El Salvador Becomes First Country To Adopt Bitcoin as Legal Tender After Passing Law (cnbc.com) 153
El Salvador has become the first country to adopt bitcoin as legal tender. Lawmakers in the Central American country's Congress voted by a "supermajority" in favor of the Bitcoin Law, receiving 62 out of 84 of the legislature's vote. CNBC adds: "The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out," the law reads. Prices can now be shown in bitcoin, tax contributions can be paid with the digital currency, and exchanges in bitcoin will not be subject to capital gains tax.
Wow (Score:1)
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This is massive actually for a monetary sovereign government to allow another currency to be used for normal transactions. Will be interesting to see how this goes but I canâ(TM)t imagine itâ(TM)s something most major countries would want to do.
Maybe it was 20 years ago when they adopted $US as their currency. [wikipedia.org]
On January 1, 2001 under the government of President Francisco Flores, the Law of Monetary Integration went into effect and allowed the free circulation of U.S. dollar in the country (see dollarization), with a fixed exchange rate of 8.75 colones.
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And Bitcoin will also just be keyed to the US dollar if accepted. They're not going to be denoting anyone's tax bill in Bitcoin or anything; it'll just be at whatever the current exchange rate is.
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And Bitcoin will also just be keyed to the US dollar if accepted. They're not going to be denoting anyone's tax bill in Bitcoin or anything; it'll just be at whatever the current exchange rate is.
Yes, but on the positive side, from now on, whenever somebody sends you a puzzled look when you try to pay with Bitcoin, an El Salvadoran person will appear in a puff of smoke and point out in a thick Spanish accent: "Yo, ese! That's legal tender..."
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Let's be honest one second, the Gresham's law will apply and the USD which is the official El Salvador currency for years and at the same time the bad money will be spent first.
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And Bitcoin will also just be keyed to the US dollar if accepted. They're not going to be denoting anyone's tax bill in Bitcoin or anything; it'll just be at whatever the current exchange rate is.
Correct. I hardly believe they'll allow a highly volatile asset like bitcoin to be used as-is. The whole reason they adopted the US dollar was to do away with fluctuations and depreciation of their own old currency. At times, Bitcoin reminds me of the Argentinian peso during the worst inflationary years.
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Uhh, having a country whose government has given up on its own currency (as did, notably, countries like Zimbabwe) now adopt Bitcoin isn't really a sign of Bitcoin going anywhere.
Now if Russia adopted Bitcoin that'd be a big help, you could just make your ransomware payments directly in the vendor's own currency.
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But that the premise was faulty. El Salvador had already given up their monetary sovereignty 20 years ago.
Re:Wow (Score:5, Interesting)
Keep in mind that the official national currency of El Salvador is presently the US dollar. So they actually have no sovereign authority over what they are using as a national currency in the first place. The central bank (if there is one) cannot print US dollars nor can they be a lender of last resort by creating money, etc. Basically they are 100 percent at the mercy of US monetary and fiscal policy.
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True, they would have been better going with barrels of oil as a currency.*
*said tongue in cheek.
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The central bank (if there is one) cannot print US dollars nor can they be a lender of last resort by creating money, etc.
That actually sounds like a good thing. Where do we (the US) sign up??
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Keep in mind that the official national currency of El Salvador is presently the US dollar. So they actually have no sovereign authority over what they are using as a national currency in the first place
That's actually ridiculous. The Salvadoran constitution orders anyone to accept the dollar (and nothing else) as currency to pay for transactions. That on itself is sovereign authority.
Perhaps you might be thinking about printing and issuing US dollars, or determining how it should exchange with other currencies. On that, you are right, they have no sovereign authority... over the dollar.
But they have sovereign authority over what is to be used as currency within their national borders.
The central bank (if there is one) cannot print US dollars nor can they be a lender of last resort by creating money, etc. Basically they are 100 percent at the mercy of US monetary and fiscal policy.
It works fine fo
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I guess I worded that badly. I actually agree with every single thing you wrote.
The only point I actually wanted to make was that El Salvador does not have their own national currency. So this is not a case of a country saying, "Hey, even though we have our own unique national currency, banking system, central bank, etc, we are going to give that up or at least allow bitcoin to compete on an even field."
What they are saying is, "Hey, let's let bitcoin compete with the dollar as our national currency." I fe
Re:Wow (Score:4, Insightful)
Ironic that the very next story is about CO2 reaching the highest level of 4 million years.
