The joy over the introduction of Bitcoin as legal tender in El Salvador was huge. El Salvadorian President Nayib Bukele had practically single-handedly made Bitcoin the official means of payment alongside the US dollar in El Salvador in a very short period of time. By his own account, he wanted to attract capital to the country and allow people to easily receive payments from abroad, which many poor people in El Salvador rely on.
Overnight, he became a celebrated star in the crypto scene. Bitcoin had finally managed to be accepted as a full-fledged means of payment by a state. Other states like Panama and Paraguay would soon follow.
However, after the euphoria had faded and a more sober view was taken, questions remained. What exactly had happened and why are these events so remarkable?
To get a full picture of what happened, one must first briefly look at Bukele's career path to becoming president of El Salvador.
In 2012, his political career began when he ran for and won the mayoral election of a small town (Nuevo Cuscatlán) for the leftist FMLN party (Frente Farabundo Martí para la Liberación Nacional).
In 2015, he was elected mayor of the capital San Salvador for the same party.
In 2017, the leftist FMLN party expelled him because, according to officials, he would contribute to the internal division of the party.
In 2019 he runs as a presidential candidate for the right-wing party GANA (Gran Alianza por la Unidad Nacional) and wins the election.
Under his presidency, the crime rate in El Salvador has dramatically reduced. Political observers suspect collusion between the government and gangs behind this, as existed under a previous government in 2013. In early 2020, he marched the military into parliament to get parliamentarians to quickly sign off on a loan to fund the security forces. This is likely related to the draconian measures against Covid-19 that followed. The arbitrary arrests carried out in the process were later declared unconstitutional by the Constitutional Court. In November 2021, Amnesty International attested that El Salvador under Bukele had taken a major step backward in terms of human rights.
The real story of Bitcoin in El Salvador begins in 2019 at Bitcoin Beach El Zonte shortly after Bukele became president that same year. A group of Bitcoin enthusiasts and entrepreneurs were working to build a self-sufficient economy there using Bitcoin as payment. A large anonymous donation from the U.S. was helping to financially support this community. At the same time, Bukele starts talking and tweeting massively about Bitcoin. In no time, Bitcoin became the legal tender in El Salvador on June 8, 2021.
What is striking now is that the Bitcoin Beach project started exactly in the same year after Bukele became president due to his sudden political change of heart from left to right. In this context, an anonymous large donation from the USA also raises the question of why it was made anonymously. It is worth once more mentioning that the U.S. dollar is the official currency of El Salvador, so in terms of monetary policy, El Salvador is under complete control of the US. Inevitably, the quote from Franklin D. Roosevelt comes to mind:
"In politics, nothing happens by accident. If it happens, you can bet it was planned that way."
States always want to control payment transactions in order to collect the corresponding taxes. In this respect, it is surprising to the casual observer how a state can introduce a means of payment that is not controlled by the state. To date, several hundred ATMs have been installed to exchange USD for BTC. Plans call for 1500 ATMs nationwide.
The government "Chivo-wallet" allows payment and sending of BTC and USD through the Lightning network. (You can read about the fundamental problems with BTC and Lightning Network here). Every El Salvadoran receives a bonus of 30 USD in BTC when using the government Chivo-wallet. Over 1.6 million citizens of the 6.3 million inhabitant country have already opted for this wallet. A full KYC is required to use it. The user does not have the keys of this custody wallet, so the state has full control over the coins and the payment transactions of each individual. For El Salvador, with 70% of the population without a bank account and therefore without control over the flow of funds, the introduction of Bitcoin, a payment method controlled by the state via the Chivo-wallet, creates a new opportunity for tax revenue. Once citizens are KYC'd via the custody Chivo-wallet, it does little good to send the coins to another wallet to escape control. The Bitcoin blockchain is so well monitored and controlled that with BTC, on whatever wallet, there is no escape from surveillance.
Exchanging into a private and anonymous cryptocurrency like EPIC Cash is the best way to escape from surveillance. So if a state recognizes BTC as an official means of payment, it is only because BTC is completely transparent and has purely nothing to do with the Bitcoin that Satoshi Nakamoto had in mind when he designed it. When you then consider that people are lured to the government-controlled wallet with USD 30, it doesn't take much imagination to see who's being played here. Basically, the state never gives anything away (anyway the citizens pay everything themselves via their taxes), but it is always connected with a return service, even if it is not immediately recognizable.
If you think it through to the end, it is of absolutely no use if BTC is limited to 21 million, but not anonymous. As long as the state has full insight into everyone's wallet, it can tighten the tax screw individually, depending on what it needs. This would have the same effect as the unrestrained volume expansion of a fiat currency. Instead of printing more and more fiat money and putting it into circulation, which leads to a creeping devaluation, the state could simply pass individual tax rates at will by law, which does not lead to the devaluation of the BTC unit, but to fewer and fewer BTC units in the wallets of the citizens. The effect is the same. The state simply takes the money from the citizen with direct, visible taxes, instead of procuring it via an indirect, invisible tax (inflation through money supply expansion).
It may be a coincidence that Bitcoin Beach and the anonymous large donation from the US happened only a short time after the election of the controversial Bukele, but it does suggest that El Salvador is a test run by the US for the possibility of introducing BTC as a legal tender alongside the planned CBDCs. Bitcoin can't be banned, but it doesn't need to be when you have it under full surveillance and control and you can draw on the state's monopoly on the use of force to extort from citizens what you want.
It is becoming increasingly clear that only a private and anonymous cryptocurrency can be a meaningful antidote to arbitrary state power. The recognition of BTC as an official means of payment in El Salvador is the opposite of what many believe. BTC has already been scheduled by the states because it is completely transparent, can be monitored, and poses no threat to the existing monetary monopoly. For-profit companies like Blockstream have ensured that a functioning fast payment function can only take place via the Lightning network, which only gets a meaningful use from the existing banking system. (More details here)
EPIC Cash is exactly what everyone thinks BTC is or should be. Pure p2p transactions, anonymous and private, permissionless, completely fungible, resistant to centralization, it cannot be confiscated, is highly scalable, immutable, scarce and the multi-algorithm proof of work makes mining accessible to everyone without major investment hurdles. The tokenomics are exactly the same as BTC. If Satoshi had had the technology of 2019, Bitcoin would look exactly like EPIC Cash today.
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