeing dollar reserves devalued with none of the upside.

Well done El Salvador - first of many.
 
Two members of Parliament in Brazil & Mexico and one each in Panama, Argentina & Ecuador have also come out and indicated a desire to embrace Bitcoin. Likewise, in the case of an advisor to the Colombian President. Of course, in isolation this means little. However, it's something that was unimaginable not all that long ago and over the longer haul, it will serve to normalise the idea of adoption in some form at nation-state level.
 
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July 2010 BTC 0.08$ Today it is 26'983€. I'd say a lot of people are just miffed they did not buy at the start say 100€ @ .08
 
SDMXTWO said:
July 2010 BTC 0.08$ Today it is 26'983€. I'd say a lot of people are just miffed they did not buy at the start say 100€ @ .08
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And yet this is all still incredibly early.

Congress is currently in session in San Salvador - and the bill has just passed. This is far more progressive than originally thought.

- Bitcoin and the US dollar will both be legal tender in El Salvador.

- Merchants will be required by law to accept bitcoin payment. Nobody will be able to refuse such a payment. There is a transitional clause in the bill to provide an exemption for merchants in remote areas with internet access difficulties.

- The government will assume volatility risk on behalf of merchants - allowing them to automatically convert to USD where that is their preference. This will be facilitated through a state-owned bank. The government will develop a wallet to facilitate this - albeit that use of the wallet is at the discretion of merchants.



The speculation over the past 18 months was that a small country in the developing world would put btc on its balance sheet. This is entirely different and builds on bitcoins use as a means of exchange.
 

That is absolutely hilarious. I hope this guy has his escape plan sorted.
 
SDMXTWO said:
July 2010 BTC 0.08$ Today it is 26'983€. I'd say a lot of people are just miffed they did not buy at the start say 100€ @ .08
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People who did not buy at the start would be "miffed" at the lost opportunity.

But not as "miffed" as people like me who sold short and then watched its irrational rise.

But people who did buy at over $60,000 would be even more "miffed" at the lost money.
 
This is very interesting. It seems that Bukele is going all-in. While I don't think a "success", however that is judged, will make bitcoin I see great possibilities for a major disaster, for example many poor people being duped as they see their btc dive.
If the purpose was to avoid transaction fees in US$ transmissions why was this State bank not set up to facilitate that much more conventionally? Indeed why does it not facilitate the immediate but cost effective conversion of transmitted btc to US$?
Surely the poor people of El Sal are not going to HODL bitcoin, or are they?

As for any possibility of any significant amount of EL Sal reserves being in bitcoin surely the community must in conscience call Halt! A typical mantra of bitcoin enthusiasts such as hedge funds is that maybe 1% to 2% of your portfolio would be suitable as a diversification play. These are wealthy individuals or institutions and can afford to take a 1%-2% diversification play. This is a very poor country - its citizens can't afford even a 1%-2% risk - unless they buy into Wolfie's philosophy "if you have nothing to lose, why not go all-in"?"
 
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I don't know what is more hilarious. People keeping an eye on Congress in San Salvador to see what is passed or the idea that The Government while negotiating an IMF aid package is in a position to guarantee anything never mind hold bitcoin or the hedging of the volatility of Bitcoin...
 
Sunny said:
The Government while negotiating an IMF aid package
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The IMF should bring the San Salvaorean team of negotiators on a junket to Albania.

Finance and Development

www.imf.org

The pyramid scheme phenomenon in Albania is important because its scale relative to the size of the economy was unprecedented, and because the political and social consequences of the collapse of the pyramid schemes were profound. At their peak, the nominal value of the pyramid schemes' liabilities amounted to almost half of the country's GDP. Many Albanians—about two-thirds of the population—invested in them. When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed. Albania's experience has significant implications for other countries in which conditions are similar to those that led to the schemes' rise in Albania, and others can learn from the way the Albanian authorities handled—and mishandled—the crisis.
 
Maybe try some of the other smaller cryptos which are at 0.0028+ now and just forget about them.
 
This is wild. As Duke said it seems Bukele is going all-in, and it's moving quickly too.

