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Salvadoran President Nayib Bukele tweeted his new profile photo on Sunday. It featured the popular young upstart standing on a catwalk with the blood-red laser eyes of a bitcoin (instead of the usual statesman gaze). In the background stand some National Guards.
The day before, in a pre-recorded video shown to the 12,000 attendees of Bitcoin Miami, the 39-year-old president announced that he had drafted a bill to be presented to the country’s legislature to make bitcoin an official currency in El Salvador. . It would be a monumental step for the nation, known less for its technological prowess than for its large underbanked population.
Details at the time of the announcement were scarce – a version of the bill was not immediately available – although Bukele sold the decision as a way to “provide financial inclusion” to its citizens and to “push it forward.” humanity at least a tiny bit in the right direction. ”Changing his Twitter profile to reflect the hodler’s credo could be taken as a formal statement of how seriously Bukele wants this to happen.
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“At this point, I don’t think it’s anything other than a symbolic gesture,” George Selgin, senior researcher and director of the Center for Monetary and Financial Alternatives at the Cato Institute, said in a telephone interview. “Obviously, he’s a smart politician who knows how to measure up to a younger constituency and gain popularity. “
Bukele has been hailed as a populist reformer and referred to as an “authoritarian hipster”. He took over the presidency in the country’s last election with 53% of the vote, after less than a decade of holding various mayoral positions, running on an anti-corruption platform as part of a newly founded third party , Nuevas Ideas (New Ideas).
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He describes his politics as neither left nor right, but rather a reflection of what everyday Salvadorans want. In most public appearances, Bukele, the son of a wealthy Palestinian merchant, wears an inside-out hat, aviators, and a neat beard. His favorite means of communication? Going straight to social media, where he has millions of followers, often using a tone “more appropriate for bitcoin or sports tweets,” the Washington Post noted.
More than a year after his inauguration, Bukele’s popularity rating fluctuates between 80 and 90%. During the coronavirus crisis, he provided food aid and direct cash payments of $ 300, which won him the admiration of his constituents. It has also worked to build community centers, expand internet access, and reduce gang-related crime.
Related: El Salvador’s Commerce Secretary: Bitcoin Won’t Replace The Dollar
But its governing tactics have indeed at times been authoritarian. In February 2020, he sent armed soldiers to Parliament to ask them to approve a loan for security equipment. In April 2020, he released official photos of hundreds of alleged almost naked stripped gang members crammed onto the floor of a prison. On May 1, he led the legislature’s efforts to remove five Supreme Court justices who opposed his policies. The next day, he dismissed the country’s attorney general.
He ignored Supreme Court rulings challenging his COVID-19 lockdowns and allegedly harassed political opponents, avoided the media and vilified human rights groups. The Catholic Church, among other leaders in the country, denounced its “persistent efforts … to erode our democratic order”.
The Washington Post called him a “millennial autocrat” and compared the foreign politician to “political bomb throwers” like the former Italian Prime Minister Silvio Berlusconi and to “violent despots”, including the Filipino Rodrigo Duterte and the Brazilian Jair Bolsonaro.
Its latest shift to bitcoin continues these two trends of wooing the most vulnerable while attacking the establishment. In his recorded message, Bukele claimed that more than 70% of El Salvador’s 6.5 million people are excluded from the banking system. About 2 million more live in the United States where they send home $ 6 billion in remittances – which makes up about 23% of the country’s economy – often getting ripped off by middlemen.
In addition, in his announcement, Bukele targeted central banks like the Federal Reserve which “are increasingly taking measures that could undermine the economic stability of El Salvador” by printing money to support their own economies. During the COVID year, Salvadoran exports fell 17%, foreign direct investment fell by $ 500 million while the country’s debt rose, according to Francisco De Sole, guest speaker at the Wilson Center.
Making bitcoin legal tender, Bukele said, fixes that problem. Not only would this allow people to access an alternative and inexpensive financial system, but it would also attract investment to the country. If only 1% of the total BTC supply moved to El Salvador, it would increase the country’s economic output by almost 25%, Bukele said. To this end, Bukele is working to make the country’s tax and regulatory frameworks favorable to crypto businesses and to provide “immediate permanent residence for crypto entrepreneurs”.
“We hope this move is just the beginning to provide a space where some of the leading innovators can reimagine the future of finance, potentially helping billions of people around the world,” he said.
Selgin de Cato believes that this is primarily political theater and that there would be no functional change in the way El Salvador operates. “Usually, the designation of currency as legal tender doesn’t mean much. People are already free to request bitcoin as a form of payment, if they wish. He noted that the Bitcoin Beach community on the coast of El Salvador has been piloting a circular Bitcoin economy since 2019.
Rohan Gray, one of the authors of the US STABLE bill and assistant professor at Willamette Law, agreed that the move would likely have little effect. Bitcoin is an inherently imperfect currency, Gray said, due to its volatility and deflationary aspects – few would choose it as their primary form of payment.
“Bitcoin as a private currency creates a lot more problems than it solves by trying to get it into the legal system,” Gray said. On the one hand, by entrusting monetary control to a decentralized network, the Salvadoran government would give up part of its capacity to define its policy. Then there is the question of finding a stake for foreign currencies.
“If El Salvador does this and demands that its citizens have the right to make these kinds of transactions, it will collide with the national sovereignty of the legal tender laws of other countries,” he said.
Selgin and Gray argue that El Salvador would have little significant impact on bitcoin itself, as it has hitherto existed without a government imprimatur.
“Bitcoin is a phenomenon that has gone so far by not being a government currency,” said Selgin. “It doesn’t matter what Bukele says.”
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