Nic Carter, a local venture capitalist, is an expert in the world of Bitcoin. So when he heard El Salvador was considering legislation to adopt Bitcoin as legal tender last week, he took to Twitter — where else? — to explore the momentous news in more depth.
What Carter learned on the live audio chat that he launched from his Boston home underscores both the symbolism and potential of the digital currency for nations on the margin or otherwise shunned by the global monetary system. Little did Carter know that his public Twitter Space — which he titled “La Bitcoinizacion” — would be joined by Nayib Bukele, the president of El Salvador, and that he’d be directly asking the head of state about the policy in an unfiltered, organic conversation.
Hours later, El Salvador passed the legislation and became the first country to adopt Bitcoin as legal tender. Bitcoin, the digital currency that is the fascination of speculators and serves as an alternative payment system, knows no boundaries and runs unfettered parallel to the traditional monetary system dominated by the dollar.
In embracing Bitcoin, Bukele has launched a strategy to draw fresh international capital to the country. He is also creating some distance from the shadow of the dollar, setting the stage to potentially thumb his nose at the United States.
#Bitcoin has a market cap of $680 billion dollars.— Nayib Bukele 🇸🇻 (@nayibbukele) June 6, 2021
If 1% of it is invested in El Salvador, that would increase our GDP by 25%.
On the other side, #Bitcoin will have 10 million potential new users and the fastest growing way to transfer 6 billion dollars a year in remittances.
“Every restaurant, every barber shop, every bank ... everything can be paid in US dollars or Bitcoin and nobody can refuse payment,” Bukele said on Carter’s audio chat, first reported locally by the Boston Business Journal. At one point, there were more than 20,000 people listening in, including Twitter CEO Jack Dorsey and billionaire entrepreneur Mark Cuban, Carter told me in an interview.
Bitcoin now has the same legal standing in El Salvador as the US dollar, which remains the official currency. “Even taxes can be paid with Bitcoin... even loans,” said Bukele on the chat. Indeed, businesses are now legally required to accept Bitcoin as payment, except those that lack technology to do so. (The country has already been experimenting with Bitcoin: For the past year, El Zonte beach, located on the Pacific coast, has turned into a mini Bitcoin economy thanks to the efforts of a non-profit organization.)
That Bukele jumped on social media to answer questions about Salvadoran domestic policy as it was happening is very on brand for him. He uses Twitter heavily and shuns traditional media in favor of YouTube influencers. But his recent authoritarian tendencies have raised the alarm of US officials, who may be considering sanctions against officials in the Salvadoran government. (It’s no coincidence that the countries that have bet heavily on cryptocurrency are those facing financial sanctions from the United States — Iran and Venezuela.)
“None of us were in denial about [Bukele]” and his authoritarian policies, Carter said. Bukele stayed on the chat for more than an hour. Carter recognized he had an unusual opportunity. “It is crazy to have a head of state enter an unscripted, unplanned, extemporaneous conversation,” he said. “I asked him if he was doing this because he wanted to de-dollarize El Salvador. And if he was doing it because he was worried about inflation of the US dollar. He said no to both,” Carter told me.
Still, the novel policy may be Bukele’s “clever, populist reprisal to the US,” Carter said. He’s right. As Bukele explained during the live conversation, the move is also about attracting capital to the country, where remittances from Salvadorans living abroad represent about 23 percent of the GDP. The new policy makes Bitcoin holders — estimated at around 100 million people globally, Carter said — look at El Salvador with fresh eyes. “There’s a lot of crypto capital flowing around and looking for a home,” Carter said. It’s people who are indifferent as to where they live but sensitive to regulation and tax policy, he added.
Bukele’s move may very well mark the beginning of a bidding war between nations to attract that volatile wealth, estimated in the hundreds of billions of dollars. In fact, other Latin American leaders have expressed interest in opening up to Bitcoin. But whether Bitcoin is going to jumpstart the Salvadoran economy or if it’s just a useful tool for Bukele’s agenda of power consolidation remains to be seen.