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It's true that in Asia a lot of Bitcoin mining still uses coal. This is changing rapidly though, and overall, worldwide, more renewable energy is used.
Also, Bitcoin mining can benefit renewables by using excess energy (e.g. at night) for Bitcoin mining:
https://ark-invest.com/white-p... [ark-invest.com]
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.This is changing rapidly though, and overall, worldwide, more renewable energy is used.
Except the mining is extra usage without which there would be even less need for non-renewable, carbon heavy electrical generation. That means it is still responsible for increased CO2, especially when you consider it produces nothing of value.
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Ethereum is designed from the beginning as "a ruler without rules", which let the ruler a lot of possible choice about the kind of autocracy. Proof of Stake is the software implementation of Plutocracy, in other words this makes Ethereum a dumb centralized and insecure copycat of the economic system we already have for decades, but without the US army to protect it.
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Eth has been saying for almost 4 years “POS Soon!!(tm)” lol that shit ain’t changing any time soon sadly
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2/3 of all US Dollars are spent outside the USA. In fact more US Dollars are spent in the UK than in the USA.
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I can't see this as having much meaning since only 38% of the nation even has internet available. No idea how many can actually afford the internet but it seems like something done for publicity more than anything tangible.
Re: Wow (Score:2)
They've been on USD for decades for the reasons you cite.
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Yes, but because laundering, ransoms and drug deals are a lot less traceable than USD transactions, Bitcoin is a good fit for the El Salvadorean business community.
History about to repeat itself... (Score:5, Interesting)
I see history repeating in a less dire way (Score:2)
I see history repeating too, but in a less dire way. For a while now, I've been thinking that since BTC is acting like digital gold, it could be treated like gold by central banks [wikipedia.org]. Right now, there are people in the community cheering the acceptance; but when central banks conspire openly to fix the price they might not like it so much.
This has been one of the great ironies of the anti-Fed/Libertarian community with which the BTC is often sympatico--the Gold Standard led to open price fixing, and then whe
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the Gold Standard led to open price fixing
Reminds me of this https://en.wikipedia.org/wiki/... [wikipedia.org]
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For a while now, I've been thinking that since BTC is acting like digital gold, it could be treated like gold by central banks.
Except BTC isn't gold. Gold has an intrinsic value. It can be used for other things, e.g. electrical conductors., but BTC has exactly zero intrinsic value. A gold coin can be turned into an ornament, wiring, or used to plate electrical contacts. What other use does a bitcoin have besides being a bitcoin?. The answer is nothing because it is just the digital representation of a number and a ledger of who has had that particular digital representation of said number.
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True, gold has a non-financial component sometimes referred to as "industrial" use even though we don't think of jewelry as industrial. Googling around, it looks to be about 60% industrial and 40% financial which would include forming in to bars and coins held by ETFs and such. I'm given to understand that in today's markets silver is even more industrial, whereas it was probably more financial when silver coins were in common circulation.
At any rate, the fact that BTC is 100% financial doesn't mean the c
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At any rate, the fact that BTC is 100% financial doesn't mean the comparison to gold is invalid.
Yes it does and you proved it by not listing a single other use for BTC.
Saying that BTC has no use other than being BTC is like saying that the financial gold market has no use other than being financial.
This is false on it's face because we know and you have admitted that the "financial gold" DOES have another use. You are being dishonest with either yourself or with everyone else.
The bars that used to back the money supply sat in vaults, doing nothing.
And, yet they could be used for other things such as making wire and that gives it a basic value. You have already admitted that BTC can't be used for anything else and thus admitted it has no basic value. The floor for the value of gold is determined by it's
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I'm saying utility is a spectrum. BTC just happens to have 0% utility. Gold doesn't have 100% utility. Maybe that will make more sense to you.
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It's structured as virtual gold with mining, a finite supply, etc.
Not quite correct. New cryptocurrencies are being created all the time, including Bitcoin forks, and all are potentially direct competitors.
The things that are direct competitors to gold are...there are not good ones that are not much more volatile. Rare Art? Silver?
The strength and the weakness of cryptocurrencies is their underlying value is IMO related to the value of ongoing transactions. Lock all the gold into a vault and its value may go up or down a bit, but it is still valuable. Lock all the Bi
Could be worse (Score:2)
Could be Venezuela and oil
Cool (Score:5, Insightful)
--
* in dollars
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Doesn't things like this stabilize the value though? There's a counter-argument to every argument when it comes to Bitcoin.
Place your bets. Will El Salvador stabilize bitcoin. Or will Bitcoin destabilize El Salvador.
