On September 7, 2021, El Salvador became the world’s first country to adopt bitcoin as an official form of legal tender. Officially dubbed the Bitcoin Law, the Salvadoran legislation was announced publicly only three months prior and was ratified into law within a week.
Salvadoran president Nayib Bukele, who made the announcement at a bitcoin event in Miami alongside Strike CEO Jack Mallers, was hailed by a month-long barrage of #bitcoin tweets as a visionary, bold first-mover, and general people’s man. Bukele took full advantage of his time in the Miami limelight, preaching the benefits of Bitcoin adoption for Salvadorans: near-zero remittance fees for migrants abroad and newfound economic inclusion for the unbanked at home.
For a community of self-labeled dissenters and free-thinkers, the bitcoin community’s unadulterated jubilation was as much an indication of triumph as it was immaturity. For as ought to be common wisdom in the twenty-first century, the world is often not as it appears on Twitter.
As a cryptocurrency enthusiast committed to objectivity – or, as many in the bitcoin community affectionately call me, a “shitcoiner” – I traveled to El Salvador to explore, look, and listen without bias. If you’re anything like me, you might appreciate a new angle on the situation.
How bitcoin arrived in El Salvador in the first place
Bitcoin’s roots in El Salvador date back to 2019 when American surfer and non-profit businessman Michael Peterson began incentivizing locals in the Salvadoran beach town of El Zonte to contribute to their community by rewarding them in BTC. Peterson rapidly spurred merchant adoption throughout the village, whose 3,000 inhabitants began accepting and using the Bitcoin Lightning Network for payments. Peterson called his project Bitcoin Beach and hired as many locals as possible to operate and further the mission from a property aptly named the Hope House.
While Peterson consistently implored government officials to contribute to bitcoin adoption in the country, and while Nayib Bukele displayed public interest in bitcoin as mayor of San Salvador as early as 2017, the initiatives of Bitcoin Beach and the Salvadoran government remain conspicuously separate in 2021.
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A significant majority of El Zonte residents transact with Bitcoin Beach Wallet, an application developed by the Hope House’s own technical and integration team. Nonetheless, Bukele saw fit to coordinate the development of a new wallet application called Chivo Wallet, along with a network of Chivo ATMs across the country where citizens can exchange Lightning BTC for U.S. dollars.
Unlike Blue Wallet and Muun Wallet, Chivo’s well-established, open-source, and decentralized counterparts that support Bitcoin’s Lightning Network, Chivo Wallet remains closed-source and largely out of the public domain. Perhaps a hint, Chivo’s official Twitter page only follows one account: Nayib Bukele.
Fortunately, the Salvadoran government was forced to provide decisive insight into the functionality of Chivo Wallet on September 7, when they shut down all access to Chivo Wallet to allow their development team to address an unforeseen technical issue. Such a measure would be entirely impossible for Chivo’s decentralized counterparts, none of whose core code grants exclusive power to any entity. Doing so would be a cardinal violation of bitcoin’s core principles, not to mention individual privacy.
Much like his taste for alliteration, Mike Peterson’s pioneering efforts to share, teach and empower appear to be as authentic as those that seeded bitcoin’s conception. Bukele’s initiative for what ought to be termed centrally planned bitcoin adoption, on the other hand, doesn’t quite have the same ring to it. It may, however, be the crypto space’s most poignant oxymoron.
But that is not to relegate El Salvador’s government to the status of outright mobsters or glutinous politicians. Like Bitcoin Beach and the Hope House, the Salvadoran government is composed of humans – humans who have stories, ideas, and agendas of their own. As is integral to any objective examination, it is imperative to understand El Salvador’s journey, the challenges that confront it, and the opportunities within its reach.
The real reason El Salvador wants to champion bitcoin
El Salvador adopted the U.S. dollar as its national currency in 2001, relinquishing its capacity to monetize debt via its central bank and subjugating its people to the monetary whims of the United States Federal Reserve. Unlike most nations, El Salvador is not particularly threatened by the properties of a self-sovereign currency; to the contrary, like many oppressed peoples of the world, El Salvador’s government likely yearns to get out from under the thumb of the powers that be – for instance, their creditors at the Inter-American Development Bank. On that accord, adopting a decentralized monetary network that eliminates exorbitant remittance fees charged by American payment processors and sourcing capital from its distributed network of ultra-wealthy libertarian-types across the globe is quite a fitting solution.
