How it started vs. how it’s going with the Bitcoin Law in 2021

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How it started vs. how it’s going with the Bitcoin Law in 2021

Before June 2021, news regarding Nayib Bukele was likely not even a blip on many crypto users’ radar screens. The Salvadoran president instead made headlines for allegations of corruption and dictator-like behavior after his party’s congressional majority sacked five members of the country’s Supreme Court and its attorney general.

During the Bitcoin 2021 conference in Miami, however, Bukele stunned many participants and garnered international attention by announcing he planned to have El Salvador adopt Bitcoin (BTC) as legal tender. Within a week, a supermajority of the Salvadoran Legislative Assembly — most members of Bukele’s own party — had passed the Bitcoin Law, requiring all businesses to accept the crypto asset as a form of payment alongside the United States dollar.

Bukele’s involvement in the crypto rollout seemed to extend further than many would have expected from a world leader. The Salvadoran president was already active on social media and presented himself differently than many politicians, often casually dressed in a baseball cap and jeans. Since the Bitcoin Law went into effect in September, he has used his Twitter account to announce several BTC buys totaling 1,391 BTC — more than $71 million, presumably from El Salvador’s national treasury. He also proposed having the country tap geothermal energy from its volcanoes to mine crypto.

Locally, opposition to the Bitcoin Law manifested itself in the form of public statements from lawmakers not connected to Bukele’s political party as well as protests in San Salvador. Before the law went into effect on Sept. 7, a group of retirees, veterans, disability pensioners and workers marched through the capital city to voice their concerns about the crypto asset’s volatility and how the Bitcoin Law could potentially affect their pensions. Protesters calling themselves the Popular Resistance and Rebellion Block carried banners saying “No to Bitcoin” in the streets to demand a repeal of the law.

Officials outside Bukele’s sphere of influence also expressed skepticism over the rollout. In June, the U.S. Department of State’s Victoria Nuland encouraged El Salvador to take a “tough look” at Bitcoin to ensure the crypto asset was “well regulated” and “transparent,” and the government offered protection “against malign actors.” The International Monetary Fund issued its own warning in July, saying the consequences of a country adopting Bitcoin as a national currency “could be dire.”

In addition to helping establish the regulatory framework for adopting BTC payments, Bukele promoted efforts to build the infrastructure necessary for Salvadoran merchants and everyday citizens to use crypto. The country is already home to Bitcoin Beach, an area in the village of El Zonte, intended to be an experiment where Bitcoiners can use crypto to pay for anything, from utility bills to tacos. Officials have also overseen the installation of hundreds of Chivo ATMs, allowing Salvadorans to withdraw cash 24 hours a day without paying commissions on their crypto holdings.

However, one announcement that will likely stand out as the most ambitious of Bukele’s crypto plans in 2021 was for the creation of Bitcoin City, funded initially by $1 billion in BTC bonds. Crypto exchange Bitfinex and Blockstream have already said they plan to support the initiative, which will reportedly aim for no capital gains, income, property or payroll taxes.

The criticism over Bukele governing like an authoritarian was necessarily been mitigated with the Bitcoin Law rollout, but coverage wa often paired with his statements on “buying the dip,” proposing a 24-hour Bitcoin news network, and other crypto-related developments in the country. There is little indication that the president has moved past self-identifying as the world’s “coolest dictator” — a Twitter bio that he later changed to the “CEO of El Salvador.”

Prior to the passage of the Bitcoin Law, police detained a San Salvador resident who had spoken out against the country adopting Bitcoin as legal tender. In October, following several protests against Bukele’s policies, the government banned gatherings, claiming its actions were aimed at preventing the spread of COVID-19 — however, it still listed sports and cultural events as exemptions.

“The crypto community embracing Bukele of all people shows that they need to think a little harder. […] This guy’s an authoritarian who can’t provide basic services to his citizens,” said Tommy Vietor, a political commentator from Pod Save the World. “[El Salvador has] one of the highest murder rates in the world. He seems to think you can get power by plugging your Apple charger into a volcano somehow. Don’t try to sell us on a literal volcano-fueled tech utopia city — let’s just start a little smaller.”

At the end of 2021, it was still unclear whether the average citizen of El Salvador was reaping many rewards from the Bitcoin Law. Bukele did announce in October that animals would benefit from crypto with the construction of a $4-million veterinary hospital funded by profits from the country’s Bitcoin trust. However, it’s likely the Latin American nation is still struggling to cope with the crypto asset’s volatility when used as a medium of exchange as well as gaining mainstream understanding and acceptance from its populace.