Most likely nobody will care as they continue to use $US for everything. Bitcoin being too volatile to generally bother showing the prices for. Bitcoin will just end up being used as a payment method for whatever the current exchange rate to $US is, and prices will only be displayed in $US anyway.
Bitcoin is just a way to pay US dollars.
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''Most likely nobody will care as they continue to use $US for everything.''
No this puts them in a position to do what Noriega didn't get away with. Basically they just legalized money laundering. They'll be the cheapest place in the world to clean cash.
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''Most likely nobody will care as they continue to use $US for everything.''
No this puts them in a position to do what Noriega didn't get away with. Basically they just legalized money laundering. They'll be the cheapest place in the world to clean cash.
Why would they do that? El Salvador is not a criminal enterprise the way the Noriega regime was. Not to mention that BTC is traceable as fuck. You can't launder shit with it without raising serious red flags.
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The only reason I've heard for it that sounds kinda valid, is that it's going to cut the evil financial institutions out of the loop when people send money out of or into the country.
Of course, doing that in no way requires a designation as "legal tender". So that designation would seem to be just a hype play.
They've also cited transaction speed as a benefit of Bitcoin (lol). I mean, I guess it could be quicker than Western Union, if they've got a long line. But it's not like gradma waiting for her son in A
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Bitcoin is only scarce because its stakeholders want it to be. If large stakeholders ever change their minds, look out.
Bitcoin is not scarce. Do the math and multiply the maximum number of bitcoins by the number of Satoshi units in each. There's no scarcity.
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Oh really? Maybe you can explain why the equilibrium price for 1btc isn't zero USD?
There are an infinite number of fractional numbers between zero and one. That doesn't actually make the number one bigger.
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Oh really? Maybe you can explain why the equilibrium price for 1btc isn't zero USD?
There are an infinite number of fractional numbers between zero and one. That doesn't actually make the number one bigger.
Holy sweet mother of... I give up.
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In the desert, water is not scarce. Count the number of water molecules, its a really big number. There's no scarcity.
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My opinion doesn't matter because I don't represent a large percentage of miners. Remember the bitcoin vs bitcoincash fiasco?
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If you were paid in BTC and everything was priced in BTC, you wouldn't be any richer. In fact you would be completely hosed at export time because the exchange rate would send investors elsewhere, where their own local currency is worth more.
And last time I checked, BTC transactions were over 15%, if you include the fees paid to exchanges as well as the coins paid to miners.
Re: Cool (Score:2)
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A national currency based upon the stock market would be better then.
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Doesn't things like this stabilize the value though? There's a counter-argument to every argument when it comes to Bitcoin.
No, it doesn't. The Salvadorian economy is a drop in the bucket, and in no way can compensate for a swing caused by powerful currency/market manipulators (Elon, I'm looking at you.)
I have a suspicion that El Salvador might impose some sort of value pegging, and that perhaps the idea is to buy BTC and then use BTC for transactions (I cannot imagine why.)
And they better have a way to prevent people from widely speculate on BTC. Otherwise, they will hurt their economy really bad.
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Any currency or asset can lose 20% or more of its value overnight, and several national currencies have done exactly this over the years.
People are often paid part of their salary in the form of shares, which also frequently change in value.
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Any currency or asset can lose 20% or more of its value overnight, and several national currencies have done exactly this over the years.
Except that's a rare event that becomes a major news item, followed by lengthy discussions about how to prevent it from happening again.
With Bitcoin, swings of 10% over the course of a day seem to be the norm.
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Any currency or asset can lose 20% or more of its value overnight, and several national currencies have done exactly this over the years.
OTOH, El Salvador's current national currency is the US dollar, which is and will be quite stable.
I suspect that while El Salvador has made BTC a legal tender, all contracts in El Salvador will continue to be denominated in US dollars. If BTC is used, it will only be used by converting from its current dollar value.
IOW, this is much ado about nothing.
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The result of all this is that a
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I'd love it if my wage were paid in a currency that can lose 20% of its value overnight because some billionaire* tweeted an emoji.
-- * in dollars
While I share your sentiment, I can't help but think of some of the crazy things that cause government run currencies to insanely fluctuate.
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Predictably missing from the list ... (Score:2)
"Income can be reported in bitcoin" predictably not on the list of uses.
As far as government is concerned Bitcoin is just a vehicle to pay US dollars.
Re: Predictably missing from the list ... (Score:2)
That's to protect users from taxes. Unlike how it's handled here in the U.S. where it's essentially tax fraud to use BTC as a currency.
