Crypto Evangelists Enter Bukele Government: El Salvador’s Dark Bitcoin Business | International

[ad_1]

American crypto-evangelist Max Keizer compared Salvadoran President Nayib Bukele to John F. Kennedy and El Salvador to the kingdom of Camelot, describing it as a kind of promised land for bitcoin where taxes and central banks are dragged like dragons . Just a few months ago, Keizer, a former American stockbroker and journalist close to Russian propaganda sites, was just another of the many extravagant characters who began arriving in the country in 2021, after Bukele announced that El Salvador would be the first in the world. accept bitcoin as legal tender.

Many of these characters, a mixture of anarcho-capitalists, cyber-utopians and simple opportunists, left El Salvador as enthusiasm for the Bitcoin project began to wane. According to official figures, only 14% of businesses in the country have ever used bitcoin. But those characters who are still in the country went all the way, like Keizer and his wife, Stacy Herbert. Since late last year, Keizer and Hebert have been in charge of the country’s National Bitcoin Office. El Salvador, one of the smallest and poorest countries in the region, has crypto-evangelists in government.

Max Keizer waves a Salvadoran flag during a cryptocurrency conference in Miami on April 7, 2022. Rebecca Blackwell (AP)

The creation of the National Bitcoin Office, like the rest of Bukeles’ crypto project and much of his government’s management, is shrouded in secrecy. The only figures that have been made public are the $200 million that was spent on infrastructure to launch the digital currency, such as bitcoin ATMs and a cell phone app. Beyond what Bukele announced on Twitter, he also doesn’t know much that the country has invested in bitcoin. Like Bukele, Keizer and Herbet are also active on social media, with over 700,000 followers. Their YouTube shows and podcasts are the main source of information on El Salvador’s bitcoin policies.

Stacy Herbert at a cryptocurrency conference in Dublin, Ireland on June 12, 2018.Stephen McCarthy (Getty Images)

Keizer and Herbert both present themselves as some kind of crypto police or crypto judges. They are authorized to investigate possible fraud, and they are the ones who decide which investor is authorized and which is not. We do not receive any salary for this. We do it for President Bukele, Herbert often says, while her husband calls their work an act of love. Leaving aside their supposed altruism, the couple own Heisenberg Capital, a fund owned by Bitfinex, one of the world’s largest bitcoin buying and selling platforms. And they also own El Zonte Capital, another fund dedicated exclusively to digital investments in El Salvador.

Propaganda and corporate diplomacy

Ricardo Valencia, a professor of political economy at California State University, argues that for Keizer and Herbert, the real value of the office is not monetary, but for propaganda and corporate diplomacy. The National Bitcoin Office is attached to the Presidency of the Republic and has the power to establish international relations. Valencia, who is also a communications specialist, points out that she has the ability to design public policies that are binding on other ministries in the country and grants Keizer and Herbert official titles to inaugurate bitcoin embassies in Europe and the United States. United.

Texas and Switzerland have already hosted Salvadoran bitcoin embassies, which work alongside official diplomatic channels. A network of apocryphal diplomats is being built which will be used to spread official and corporate propaganda. It is an exchange of favors within the framework of the patrimonial use of the State. In El Salvador, there is no difference between Bukeles’ personal deposits and public finances, Valencia adds. Given the risks associated with bitcoin, such as its high volatility and lack of transparency, Bukeles’ decision to make the cryptocurrency legal tender drew strong rebukes from the International Monetary Fund (IMF), agencies ratings and even the US government.

Farmers demonstrate against the adoption of Bitcoin as legal tender on the Pan-American Highway, September 2021.Salvador Melendez (AP)Bitcoin City

In June 2021, Bukele announced that bitcoin would be his country’s official currency, along with the dollar. He made the announcement at the Bitcoin Conference in Miami, a large-scale event with concerts, sumo wrestlers, televangelist-style presentations and slogans such as death to the dollar and everyone against the Federal Reserve. Crypto evangelists criticize the state because they see it as the enemy of what they call individual sovereignty. For them, neither Elon Musk nor Mark Zuckerberg are disruptive enough. They understand life in society as a jungle or a casino, where practically the only law is the direct exchange of digital money.

Bukele also shares this messianic tone and flashy exhibitionism. In late 2021, Bukele hosted Bitcoin Week in El Salvador, an event that attempted to emulate the vibe of the Miami conference. During the party to celebrate the end of the event, Bukele took his place on the main stage, at the foot of the beach, while a giant screen projected in fluorescent blue letters: The President. Laser lights, smoke cannons and fireworks went off when the president took the microphone: as Alexander the Great conquered the world, he decided to establish 20 Alexandrias throughout his empire. These cities were beacons of hope for the rest of the planet. We must establish our first Alexandria here in El Salvador. Let’s build Bitcoin City.

Bukele announces Bitcoin City, November 20, 2021.Salvador Melendez (AP)

Bukele said his Bitcoin City would be powered by geothermal energy from a nearby volcano, and the money to set up schools, hospitals and the rest of the necessary services would come from so-called volcano bonds or bitcoin bonds. : New securities of Salvadoran public debt backed by bitcoin. A year and a half after the announcement, El Salvador turning a deaf ear to the warnings of the IMF prepared a law which will allow it to raise 1 billion dollars via bonds backed by bitcoins. Keizer and Herbert played a key role in this process. According to a Wall Street Journal investigation, Bitfinex, the parent company of their two funds, will not only provide the technology platform for the bonds, but will also apply for a license to operate as a trader.

But Keizer and Herbert aren’t the only influential figures in the crypto world who have collaborated in enacting the bitcoin transition in El Salvador. Jack Mallers, a 27-year-old who created an instant money transfer app via bitcoin, was one of the president’s closest advisers when drafting the legislation that officially introduced the currency to the country. . Like Keizer and Herbert, he also had a vested interest in El Salvador’s bitcoin project: he hoped his app would be able to gain traction in the country’s remittance market. Some 20% of El Salvador’s gross domestic product (GDP) comes from remittances sent by Salvadorans living abroad, notably in the United States. But the project did not work out and, according to sources close to Mallers, he did not set foot in the country again.

A model of Bitcoin City shared by Bukele on social media. Nayib Bukele via Twitter

Only 2% of remittances are transferred via bitcoin, according to Central Bank data. And about 70% of Salvadorans don’t even have a bank account. Financial inclusion was one of the goals of the Bitcoin Project. But there is no public policy that develops these objectives, explains economist Tatiana Marroqun. The other objectives were to promote the brand image of the country and the reception of tourists. But with everything that’s happened with bitcoin in recent months, falling prices, financial fraud, El Salvador’s financial profile has gone down instead of up.

Bitcoin has lost 40% of its value over the past year. And since Bukele announced that it would be legal tender, the IMF has multiplied its warnings. The latest warning was in response to the impending issuance of the so-called volcanic bonds. In a statement last month, the international institution stressed: Given the legal risks, fiscal fragility and largely speculative nature of crypto markets, authorities should reconsider their plans to expand government exposures to Bitcoin. , in particular by issuing tokenized bonds.

Sign up for our weekly newsletter to get more English language news coverage from EL PAS USA Edition

[ad_2]