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Bitcoin Government

Skepticism Grows Over El Salvador's Pioneering Plan to Adopt Bitcoin as Legal Tender (theguardian.com) 89

Posted by EditorDavid from the show-me-the-money dept.
This week the Guardian reported that a "tumultuous few weeks" awaits El Salvador as it prepares to become the first country to adopt Bitcoin as legal tender on Tuesday. In August a research note by Bank of America enthused about the new law's ability to reduce the cost of cross-border transactions (remittances account for 20% of El Salvador's GDP), increase digital penetration in a country where 70% of people still do not use banks, and attract foreign investment as a first mover in cryptocurrency adoption. Since then, however, the verdict from international financial organisations — and El Salvadorans themselves — has turned decidedly pessimistic. "The law was adopted extremely quickly, without a technical study or a public debate," says Ricardo Castañeda, a local economist. "I don't think the president has fully understood the implications of the law, its potential to cause serious macroeconomic problems and convert the country into a haven for money laundering."

The regulatory framework for adoption has yet to be published and there are rumours of delays to the Chivo app. Bankers in the capital say they have received calls from anxious clients threatening to withdraw their deposits rather than risk exposure to the volatile cryptocurrency markets. The ratings agency Moody's downgraded El Salvadoran debt over fears of "weakened governance" evidenced by the new law, and the IMF — with which the government is negotiating a $1bn loan — published a blogpost highlighting the risks of adopting crypto as national currency. "The shift from euphoria to scepticism has been very fast," says Castañeda.

The potential benefits identified by the Bank of America are probably overstated. A paper by Johns Hopkins University says the cost of remittances via Bitcoin will be higher than traditional methods, and a July survey found that nearly two-thirds of El Salvadorans would not be open to accepting payment in Bitcoin. Eric Grill, CEO of Chainbytes, which produces Bitcoin ATMs, told the Guardian that his plan to relocate manufacturing to El Salvador had faced serious challenges in sourcing parts. Local geothermal energy experts say Bukele's plan to power energy-intensive Bitcoin mining activities from the country's volcanoes are wildly optimistic.
Reuters offered an update on Thursday. "In the main handicraft market of El Salvador's capital, traders complain that with a week to go before bitcoin becomes legal tender, no officials have come to explain how it will work or what benefits it may bring."
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Skepticism Grows Over El Salvador's Pioneering Plan to Adopt Bitcoin as Legal Tender More

Skepticism Grows Over El Salvador's Pioneering Plan to Adopt Bitcoin as Legal Tender

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  • The only surprise there is that there was anyone who wasn't skeptical to begin with.

  • Yeah, Musk, Wood and Dorsey must be buffoons. What would they know about the future?

  • Why Bitcoin? (Score:3)

    by SinGunner ( 911891 ) on Sunday September 05, 2021 @03:10AM (#61764985)
    There's nothing wrong with cryptocurrency, but it's a technology and Bitcoin is the first one. Why not roll your own or choose one that had a little more thought put into its creation after seeing the weaknesses of the first generation?

    • Why not roll your own

      There are already more cryptocurrencies than there are countries. Rolling your own cryptocurrency is not just printing money, it's printing money printing machines.

      Why not just go the whole Weimar Republic, and create a new currency every time the old one runs into trouble. In fact, why not just base your entire economy on gift cards? Every store has their own gift cards that can only be used for their store, and it's up to the consumer to trade gift cards of different stores with other gift card owners.

    • Nah, Bitcoin is solid. It's survived this long. A pandemic, a ban in China, etc. People keep predicting something will kill it and so far they're all eating their hats.

      • Remember all those people who bought at $60,000? Where is their money now?

        (In the accounts of the people with enough power to keep Bitcoin going, that's where...)

        • C'mon man. BTC is barely down from it's all-time high. Name a stock that outperformed BTC over the last 10 years.

          • Re: (Score:3)

            by Entrope ( 68843 )

            To coin a phrase, past performance is no guarantee of future results.

            • Right, so why not bet against Apple or Google or Amazon? Haters gonna hate.

              • Re: (Score:2)

                by Entrope ( 68843 )

                You act like you are looking for a greater fool [wikipedia.org].

                • I don't pretend to know the future, but btc has seen 12 years of consecutive growth so far. That is not the signature of a pump and dump. This is not Tulip Mania or Beanie Babies.

                  When guys like Warren Buffett say they don't invest in crypto because they don't understand it, I respect that. But when internet tough guys call btfc a scam, it's clear you're just kicking yourself for not getting in on btc early, and I feel your pain there, brother.