Seen through the lens of El Salvador’s recent past, 40-year-old Nayib Bukele appears distinctly human. The Salvadoran president followed up his feel-good story in Miami with an epilogue on Peter McCormack’s “What Bitcoin Did” podcast in late June. Recorded live in El Salvador, the two donned casual wear and celebrated bitcoin’s promise of individual freedom and economic inclusion alongside El Salvador’s zero property tax, non-residential tax regime, newly ordained permanent residence program, and of course, its beloved pupusas. Naturally, the interview neglected to cover other relevant developments of late, like the go-ahead Bukele received from El Salvador’s highest court on September 4 to run for re-election in 2024 counter to the Salvadoran constitution’s explicit 1-term restriction, or the five judges he appointed to that same court in May.
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Establishing itself as a crypto-friendly tax haven for crypto whales, the Salvadoran government may just cultivate the wealth and resources it needs to liberate itself – and therefore its people – from the tyranny of the U.S. dollar. You can safely assume that there will be some strong-arming from Bukele and co. and that some less-than-principled high-net-worth bitcoiners will be showing up on the scene in a promotional capacity.
Nonetheless, it is far from outlandish to suggest that El Salvador’s government may be developing centralized infrastructure to compete with existing, decentralized applications using the nation’s tax base. As of today, any Salvadoran citizen that downloads Chivo Wallet receives $30 in BTC. Such a promotional campaign, however, remains far beyond the financial means of Bitcoin Beach.
What’s next for El Salvador?
If the social, economic, and geopolitical history of humankind has taught us anything, it is that systems that can be exploited will be exploited. If any pocket of concentrated wealth or power exists in an economic or political structure, it will inevitably act as a nerve center where unscrupulous individuals with affinities for control will fester and organize. One of the most significant challenges that confront human civilization today is how to formulate systems that can function autonomously and sustainably across borders, cultures, and, most importantly, generations.
It is not so much a question of what the intentions of the Salvadoran government are today. Still, of how effectively the tyrannical intentions of malicious groups might be put into action in the event they are able to establish themselves in the positions where Salvadoran government officials presently stand.
For it should go without saying that any entity – be it private or public – that has the power to revoke individual access to basic financial services – or merely to surveil its users – possesses excessive and dangerous power. Within its own economic system, such an entity represents a singular point of failure, or more accurately, a singular point of exploitation.
Whether we choose to believe and obey or distrust and dispute the sweet-talkers and do-gooders that stand at the interface between government and citizenry is of no relevance; only the political and economic systems which empirically enable or prevent the implementation of authoritarian agendas are worthy of our attention.
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As a sovereign entity operating on a foreign fiat currency, the Salvadoran government finds its goals in alignment with those of its people. As long as such an alignment remains the status quo, they will act in the best interest of their constituents. But as long as they possess the technological means to abandon the constitutional mandate to serve their people, authoritarianism will remain an inevitability and individual freedom, an ever-diminishing glimpse into the past.
Alex Shipp is the Chief Strategy Officer of Offshift, a private decentralized finance derivatives platform. He is a professional strategist and writer in the digital asset space with a deep background in traditional finance and economics, as well as the emerging fields of decentralized system architecture, tokenomics, blockchain, and digital assets. Alex has been professionally involved in the digital asset space since 2017.
YouTube: On the ground in El Salvador as bitcoin is put to the test (Forkast News)
Photo credit: The feature image has been done by Mauricio Cuéllar. The photos in the body of the article have been taken by Alex Shipp.
Source: Nelson Renteria, Anthony Esposito (Reuters) / MacKenzie Sigalos (CNBC) / Tatiana Koffman (Forbes) / Juanita Darling (LA Times) / Peter McCormack, Nayib Bukele (What Bitcoin Did) / Nelson Renteria (Reuters) / Marco Quiroz-Gutierrez (Fortune)