Believe it or not, El Salvador’s Bitcoin Law is only one year old. This is a multi-year project in its infancy. What mainstream media is working extra hours to call “a failure” is the equivalent of a baby. Why do they hate babies so much? All jokes aside, there are several areas where criticism of the project is justified. The thing is, mainstream media, the IMF, and the World Bank have problems identifying them.
The Bitcoin Law project is not failing and El Salvador hasn’t “lost” money on their bitcoin investment. The project’s failures can and should be criticized, that’s where Bitcoinist comes in. However, the Salvadoran government knew what it was getting into with its bitcoin investment. Volatility is the name of the game. This has happened before and will happen again. As long as El Salvador doesn’t sell their BTC, there’s no loss. There are just market fluctuations.
— Nayib Bukele (@nayibbukele) June 9, 2021
And speaking about the government, this publication is about bitcoin, so we won’t discuss policy. This post is about El Salvador’s Bitcoin Law; nothing more, nothing less.
In any case, we’ll get to the criticism. Let’s be courteous and start with the flowers.
The Good – El Salvador’s Bitcoin Law, 1-Year Anniversary
The first thing to praise El Salvador about: Bitcoin is legal tender there. Its citizens have direct access to the greatest monetary system ever invented. The government is the first one openly accumulating the scarcest asset in the world. That in itself is outstanding. Plus, they’ve avoided the temptation of the digital printing press and remain bitcoin-only. That is an anomaly of epic proportions, but sin El Salvador’s Bitcoin Law was the first one it’s hard to see its magnitude.
In a year in which every country under the sun is reporting record inflation numbers, El Salvador remains in the green. The US government has been printing dollars like there’s no tomorrow. The other two dollarized countries in the area, Panama and Ecuador, report protests and chaos in the streets. El Salvador is calm on that front. They might still be dollarized, but they’re also hyperbitcoinized. And that made a difference. Plus, the government took profit from their bitcoin investment and built a pet hospital that will serve San Salvador for years to come.
The Bitcoin Beach people are word-wide celebrities in bitcoin circles. They’ve been a staple of the latest bitcoin conferences and their story usually gets extra praise in the press and Twitter. The Bitcoin Beach project in itself, the inspiration for El Salvador’s Bitcoin Law, keeps growing. It’s getting stronger and it’s helping similar projects to follow in their footsteps. That shows greatness.
BTC price chart for 09/07/2022 on Bitstamp | Source: BTC/USD on TradingView.com
The Bad – El Salvador’s Bitcoin Law, 1-Year Anniversary
Is Bitcoin City a viable project? We might be wrong, but the model President Bukele once showed looks almost comically massive. The government would have to bet most of its social and economic capital to build it. And bitcoin would have to perform beautifully during the construction. And then there’s the problem of centrally-planned cities as a concept, but that’s a topic for another time.
Thank you for selling cheap pic.twitter.com/ZHwr0Ln1Ze
— Nayib Bukele (@nayibbukele) July 1, 2022
There’s also the topic of the Volcano Bonds that are supposed to finance the whole operation and the application of El Salvador’s Bitcoin Law. The government faced heavy criticism for delaying it multiple times, but they might’ve avoided a bomb. To release the Volcano Bonds at the beginning of the bear market would’ve been catastrophic. However, the Salvadoran government doesn’t get a pass for announcing them and failing to execute. That was bad.
The Ugly – El Salvador’s Bitcoin Law, 1-Year Anniversary
The worst thing about El Salvador’s Bitcoin Law operation has been the Chivo ecosystem. Especially the wallet. First of all, it’s not necessary and it stinks of CBDC. Secondly, it was poorly executed and a lot of people lost dollars or BTC and never got it back. Plus, interoperability with other Lightning Network wallets was paramount and should’ve been a priority. Reportedly, the Chivo wallet is tailor-made for handling digital dollars and BTC is an afterthought. Finally, why was Algorand involved at all? That’s suspicious and points to nasty possibilities.
Anyway, the Chivo wallet was a failure. Thankfully, there are hundreds of Lightning Network wallets, and they’re all interoperational.
— Napoleon Osorio (@elisuademo) September 7, 2022
The other area that requires heavy criticism is the lack of education. El Salvador’s Bitcoin Law is 3 pages long and specifically promises educational efforts. Bitcoin is a complex subject. If people don’t have a reliable way of acquiring information about it, they won’t adopt bitcoin. They won’t send and receive remittances. They will not save in the hardest currency the world has ever known.
The bitcoin rabbit hole is deep and intricate. The sooner the people start to travel bitcoin’s long and winding road, the better. And the more help they have, the fastest they will travel. Organizations like My First Bitcoin can’t do it all. The Salvadoran government has to step up and face the educational responsibility it assumed while passing El Salvador’s Bitcoin Law.