                  Still, a stopped clock is right eventually and no doubt the

                  • That is not the signature of a pump and dump. This is not Tulip Mania or Beanie Babies.

                    You're assuming there's a timeframe associated with speculative bubbles. It is not clear why - these can go on for a very long time, as long as there's people willing to pump money into them. And this is particularly true of Bitcoin et al, which operate at a global scale.

                    Maddof's operation lasted ~5 years before he became investigated and arrested. And Albania had country-wide Ponzi scheme operations before its entire economy collapsed, sinking the country into a civil war.

                  • It has seen continuous price increase, not overall utilitarian growth and adoption ... that that is not real measure of success. Actually I would say that there isless utilitarian adoption now than a few years ago, right before the first major crash. At that time many stores had it as a payment option. Then came the first major crash were prices went from almost 20.000$ down to almost hitting 4.000$ , and suddenly most of those stores stopped accepting it payment, it was to risky. The low utilitarian ado

                • Re: (Score:2)

                  by Kaenneth ( 82978 )

                  The greatest fool of all is the last one to adapt to the new reality.

          • But the moon phase is over, there's plenty of stocks which outperformed it over the last year. Of course the stock market is a casino too the last year ... but that's neither here nor there.

            Bitcoin turned into an eternal penny stock, not crashing to zero due to the absence of a company to go bankrupt but trivial to manipulate the price for, because of plausible deniability. Pumping a penny stock with fantasy bullshit while claiming you actually believe what you say is hard, there's an underlying company ope

          • 10 years? Off the top of my head, AMZN.

            • Re: (Score:2)

              by Entrope ( 68843 )

              Definitely not. I've held AMZN for something like 13 years, since it was in the low $60s, and its long-term return is less than Bitcoin. For example, five years ago, BTC was $608 and AMZN was $760. One year ago, BTC was $10258 and AMZN was $3150. Now BTC is $51805 and AMZN is $3478.

              That doesn't mean that BTC has better fundamentals, just that there are a bunch of people who really want to try to hide their payment details on a blockchain or snuggle money out of repressive regimes.

      • It's not really all that useful as a currency though. It can't handle a lot of transactions. The transactions it does handle take time.

        • Re: (Score:2)

          by Kaenneth ( 82978 )

          Bitcoin transfer wallet to wallet: 30 minutes.

          Transfer from my bank checking to pay my same bank credit card? 5 days, still pending.

          • Re: (Score:2)

            by iNaya ( 1049686 )

            Interesting banking system you have...

            For me:
            Transfer from my bank to same bank VISA credit card: instant. ($0 fee)
            Transfer to friend at different bank: 1 - 2 hours. ($0 fee)
            Transfer to 3rd party same bank: instant. ($0 fee)
            Transfer to friend overseas: 1 - 2 days, ~15 USD equivalent fee + currency conversion.

            So, I can see Bitcoin being useful in limited circumstances. But then there would also be the annoyance of converting the Bitcoin to local currency so it can actually be spent. I can convert my

            • I agree, but I was thinking more about day to day transactions. Buying a sandwich - Cash or card will take a few seconds. Might take a bit longer for the systems to actually process all this but the transaction is confirmed fairly quickly.

              It would be possible to do the same for bitcoin, I guess, but then you're back to delegating transactions to banks, which goes against the ethos of bitcoin.

            • Not everywhere has the same fee structure as you.

              Even shopping around here, best I can get is 30 rappen for a transaction (your points 1 to 3).

              Outside of the EU/EEA, Transfers take a week because it goes via the US and gets converted in to US dollars first. Also, interbank, international transfers are all done during New York working hours. Walled gardens exist in various banking systems, which have no purpose other than to enable banking profits.

              Fintech companies are doing well as they can get around some

      • While it may survive or even prosper, it is fucking awful for use as a currency. They could not have picked a worse crypto coin.

      • Nah, Bitcoin is solid. It's survived this long. A pandemic, a ban in China, etc. People keep predicting something will kill it and so far they're all eating their hats.

        Money paid by Bitcoin buyers minus cost of creating bitcoin minus cost of transactions minus cost of fraud minus cost of accidental losses equals money paid to Bitcoin sellers.

        That's mathematics. You can't beat mathematics. Since it's invention, Bitcoin has lost money. Of course some people made money, but because of the losses, other people lost more money.

    • Because it's a large scale pump and dump scheme, El Salvadoran politicians were bought to manipulate the Bitcoin price for profit.