Excellent (Score:1, Troll)
Now we just aggregate the carbon emissions from Bitcoin mining, apply them to El Salvador and watch them shoot to the top of the world rankings in emissions per capita. Then we apply political pressure for them to reduce their emissions.
If you want to play stupid games with stupid projects then expect stupid results.
Best case scenario, this actually works, the world realises how stupid bitcoin is, and every other country starts regulating it out of existance.
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-1, Cultist nerve struck
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Huh? Nerve struck? Sorry that you need to defend Bitcoin against pointing out the obvious waste of electricity it is. The topic doesn't strike a nerve with me, it just disappoints me how fucking retarded the world is chasing a quick buck on speculation.
Now be a good little Applehu Akbar and be more energy efficient. The world depends on you doing your part so we can fuck it up mining imaginary numbers.
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Actually I was commenting on the Bitcoiners being one of the roving gangs that uses their mod points as a weapon. It seems to be one of several such gangs.
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Bitcoin, the environmental disaster (Score:5, Insightful)
Meanwhile the next article down from this one is "Carbon Dioxide Reaches Highest Level In 4 Million Years"
https://news.slashdot.org/stor... [slashdot.org]
With the energy to run Bitcoin ever-increasing (inherent in the design of Bitcoin), it is now as much energy as a medium-sized country (Norway or Argentina): https://www.bbc.co.uk/news/tec... [bbc.co.uk]
Bitcoin mining produces 22M tons of CO2 each year, with entire fossil-fuel power stations devoted to it ( https://arstechnica.com/tech-p... [arstechnica.com]).
Bitcoin is a bad economic idea, a really terrible environmental idea, and used only for value speculation or criminal transactions.
Bitcoin delenda est.
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You can parrot the typical FUD the mainstream media has to say about Bitcoin and Crypto, or you can do your own research and figure out what it's really all about. You could do worse than the CoinBureau for that:
Fact check - Is Bitcoin mining bad for the planet?
https://www.youtube.com/watch?... [youtube.com]
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He opens by using that old Mark Twain quote "there are lies, damned lies, and statistics" which is itself BS. Then he spends at least half the video defending a straw man. He has found some paper from ten years ago that made claims that are a bit crazy and shoots it down. I don't know if he was going to address the fact that Bitcoin uses more electricity than Argentina because I ran out of patience.
Anything that uses that much electricity for no real benefit is bad for the environment.
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Anything that uses that much electricity for no real benefit is bad for the environment.
Ah but it is. Just look at how much our pipeline security has improved since BTC was invented. You couldn't get this motivation with regular money.
Resilience, anyone? (Score:1)
El Salvador, Central america.
Politically interesting area of the world, weather-wise kind of hurricany, and electricity infrastructure that looks OK on paper, no idea about the reality.
How wise is it to be dependent on a currency that requires electricity to be exchanged... I remember this story about Puerto Rico where a hurricane devastated its electricity grid, for almost a year. Cash became king again.
I guess they're still keeping the dollar as a second currency.
Re: Resilience, anyone? (Score:2)
El Salvador, Central america.
Politically interesting area of the world, weather-wise kind of hurricany, and electricity infrastructure that looks OK on paper, no idea about the reality.
That's not what an average anglo needs to know about El Salvador. This is one of the most violent and unruly places in the world. This is why thousands of salvadorians are trying to escape to the USA on foot, but not so many nicaraguans, even though the neighboring Nicaragua is just as poor (but much safer country for the loc
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Honduras and Guatemala are about just as bad as Salvador. Nicaragua is a much safer place. When I was in Nicaragua the main concern in the capital was pickpockets and petty theft.
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I guess they're still keeping the dollar as a second currency.
They will be keeping US dollars as their main currency. Bitcoin will just be another acceptable payment method. For paying the US dollar amount of whatever it is you are buying. Probably at a substantial penalty because of the fees and volatility inherent in bitcoin.
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As I understand the law, businesses will be forced to accept bitcoin as payment, and so it's unlikely the gov. will tolerate any extra fees.
It seems inevitable that for bitcoin to keep growing, they'd have to start force drafting participants in the scheme.
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You'd have to wait and see the implementation details. But generally for a payment method that is more expensive, you will charge more. Or just include it in all the prices. Someone will have to pay those transaction fees.
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Well, not where I live. Because Visa demands of merchants, as condition of being allowed to use their cards, that they don't charge extra for use of Visa. They're dominant enough to get away with it, and here (unlike in some other countries) courts and regulatory authorities have been fine with it.
