Ep 34. The Rising Sun
Hola El Salvador! | McDonald's: I'm lovin' bitcoin
It only took 5 years. But, I finally did it! I visited the Big Bend National Park over the Labor Day weekend. The park is bigger than the state of Rhode Island and it has well preserved dinosaur fossils. The rivers carved temple-like canyons in the ancient limestone and the night skies are as dark as coal but spectacularly set alight by shooting stars. It was peaceful and blissful….and yes there is a crypto connection, stay with me.
If only the mountains could talk. They might tell stories of change. Scientists say this region was once a mighty sea but today it’s an arid desert 500 miles away from the coast. The climate and environment slowly changed over time. Today, financial services and technology are changing. It feels like the pace of change is both quick and slow. If you don’t pay attention, you might be surprised by the rise of crypto.
1. El Salvador: Bitcoin is legal tender
I’ll never forget that night in Miami. The air was thick with expectation. Jack Mallers had happy tears in his eyes as he introduced President Nayib Bukele of El Salvador. President Bukele announced he was drafting a bill to make bitcoin legal tender in his country. Instantly, the main hall at the Bitcoin 2021 conference erupted in applause and cheers. As the excitement wore down, I quietly wondered how this would all play out. Well, we are about to find out.
This week, on September 7, 2021, the law went into effect. Here’s what it means:
All merchants are required to accept bitcoin in addition to US dollars, the other legal tender.
Government launched a digital wallet, Chivo, and building out bitcoin ATM network, Chivo ATMs. These allow locals to withdraw cash without fees.
The government purchased over $20M worth of bitcoin and all Salvadorans were given about $30 of bitcoin each
El Salvador’s economy has struggled. Remittances, money sent home by Salvadorans abroad, now account for 25% of the GDP, up from 9% in 1991. Unfortunately, locals pay high fees to receive them. Firms like Western Union earned $400M in fees last year. These are funds that could have gone to health, education, investments and so on. Leveraging Strike built on the Bitcoin Lightning network enables cheaper and faster transactions.
It’s not all rainbows and unicorns. There have been protests and local opposition. Protestors allege that the new law was rushed without proper consultation from the public. They sight a need for more education to understand the pros and cons of Bitcoin. A poll by a local university found 70% of population preferred US dollars to bitcoin. The government has given assurances that salaries and pensions will be paid in US dollars.
And so it begins. The eyes of the world are on El Salvador as it hosts the first bitcoin experiment. I don’t anticipate we will see a stampede of all countries doing the same thing. However, we could see some countries fast track their Central Bank-backed Digital Currencies (CBDC).
2. McDonalds accepts Bitcoin: I’m lovin’ it
McDonald’s, Starbucks, Pizza Hut and the Holiday Inn are some of the American companies operating in El Salvador that now accept bitcoin payments there.
The law requires local companies to accept bitcoin but they are free to immediately convert it to US dollars if they choose to.
Perhaps the biggest impact of this law might be accelerating international companies comfort and adoption of bitcoin payments. Now that McDonald’s and Starbucks are accepting bitcoin in El Salvador, could they do the same elsewhere? It remains to be seen.
3. Panama and Ukraine
El Salvador was the first to adopt Bitcoin but it certainly won’t be the last.
Nearby Panama is an international trade and finance center. A Congressman has introduced a CryptoLaw bill which aims to
Provide legal, regulatory, and fiscal certainty to the use, hold and issue digital value and crypto assets NOT limited to bitcoin
Expand government use of blockchain technology in identity and transparency
Across the Atlantic, the Ukrainian parliament passed a bill to regulate and legalize cryptocurrencies. The bill just needs the president’s signature to become a law. There are some differences compared to El Salvador.
Unlike El Salvador’s law, the bill in Ukraine does NOT put cryptocurrency on the same legal footing as the national currency.
Additionally, the government is NOT limited to Bitcoin nor is the government invested in rolling out digital wallets and ATMs to support cryptocurrencies
4. British Post Office + Bitcoin: Odd duck?
Beginning next week, British citizens would able to purchase Bitcoin through the Post Office. I guess it’s not the post office of our grandparent’s generation. My brain is tickled by the union of strange bedfellows.
Well, it turns out the process is not so smooth. Verified users of the Post Office app can click through to DEX Swarm where they can purchase vouchers to that can be redeemed for cryptocurrencies. I’m curious to see how much uptake this scheme has. Perhaps the goal was just to get more people signed up to use the Post Office’s app.
That’s all for this week. I hope you have a delightful week ahead.
#NeverForget. My thoughts and prayers are with everyone impacted by 9/11. 20 years have gone by but the pain still endures. May we never see a day like that again.