  • Albania pyramid schemes (Score:4, Interesting)

    by gnasher719 ( 869701 ) on Sunday September 05, 2021 @04:38AM (#61765107)
    In the late 1990s, the Albanian economy was destroyed by pyramid schemes. A result of economic freedom (with communism disappearing) combined with total lack of any experience with fraud.

    In Salvador, I would very much fear for something similar. In the UK, I'm very safe from any damage caused by crypto currency - don't invest, you don't lose. In Salvador, by making this legal tender, it will be much more difficult to avoid, people are less sophisticated and much more likely to fall victim to fraud, and any damage will affect a substantially part of total income of the country.

  • What banking client fears? (Score:3)

    by ccham ( 162985 ) on Sunday September 05, 2021 @05:56AM (#61765261)

    What utter FUD and absolute bullshit. I know journalists don't exist and they print whatever garbage they are told, but at least the IMF, CIA, or whoever could put some effort in their lies. The official currency is the US dollar, they have no internal currency anymore. Adding bitcoin, shitcoin, or actual shit to their economy would not effect a single banking client.

    • Right until banks are forced to accept transactions in BTC. This is happening next week too.

    • If journalistss did not exist, that would be would capitalists call an unfulfilled need and someone would start a journalist company.

      The quiet truth is that your conspiracy theories are totally true in countries where:
      1) the government prevents foreign news from entering the country
      2) either language barriers, money, or laws prevent the existing population from travelling and reading foreign news.

      None of that applies to the US. Which means that even if some inane country specific conspiracy, such as you be

  • increase digital penetration

    Heh heh ... heh heh ... he said ...

  • aka the Fyre Festival [wikipedia.org] of monetary policy

  • Didn't understand the implications? (Score:3)

    by algaeman ( 600564 ) on Sunday September 05, 2021 @08:18AM (#61765467)
    I think they understood the implications quite well. They want to be a money laundering haven. The government sees this as a way to attract foreign capital to the country. They don't really care that most of the purchases made using bitcoin will be cocaine.

    • Personal remittances account for a quarter of El Salvador's GDP. BTC's adoption is mostly intended to ease these as much as possible.

  • In other news the World Bank is demanding immediate repayment on all of El Salvador's debt, President Nayib Bukele has been assassinated, and is an uprising over economic conditions in the country, with surprisingly well-equipped rebels.

  • The arguments for and against this really come down to a few simple system dynamics. As a small, untrusted county you can:

    - Print your own currency, which gets devalued due to inflation from lack of trust or worse yet, is attacked by larger nations.
    - Accept the USD as your currency and deal with illiquid periods that ravage your economy ("America sneezes and the third world gets a cold."). This needs more detail than I want to go into, but just imagine in 2008 when the credit system froze up, you needed dol

  • 1 BTC
    no, 0.5 BTC
    no, 0.25 BTC
    no 3 BTC
    no 0.75 BTC
    no 0.001 BTC
    no 2 BTC

  • and a July survey found that nearly two-thirds of El Salvadorans would not be open to accepting payment in Bitcoin.

    And who can blame them?
    The volatility is beyond parody.
    It's akin to a bushel of corn costing $20 on Monday, $15 on Tuesday and $100 on Friday.

    It's clear to me that some form of digital currency will rise from the ashes of the cryptocurrency bubble, that is hopefully more robust and transparent that a FIAT based economy, but is sure as shit isn't going to be BTC.

    There's a LOT of logic in *some* of the cryptocurrency market, a tiny little fraction - and it is entirely unrelated to speculation.
    I believe financ


  • Its not going to work but they will try
  • How could it have grown when it was immediately at max level?

  • ...and other countries are like "hold up there El Salvador".

    (shrug)

    This wasn't about privacy for anyone besides massive drug lords, Chinese millionaires trying to hide their cash, and Russian oligarchs.

  • BTC forked off the Bitcoin protocol in 2018. BSV is Bitcoin as defined by the Bitcoin white paper. Besides, they will not even do BTC transactions in El Salvador (obviously they couldn't since the incredibly stupid Bitcoin Core/Blockstream developers crippled the protocol to like 3 transactions per second). They will use the bug ridden barely functional Lighting Network which steals your money if you lose connection :D
  • 'benefits... are probably overstated'. Maybe. But definitely overheated, if estimates of future power consumption are accurate. How much of he overhead will whatever cooling system is needed cost, as a percentage of total expenses?

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