Bitcoin becomes legal tender, can this country’s cyberpunk dream come true?

In the ideal world of cyberpunk puzzles, what is the most suitable way to set currency? Bitcoin may be elected with high votes.

Recently, this cyberpunk dream has never been closer to reality.

On June 6, El Salvador’s President Nayib Bukele stated at the Bitcoin 2021 conference in Miami that he would submit a bill to the country’s parliament next week to make Bitcoin a legal means of payment in the country.

Once the bill is approved, it means that El Salvador will become the first country in the world to use Bitcoin as legal tender.

Subsequently, the President of El Salvador also retweeted the “King of Topics” in the currency circle and Justin Sun, CEO of TRON, on “crypto investors and entrepreneurs emigrating to El Salvador”, analyzing the four major benefits of El Salvador for crypto entrepreneurs, namely:

1. Favorable climate, world-class surfing beaches, and sale of beachfront properties

2. One of the few countries in the world that does not have a property tax;

3. No tax on Bitcoin gains, because Bitcoin will become legal tender;

4. Crypto entrepreneurs immediately obtain permanent residency rights.

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This news cheered up the crypto industry. Binance CEO Changpeng Zhao and Justin Sun also responded in a short time, and for a while, the news about El Salvador in the Twitter crypto circle began to sweep the screen.

But most of everyone’s first reaction is, what is El Salvador like?

 Redefining El Salvador 

El Salvador, a small coastal country located in the northern part of Central America, has a land area of ​​more than 20,000 square kilometers, an area equivalent to 1.2 Beijing, and a total population of about 6.7 million, which is about one-third of the permanent population of Beijing.

As a “low- and middle-income country” with agriculture as the backbone of its economy, El Salvador has experienced 12 years of war and civil strife. It is famous for poverty and gang violence. There have been more than 3,400 murders in 7 months. One of the most dangerous countries in the world.”

Economically, El Salvador has not issued its own independent sovereign currency, and has always settled in US dollars. The US dollar issuance and regulation are all determined by the United States. El Salvador can only obediently rely on it, and true independence cannot be talked about.

Today, this small and small country has made global headlines following the shocking remarks of the new president and has received close attention from the crypto industry.

After the news was broadcast, some Salvadoran netizens expressed their appreciation for the new president on reddit. The netizen with the ID named RussianRadium posted a message saying that the president who keeps pace with the times has brought changes and redefinitions for Salvador Has improved the country’s international image.

Through the description of this netizen, we may be able to glimpse the current situation of this country:

The President of El Salvador, Nayib Bukele, is 39 years old this year. His organization is mainly composed of young professionals who are tired of the corrupt system that has made El Salvador poor and underdeveloped over the past 30 years. In the early days of taking office, he fired the Attorney General (he has been protecting other corrupt politicians) and 5 other corrupt magistrates. Within a month of taking office, the Salvadoran Congress approved new education and infrastructure financing plans, and passed a series of bills to ensure that the predatory business elites who bought politicians in the past are restrained. Many large infrastructure projects are expected to be approved by Congress soon, including the construction of a high-speed railway and a new international airport.

Currently, one of the largest projects under construction in El Salvador is “SurfCity”, which mainly builds roads, power and communication infrastructure along the coast of El Salvador to help small and medium-sized enterprises. For this reason, the International Surfing Association (ISA) decided to host the World Surfing Games, and the winner can be eligible to represent El Salvador in the 2021 Tokyo Olympics . Currently, Bitcoin has been widely used by small businesses in El Salvador, especially in El Zonte, a small beach town in southeastern El Salvador that is popular with international tourists.

I know that most people think El Salvador is a place of disaster. We used to be. However, this country is undergoing tremendous changes. …El Salvador is no longer one of the 10 most violent countries in the world (the murders here used to be 12-15 a day, but since Bukele came to power, it has dropped to nearly 3-4 a day), and our economy is also expected to be stable increase.

The use of Bitcoin as legal tender is huge news for El Salvador. I assure you that Congress will pass this bill. I can’t give you an exact date, but the Economic Committee may receive all the papers on Bitcoin this week and discuss them.

Cyberpunk’s Bitcoin Beach 

Surprisingly, Bitcoin has become one of the payment methods on the El Zonte coast in El Salvador before the president’s statement. This project is called “Bitcoin Beach” (Bitcoin Beach).

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El Zonte is a rural town on the coast of El Salvador with 3,000 inhabitants. It has become a surfer’s paradise because of its beautiful waterfront. Under the impact of the COVID-19 epidemic, El Zonte has found its own unique path due to the Bitcoin economy.

