El Salvador will be the first country to make Bitcoin legal tender but would not be the first country to use cryptocurrency to evade sanctions. North Korea and Venezuela have done the same, to varying degrees of success...
President Bukele’s announcement is aimed to impress tech investors, and it appears to be working. But it comes as US-ES relations are hitting nosedive due to Bukele’s authoritarianism, State Dept. naming officials to corruption lists, and Treasury likely preparing sanctions.
https://twitter.com/tyler/status/1401324319502782465
Notably a number of these Salvadoran officials in Bukele’s party who are likely targets for glomag sanctions are credibly accused of money laundering. These are through ties to Alba, a joint venture with Venezuela’s state oil company, and/or the Texis Cartel.
For sanctioned governments, the promise of crypto is that it would allow for them to evade the US’s SWIFT messaging system that monitors and tracks bank transactions. North Korea has used crypto to fund its nuclear program. worldpoliticsreview.com/articles/29092…
The problem for these governments is it doesn’t really work. Bitcoin transaction info is public. To have real control, governments have to create their own cryptocurrencies, as Venezuela tried to do with the Petro. No one really accepts it. NK profits from crypto by stealing it.
El Salvador is particularly dependent on the US. ES switched its currency to the dollar in 2001. 20% of its GDP come from remittances from Salvadorans in the US. Its debt is close to 100% of its GDP. It’s in negotiations with IMF for a loan that is now being held up by the US.
Recent moves by Pres. Bukele have been to shut down any corruption investigations against him: getting rid of the attorney general, commissioner of the transparency body IAIP, and anti-corruption body CICIES, after it had opened 12 corruption cases against his administration.
For an entrepreneur-president facing deteriorating relations with the country it is most dependent on, and preparing for sanctions and money laundering investigations, crypto has a real appeal. But it won’t work unless ES makes its own sovereign crypto, which is unlikely.
Bukele’s hope also lies in convincing Salvadorans in US to switch remittances to Bitcoin. This would be a tall order for a diaspora of 2m used to wiring cash...
https://twitter.com/TizBreda/status/1401338946341179394
The real value of the announcement though is the publicity. ES needs to attract investors and distract from fact that it’s a bad bet rn, with unsustainable debt, bad relations with US, and Bukele harassing critics in the business sector by sending regulatory agencies after them.
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