Bitcoin becomes legal tender Can this country’s cyberpunk dreams come true?

The dream has never been closer to reality.

In the ideal world of cyberpunk mystery, what would be the best fit for a legal tender? Bitcoin might be high on the list.

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

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

Once approved, the bill would mean that El Salvador would be the first country in the world to make bitcoin a legal tender.

Later, the President of El Salvador also retweeted a tweet from the “king of conversation” in the cryptocurrency world and CEO of Wavefield, Yuchen Sun, about “crypto investors and entrepreneurs moving to El Salvador”, analyzing the four main benefits of El Salvador for crypto entrepreneurs, which are

  1. a great climate, world-class surfing beaches, and beachfront properties for sale
  2. one of the few countries in the world without property taxes
  3. no tax on bitcoin earnings, as bitcoin will become legal tender.
  4. instant permanent residency for crypto entrepreneurs.
Bitcoin becomes legal tender Can this country's cyberpunk dreams come true?

The news cheered up the crypto industry, and the CEOs of CoinA, Zhao Changpeng and Sun Yuchen, also responded across the board, and for a while the Twitter crypto circle about El Salvador started to brush up.

But everyone’s first reaction was mostly, what does El Salvador look like?

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

As a “low-middle-income country” with agriculture as the mainstay of its economy, El Salvador has experienced 12 years of civil war and is known for its poverty and gang violence, with more than 3,400 murders in seven months, making it “one of the most dangerous countries in the world.

Economically, El Salvador has not issued its own sovereign currency, and has always settled in U.S. dollars, which are issued and regulated by the United States, leaving El Salvador submissively dependent, with no real independence to speak of.

Now, this tiny country has made global headlines and gained close attention from the crypto industry with the new president’s shocking remarks.

After the news aired, some Salvadoran netizens took to reddit to express their appreciation for the new president, with the ID RussianRadium posting that the president, who has changed with the times, has brought change to Saldova and redefined the country’s international image.

The user’s description may give us a glimpse of the country’s current situation.

The President of El Salvador, Nayib Bukele, is 39 years old and his organization is composed mainly of young professionals who are tired of the corrupt system that has kept El Salvador poor and underdeveloped for the last 30 years. Early in his term, he fired the attorney general (who had been protecting other corrupt politicians) and five other corrupt magistrates. Within just one month of taking office, El Salvador’s Congress approved new education and infrastructure financing plans and passed a series of bills to ensure that the predatory business elite that used to buy politicians are kept in check. Many major infrastructure projects are expected to be approved by Congress soon, including the construction of a high-speed rail line and a new international airport.

One of the largest projects currently under construction in El Salvador is SurfCity, a road, power and communications infrastructure to help small and medium-sized businesses, primarily along the Salvadoran coastline. It is for this reason that the International Surfing Association (ISA) has decided to hold the World Surfing Games, where the winner could qualify to represent El Salvador in the 2021 Tokyo Olympics. Currently, Bitcoin is already 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 most people think of El Salvador as a place of disaster, and we really have been in the past. However, the country is undergoing a dramatic change. …… El Salvador is no longer one of the 10 most violent countries in the world (murders here used to be 12-15 a day and have dropped to nearly 3-4 a day since Bukele took over) and our economy is expected to grow steadily.

……

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 will probably receive all the papers on Bitcoin this week and study them for discussion.

Cyberpunk’s Bitcoin Beach
Surprisingly, bitcoin was already one of the payment methods in El Zonte beach in El Salvador before the president took a stand. The project is called ‘Bitcoin Beach’ (Bitcoin Beach).

Bitcoin becomes legal tender Can this country's cyberpunk dreams come true?

El Zonte is a rural town of 3,000 residents on the coast of El Salvador that has become a surfer’s paradise due to its beautiful beachfront. In the wake of the COVID-19 epidemic, El Zonte has found its own unique path thanks to the Bitcoin economy.

According to Forbes, El Zonte’s anonymous donor initially purchased bitcoins for 5-10 cents and kept them on a USB drive for several years. in early 2019, after retrieving his wallet password, he used bitcoin to make a six-figure donation to El Zonte.

The donor then partnered with El Zonte volunteer Michael Peterson to use the money to improve the lives of El Zonte residents on one condition, Michael Peterson could not convert the bitcoins into fiat currency. the residents of El Zonte had to learn how to use the bitcoins themselves, thereby creating a bitcoin economy. This will create a bitcoin economy. This is how the “Bitcoin Beach” project was born.