Bitcoin "entrepreneurs" aren't powerful enough to make similar demands, but now they've managed to convince (or bribe?) an idiot president to demand it for them. Merchants will not have the free choice to accept e
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Yes?
Point is, it's very revealing for the "bitcoin entrepreneurs". They're all for freedom of choice and "may be the best store of value win" or whatever, but first time they got the opportunity, they forced people to accept bitcoin instead.
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The dollar will remain the first currency. The government will continue to operate in dollars. People will continue to use dollars in their daily lives.
In practice? (Score:4, Interesting)
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They won't.
They're gambling that rich gringos from Gringoland will pay for their hotel accommodation and bar tab in crypto.
Re: In practice? (Score:2)
It's (nearly) instant and picked up by the purchaser, assuming Lightning 2nd layer. Fees are a few cents.
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How does that work if you want to buy a loaf of bread? How long does that take these days? Who picks up the transaction cost?
That's not why they are doing it. Mostly it's because significant numbers of El Salvadorans live in the USA and regularly send money back to El Salvador. In fact, their president has admitted that their economy basically depends on it. By legalizing Bitcoin, it opens the door so that expats can send back money as Bitcoins and avoid the horrible surcharges that places like Western Union place on money transfers. I have an elderly uncle who a few years ago reached out to me for some one time financial
Can I has a pupusa? (Score:2)
Soon bitcoin exchange will be reported in thousands of pupusas.
a banana republic? (Score:4, Interesting)
It's about remittances (Score:2)
With this in mind, it is easy to see why the government of El Salvador want to green light easily portable currencies. The other complaints about Bit Coin all remain valid. However, they pale in light of the realities in El Salvador.
Kick El Salvador out of banking system (Score:4, Interesting)
Adding an entire nation and its economy to the mingling service is exactly want the drug lords and criminals want. The right response should be to treat El Salvador as a failed nation and a simple bit coin obfuscator service and kick them out of world banking system.
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I'm sure the average El Salvadorian considers themselves to be "the little guy" and is extremely thankful you are protecting them from mean comments on the internet. /s
Economic Drag (Score:2)
I hear a million generators revving... (Score:2)
follow the money (Score:2)
This doesn't benefit most Salvadorans (Score:2)
Now, the mean income is around $40,000 a year. The vast difference indicates to me that there are a lot of very poor people, a small middle class, and pool of very rich people which includes the politicians. Can you guess who this benefits?
What about capital gains tax? (Score:2)
Prices can now be shown in bitcoin, tax contributions can be paid with the digital currency, and exchanges in bitcoin will not be subject to capital gains tax.
Here's a copy of the new law.
https://twitter.com/nayibbukel... [twitter.com]
My first thought is that El Salvador at some time in the future is going to have a run on people selling their BTC for dollars and forcing a dollar liquidity crisis to bankrupt the financial system of the country.
This will happen when something like Tether stablecoins has a liquidity problem and collapses. Then El Salvador assets can be bought for pennies on the dollar, kinda like what happened in 2007.
OTOH, maybe everything will turn out fine if
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This actually makes no sense considering the average income in comparison to Bitcoin transaction fees.
Since when do politicians and their laws need to make sense?
Re: Expensive (Score:3)
While it hasn't been talked about, my guess is this will quickly lead to a wider adoption of the Lightning network. International remittances are a really good use case to ramp up Lightning.
(Lightning is a layer 2 protocol built on the layer 1 Bitcoin network that vastly reduces fees by clumping transactions; it's major downside of requiring a payment channel isn't a big deal for remittances)
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Transactions can only be made when all parties involved are online.
The typical Salvadoran makes $7,000 a year. How useful will it be when all parties have to be on line? Many stores in El Salvador don't have internet access.
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That's actually not entirely true. Trusted parties can transact Bitcoin offline and then publish the transactions to the network later. Not appropriate for selling digital goods online, but it's fine for buying bread from the local merchant when the network is knocked out or you're in a temporary dead zone.
Much more significant to them is the transaction fees. When you only make $7k/year, even a $0.10 transaction fee sounds pretty bad when you are buying a $0.45 loaf of bread.
Fortunately, Bitcoin is desi
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Oh, also, Bitcoin transactions can be made over text messaging if the software infrastructure is in place with appropriate Internet gateways. There are 1.46 mobile users per capita. I don't know how spotty the coverage is on the ground, but generally it's pretty easy to get good 2G coverage for SMS.