El Salvador: How it started vs. how it went 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. 

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