I see this whole thing more as a test of, and challange for, Strike than bitcoin. I expect that in terms of the population using it that they'll use Strike. That will take care of the remittance aspect from the US side. There's also no way he can make accepting bitcoin mandatory and expect everyone to learn how to use, accept and secure it in such a short time frame, so I assume what really will happen is that they must allow payment of bitcoin through *some* app, which is probably Strike. Just a guess though.
Duke of Marmalade said:
Surely the poor people of El Sal are not going to HODL bitcoin, or are they?
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I think the Strike app effectively gives the choice of balance as bitcoin or as some USD stable coin.

The other aspect is the government themselves keeping reserves. I see that as a completely unrelated aspect except that if they accept some payments from the citizens via something like Strike, they might accept it as bitcoin and then directly add it to the reserves.

There's a risk Bukele is doing this for all the wrong reasons and that it fails spectacularly. Even if he isn't, there's a risk that they depend on something like Strike and it's just not ready yet for such heavy usage. Fascinating to see though.
 
Duke of Marmalade said:
This is a very poor country - its citizens can't afford even a 1%-2% risk
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But you keep telling us fiat currency is designed to lose 2% purchasing power pa? This is more of the "you are poor, you will stay poor, that is just the way things are", mentality.

My take on this, is that is mostly media-pumped window dressing, for now at least. The % population in El Salvador that is engaged in bitcoin I'm guessing is extremely low. And if a large portion of that population is poor, then we are not talking about large sums here, for now at least.
There is a trend on Twitter about how Tesla will now be forced to take bitcoin payments....but realistically, how many Tesla's are sold in El Salvador? How many poor people buy electric vehicles? Zero, or else they would not be classed as poor.

Away from the hype, overall it is a good thing. It means poor people, perpetually disenfranchised, ostracised, marginalised from the financial and economic system can for the first time take ownership of property that has value, with government backing. This is the import of what is happening now, not that you could buy a latte in bitcoin - that will follow in its own time.
Psychologically this has greater import than the BTC/USD exchange rate.
 
There seems to be a lot of fear and misunderstanding on this. This switch will be very subtle. In reality, everyone keeps using the dollar as normal. However, it just facilitates someone to pay in bitcoin should they want to do so. They are NOT holding bitcoin reserves and not putting bitcoin on their balance sheet per se. They are setting up a trust fund to act as a market maker in effect. i.e. they will automatically convert btc received by a merchant into usd - assuming the merchant wants that conversion - which of course most of them will.

We're talking about starting a project like this from a standing start - so despite this being a groundbreaking move - nobody should expect any major change for the foreseeable. However, El Salvador is an extreme case with regard to remittances. Duke - you referred to 'monetary rape' the other day but surely anyone can see that WU or Moneygram taking 10% of remittances is bonkers - yet that's whats happening. Imagine working a low end job in the US - trying to support family back home in El Salvador and this slime is taking 10%. That's gone on for years and affects millions of migrants. This should be the start of that going away. Mallers claims zero commission but there's some sort of mechanism built in somewhere or other...but no matter - we're talking a reduction in commission from 10% to 1 or 2%.
Whereas that might not be so significant for any other country at a state level, its hugely significant in El Salvador where remittances account for in excess of 20% of GDP.
It's also clever in that they have not been getting any FDI - but they can harness FDI unconventionally via the crypto community. A further change will be made to immigration policy, which will offer permanent residency to those that want it in return for a minimum 3 BTC inward investment into the country.

Dazed in Pontoon said:
There's also no way he can make accepting bitcoin mandatory and expect everyone to learn how to use, accept and secure it in such a short time frame, so I assume what really will happen is that they must allow payment of bitcoin through *some* app,
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The government are building out an app for use which will provide for seamless automatic conversion back to USD. However, it's not mandatory - merchants can use any wallet that they want.
The bill was passed and signed last night. The law becomes effective in 90 days so there's an adjustment period. In many Latin countries, merchants tack on a 5% surcharge for using visa/mastercard - so there won't be any such charge in this instance.

Dazed in Pontoon said:
I think the Strike app effectively gives the choice of balance as bitcoin or as some USD stable coin
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You're quite right. Bitcoin Beach have their own bitcoin-based app. In recent months, the finding has been that locals were using the Strike app akin to a checking account and the Bitcoin Beach app akin to a savings account. Remember - these are people who have been denied access to the banking system.
 
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What is your source that BTC to USD conversion in EL Salvador will only have a fee of 1-2%?
 