According to Forbes, the anonymous donors of El Zonte initially purchased bitcoins for 5-10 cents and kept them in a USB flash drive for several years. In early 2019, after recovering the wallet password, he used Bitcoin to donate a 6-digit donation to El Zonte.

Subsequently, the donor worked with El Zonte volunteer Michael Peterson to use the money to improve the lives of El Zonte residents, but there was only one condition that Michael Peterson could not exchange bitcoin for legal tender. Residents of El Zonte must learn how to use Bitcoin itself in order to create a Bitcoin economy. This is the birth of the “Bitcoin Beach” project.

Currently, a common criticism of Bitcoin payments is the high fees and slow network processing speeds. Faced with this challenge, the “Bitcoin Beach” project began to find new ways. “When transaction costs rise, we switch to the Lightning Network.” said Michael Peterson, founder of “Bitcoin Beach”.

The Lightning Network is a second-layer payment protocol that runs on top of the Bitcoin network, enabling instant transactions. “Bitcoin Beach” chose a crypto wallet as a payment tool. Local residents can use the Lightning Network to buy anything, from Mexican rolls and bulky goods to paying utility bills.

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The internal and external difficulties of Bitcoin payment 

Whether the success of El Zonte can be applied to the entire El Salvador is a question that President Nayib Bukele will face in the future.

Currently, the image he shows through Twitter is a far cry from the steady president of a country. After gaining the attention of the world through Bitcoin speech, it is not difficult to see that the president fell in love with surfing the Internet.

He replaced his Twitter avatar with the “laser eye”, which is a must-have for the currency circle, and frequently reposted in large numbers in response to his positive comments, and called El Salvador a “land of freedom.” From his Twitter, it seems that using Bitcoin as a legal currency seems to be a smooth journey, everything is ready, only owes east wind.

However, under the noise and enthusiasm, it is inevitable that there will be shadows.

In discussions about Bitcoin payments, the most common problem is the violent fluctuations in the price of Bitcoin. When residents abroad in El Salvador exchange their assets for Bitcoin, and then send them back to the accounts of their loved ones through the Lightning Network. If the price of Bitcoin plummeted by 30% in this short period of time, how should the hard-working residents bear it?

In addition, financial institutions such as Wall Street more often define Bitcoin as a “commodity” rather than a currency, which is similar to “gold” and “oil” in the financial system. In El Salvador, where the financial system is imperfect, how do local residents use “oil” for daily transactions?

Internally, the new president faces many criticisms. Reddit netizen mschweini said that Bukele’s attitude is more populist, and he is replacing the judiciary in El Salvador with his cronies. In an environment where gangs in El Salvador prevail, Bitcoin may be more conducive to illegal activities such as the black market and money laundering.

As a war country with frequent civil strife, Bukele’s political career has just begun for 3 years. Bitcoin’s legal currency status is closely linked to the stability of his personal political career, which also brings various uncertainties to Bitcoin’s development prospects in El Salvador. Sex.

Externally, it is also difficult for El Salvador to use Bitcoin as a legal currency. You know, El Salvador is not the first country that wants to issue fiat cryptocurrency.

In February 2018, the Marshall Islands, a sovereign nation in the South Pacific, stated that it would issue the world’s first sovereign legal crypto crypto currency-“Sovereign (SOV)”. It is reported that the sovereign crypto currency will circulate in the country together with the U.S. dollar, and the Marshall Islands National Assembly has passed this resolution.

However, this resolution is not popular internationally.

In 2018, financial institutions such as the International Monetary Fund (IMF) and the U.S. Department of the Treasury questioned and criticized the Marshall Islands resolution. In May 2020, the International Monetary Fund issued another official statement against the upcoming national crypto currency SOV issued by the Republic of the Marshall Islands.

Similar to the Marshall Islands, Venezuela also relies heavily on foreign aid, trying to save itself by issuing the national sovereign cryptocurrency “Petro” (Petro), but ultimately failed. Relying solely on petrocoins cannot really save Venezuela, which has a terrible economy.

The Marshall Islands and Venezuela’s fiat-to-cryptocurrency road is not smooth, so can El Salvador, a small country, rely on Bitcoin to go out of its own independent currency road?

On June 8, the Minister of Commerce of El Salvador told the media that the use of cryptocurrency will not replace the legal status of the U.S. dollar, which does not mean that the economy is de-dollarized. At present, the U.S. dollar is still the legal tender of El Salvador, and the receiver and payer can choose Bitcoin to pay when they are willing, and the U.S. dollar is still the pricing standard.

From this point of view, Bitcoin still has a long way to go to help El Salvador become a country with independent currency and autonomy.

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