Nayib Bukele is the telegenic young (born 1981) 46th President of El Salvador who came to office on 1 June 2019 and announced the stunning move to make Bitcoin legal tender on 25 June 2021 (to take effect on 7 September).
Before noting 10 reasons why he made the right call on Bitcoin at the right time, a small quibble. Bitcoin is already legal tender in Switzerland (where like El Salvador, its use is optional). Point 7 notes why El Salvador’s decision is more important than Switzerland’s move which dates back to the 1930’s and which Daily Fintech told you about in 2015.
1. Bukele may have better timing than most traders. When El Salvador gave away the Bitcoin equivalent of USD 30 to millions of its citizens, the price had already come down a long way from the all time peak when VCs unloaded Coinbase stock onto retail investors on 15 April. Yes Bitcoin could go to zero – decisions always require courage – but I think hindsight will view the Bitcoin price in June 2021 to be a good buying opportunity.
2. With China and America battling over whose currency will be the next global reserve, there is a jurisdictional innovation vacuum in crypto. There may not be a single reserve currency in future. It maybe a multipolar world and Bitcoin might one of those poles. America will not have reserve currency seignorage forever and both China and EU are far from ready. There will continue to be a lot of wealth creation in countries investing in and building the Blockchain Economy. That can include already wealthy countries like Switzerland as well as innovation friendly countries in the Rest of the World like El Salvador.
3. Bitcorati (people who made money from Bitcoin) like to travel. They want to have some fun when not talking crypto innovation and El Salvador has lots of fun things to do (like surfing on Bitcoin beach) . So Bukele will put money in his citizen’s pockets by boosting tourism.
4. El Salvador’s decision may prompt other countries with failed Fiat currencies to follow their lead. The first might be countries whose own Fiat currencies failed who then adopted the US dollar as their currency (such as Ecuador and Panama).
5. Nayib Bukele presents very well in the media. He is young & handsome, appears sincere, intelligent and willing to take smart calculated risks.
6. His reasons align to the needs of his people. In Venezuela the Bitcoin traction is bottom up. In El Salvador it is both top down AND bottom up. For example he articulates very well why money printing aka stimulus in America has positives for American people with negatives around inflation. Other countries that use US dollar have only the negatives ie no stimulus checks for El Salvador’s people.
7. Bitcoin is legal tender in Switzerland but does not solve any big problem for Swiss people who trust their Swiss Franc. The Rest has the advantage that their citizens are more likely to use Bitcoin as a currency for everyday use.
8. The smart technology timing around Lightning Network is more reminiscent of a VC than a politician. His mission is to put money in El Salvador people’s pockets and so he needs a payment system that is dirt cheap and fast, which Lightning Network offers.
9. This young politician from the Rest is articulating concerns of old rich people in the West about money printing. For example, look at what Mises Institute says about El Salvador and Bitcoin.
10. El Salvador is physically easy to get to from the American West Coast. Some of that innovation capital (cash and IP) will head down to El Salvador if it is easy. There are direct flights from San Francisco and the time difference is only one hour. Oh and there are lots of fun things for nerds to do when not talking crypto innovation .
Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.