A common criticism of bitcoin payments today is the high cost and slow processing speed of the network. The “Bitcoin Beach” project faced this challenge and set out to find a new approach. When the cost of transactions went up, we turned to the Lightning Network. said Michael Peterson, founder of Bitcoin Beach.

The Lightning Network is a second layer of payment protocol that runs on top of the Bitcoin network, enabling instant transactions. Bitcoin Beach has chosen digital wallets as its payment tool, and local residents can use the Lightning Network to purchase anything from tacos to big-ticket items to paying their utility bills.

Bitcoin becomes legal tender Can this country's cyberpunk dreams come true?

Bitcoin Payments’ Internal and External Difficulties
Whether the success of El Zonte can be applied to El Salvador as a whole is the question President Nayib Bukele will have to face in the future.

At the moment, the image he presents via Twitter is far from that of a calm and collected president of a country. After gaining worldwide attention through his Bitcoin comments, it’s easy to see that the president has fallen in love with surfing the web.

He has changed his Twitter avatar to the obligatory ‘laser eyes’ of the cryptocurrency world, retweeted frequently and heavily in response to his positive comments, and called El Salvador a ‘land of the free’. From his tweets, it looks like the road to using bitcoin as a fiat currency is wide open, and everything is ready to go.

However, beneath the noise and enthusiasm, there are inevitably shadows.

The most common problem in discussions about bitcoin payments is the dramatic fluctuations in the price of bitcoin. When residents abroad in El Salvador exchange their assets for bitcoin and call them back to their loved ones’ accounts via the lightning network. If the price of bitcoin plummets by 30% in that short period of time, how will the hard-working resident be able to afford it?

In addition, financial institutions such as Wall Street define bitcoin more as a bulk ‘commodity’ than a currency, with a similar position in the financial system to ‘gold’ and ‘oil’. In El Salvador, where the financial system is not well developed, how can local residents use “oil” for their daily transactions?

Internally, the new president has faced a lot of criticism. reddit user mschweini said that Bukele’s attitude is more populist and that he is replacing the Salvadoran judiciary with his own cronies. In an environment where gangs are prevalent in El Salvador, bitcoin may be more conducive to black market, money laundering and other nefarious practices.

As a warring country with frequent civil unrest, Bukele’s political career is just three years old, and Bitcoin’s fiat currency status is tied to the stability of his personal political career, which brings all sorts of uncertainty to Bitcoin’s future in El Salvador.

Externally, the use of bitcoin as a fiat currency in El Salvador has been equally difficult. Keep in mind that El Salvador is not the first country to want to release a legal cryptocurrency.

In February 2018, the South Pacific sovereign nation of the Marshall Islands said it would issue the world’s first sovereign legal cryptocurrency, the ‘Sovereign (SOV)’. The sovereign digital currency will reportedly circulate in the country alongside the U.S. dollar, and the resolution has been passed by the RMI’s national parliament.

However, this resolution has not been well received internationally.

In 2018, financial institutions such as the International Monetary Fund (IMF) and the U.S. Treasury Department questioned and criticized this RMI resolution.2020 In May, the IMF issued another official statement opposing the RMI’s upcoming national digital currency, the SOV.

Similar to the RMI, Venezuela is deeply dependent on foreign aid and has attempted to save itself by issuing a national sovereign cryptocurrency called Petro, which ultimately failed. Petro alone cannot really save Venezuela from its poor economy.

The Marshall Islands and Venezuela have had a rough road to legal cryptocurrency, so can El Salvador, a small country, rely on bitcoin to make its own independent currency?

On June 8, El Salvador’s commerce minister told the media that the use of cryptocurrencies will not replace the legal status of the U.S. dollar, and that this does not mean de-dollarizing the economy. For now, the U.S. dollar is still legal tender in El Salvador, and both the receiving and paying parties can choose to pay in bitcoin when they wish, with the U.S. dollar still being the standard of denomination.

So it seems that Bitcoin still has a long way to go before it can help El Salvador become a country with an independent currency and autonomy.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/bitcoin-becomes-legal-tender-can-this-countrys-cyberpunk-dreams-come-true/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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