A few years back my son was on some medical training thing in Cameroon. I was on holiday in South of France. I got the rather alarming message that he had no funds and was rather desperate to receive them. My normal banking relationships were of no use. That's when I first discovered WU in a French post office. Given the banks complete impotence in this space I was truly grateful that WU facilitated the transfer of (I think) €300 in Cameroon Francs, I forget but at most with a day's delay. The charge was €25 or something like that, but I could have kissed them for it. So I will never see them as slime. Similarly I do not see charities like Oxfam as slime, even though I understand their fees for merely passing on charitable donations would be considerably higher than 10%.
I didn't reflect on the charges aspect and I certainly didn't blame WU. If blame there was to be it was that Cameroon was rather backward in the ways of modern banking. The same seems to hold for El Sal. The blame would not appear to be on the First World side of the transfer otherwise transfers between US and EU would also be very expensive.
So I am puzzled on a couple of fronts.
If Bukele can set up a State bank to facilitate bitcoin why could he not have set up a State bank to bring conventional bank transfers between the US and El Sal on to a modern footing? He might even have given all his citizens an opening account (balance zero of course), that would solve the disenfranchisement at a stroke.

As I understand it, bitcoin transactions and holdings were entirely legal in El Sal. Why could these not have already been used to bypass the slime?
 
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Duke of Marmalade said:
If Bukele can set up a State bank to facilitate bitcoin why could he not have set up a State bank to bring conventional bank transfers between the US and El Sal on to a modern footing?
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For all the same reasons conventional bank transfers don't work quickly and cheaply between different countries? You say this as if it's trivial, surely it isn't since WU get to charge 25 quid for the service.

Spending 25 to send 300 once in an emergency is grand (I've been in that situation too). But if you're spending 25 to send 50 every week or fortnight I imagine the novelty wears off.

It sounds like Strike, using bitcoin/lighning as the settlement layer is the solution they're using.
 
I understand your example and I understand that you couldn't have cared less about the commission in an emergency scenario. However, millions of migrants around the world today are sending back remittances on an ongoing basis to their families in their countries of origin and the average commission is 10%. That's morally bankrupt. You can say that its the governments issue or the banking systems issue - I would imagine it's both.


State-owned bank or not, I can only assume that the banking system thwarts that effort. The bill goes out of its way to outline that 70% of the populace don't have bank accounts. Regulatory bloat has a lot to do with that. I'd also imagine he sees what way things are going and its an opportunity for the country to address some major issues and in some ways, put it ahead of the game rather than on a par via conventional banking.

Duke of Marmalade said:
As I understand it, bitcoin transactions and holding were entirely legal in E Sal. Why could these not have already been used to bypass the slime?
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Because Mallers service hasn't even really gotten going - it's an early stage startup. Furthermore, whilst one of the key facets of bitcoin is decentralisation, it's completely different to what people are accustomed to. There's a large educational aspect to that in introducing this to the populace. The government can help with that by being proactive about it (and they can do so without that affecting bitcoin's decentralisation all the while).
 
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I worked in the United States and never once had to use WU to send money back home. Banks charge high fees on international transfers and there are a number of FinTech competitors closing the gap making it much more affordable (transferwise, worldfirst etc). So I assume the rhetoric on WU relates to workers in the US that are likely to be illegal workers earning cash in hand? Yes this cohort of people get a raw deal and resort to using WU and high fees to send money back given they don't have legal status to open bank accounts etc.

However, I am not sure that BTC solves the root of the issue. If they could now use BTC to bypass WU fees, this just supports the illegal labour market and mistreatment of millions. In this instance BTC is not banking the unbanked but rather keeping them outside the banked system furthering their exclusion and is not humanitarian.

Secondly, the only real reduction in fees would arise from if the individual was paid in BTC which currently is not the case. So in the example of a person in the US paid in $ wanting to send money back to EL Salvador would have to convert the dollar to BTC (fee) first for it to be spent in BTC terms in EL Salvador. However, to convert from $ to BTC on a recognized exchange requires a SSN, photo identity which the person is unlikely to be in the possession of or they wouldn't need to use WU in the first place. This will lead to the use of alternative sources to convert $ to BTC with much higher fees than established exchanges such as coinbase.


A separate question, I assume the price of goods will be higher in EL Salvador when bought with BTC vs $ to account for the spread built into BTC to account for price risk?
 
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