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Avik Roy Profile picture
@Avik
Jun 6, 2021 • 29 tweets • 15 min read • Read on X
President of El Salvador announced at @TheBitcoinConf that he is introducing a bill to make #bitcoin legal tender in the country. This is a major development in the history of monetary policy.
via @YouTube
There are many reasons why this is significant. 1/ in the US, #bitcoin is treated by the IRS as property, which means that every time you try to spend it it’s a taxable event. If $BTC is now a currency, it can be spent in a non-taxable way just like Euros or British pounds.
If the IRS needs to treat Salvadoran bitcoin as a currency, it makes bitcoin much more viable as a medium of exchange. 2/ because Salvadoran banks will need to allow citizens to deposit & withdraw bitcoin, $BTC becomes much more deeply integrated into the global banking system.
Here is a press release from @JackMallers, an early Bitcoin pioneer who helped engineer the El Salvador legislation. businesswire.com/news/home/2021…’s-First-Country-to-Adopt-Bitcoin-as-Legal-Tender
Another key aspect of this from @CaitlinLong_: Bitcoin as legal tender makes it much easier for corporations and other institutions to hold it on their balance sheets, because the GAAP accounting rules for currencies are much simpler than the ones currently in place for $BTC.
Today, $USD is the official currency of El Salvador. That’s explicitly why they’re making this move. @federalreserve moves to massively increase the quantity of $USD have detrimental, inflationary effects on countries like SLV that use dollars as legal tender or peg to the $USD.
In other words, El Salvador isn’t making #bitcoin legal tender in an attempt to be trendy. This is an attempt to protect Salvadorans from inflationary U.S. policy. A number of other countries could follow SLV’s lead. Caribbean nations would be of particular importance.
More on the rationale for this #bitcoin move from the President of El Salvador, Nayib Bukele:
From the proposed legislation: “Central banks are increasingly taking actions that may cause harm to the economic stability of El Salvador...in order to mitigate the negative impact of central banks, it becomes necessary to authorize the circulation of a digital currency with...
“...a supply that cannot be controlled by any central bank and is only altered in accord with objective and calculable criteria.” I.e., #bitcoin.
Here’s the front page of the El Salvador paper today:
Another key point: some people, like @RayDalio, worry that as #bitcoin becomes more successful, the U.S. may seek to ban it. But is the U.S. willing to ban the exchange of legal tender with other nation states like El Salvador? That becomes a lot harder.
Today, El Salvador is best known in the U.S. as a source of migrants. In the future, if @nayibbukele is successful, El Salvador may become best known as a destination for emigrants *from* the United States, especially those who care about building the #Bitcoin ecosystem.
As @balajis notes, efforts by the G7 to coordinate tax increases on corporations is a striking contrast to El Salvador’s effort to reinstall sound money.
Think about it this way: the GDP of El Salvador is $25 billion. the market value of all the crypto in the world is $1640 billion. A relocation of 1.5% of the world’s crypto to #SLV ($25 billion at today’s prices) would be transformative.
Here is El Salvador president @nayibbukele describing the immigration & economic incentives for crypto entrepreneurs to move to his country, including "immediate permanent residence" and no taxes on property or #Bitcoin gains.
Today, I've published a deep dive into El Salvador president @nayibbukele's proposal to adopt bitcoin as legal tender @Forbes. Could El Salvador become the global capital of the #Bitcoin ecosystem? forbes.com/sites/theapoth…
In the Forbes piece, I conclude: "El Salvador may be the smallest country in North America. But if President Bukele’s bitcoin proposal becomes law, El Salvador could become one of the most significant monetary centers in the world." forbes.com/sites/theapoth…
Full video of my chat w/ @CoinDesk TV's @christinenews on the historic significance of El Salvador's move to adopt #bitcoin as legal tender. We also discuss Trump's responsibility for $USD inflation, and how to think about what may be Salvadoran FUD. coindesk.com/video/bitcoin-…
El Salvador's Sec'y of Commerce & Investment, @MiguelKattan1, held a press conference yesterday where he emphasized that the country is not getting rid of $USD. "What the law will say...is that you can pay [with #BTC]" if people want to transact that way.
Obviously, once we have the full formal proposal from @nayibbukele on adopting bitcoin as legal tender, we'll know more about how deeply El Salvador intends to integrate #bitcoin into its financial system.
According to Salvadoran newspaper El Mundo, "Kattán reiterated that the model to be implemented in the country is one similar to the one developed on a small scale at El Zonte beach with @Bitcoinbeach."
Salvadoran President @nayibbukele has officially sent his #bitcoin legal tender proposal to the legislative assembly. Looking forward to reviewing the text.
Here is the Spanish version:
I've transcribed the English version of @nayibbukele's #Bitcoin Law @FREOPP for easier analysis. The bottom line: this is about as robust an endorsement of #bitcoin as legal tender as one could expect. freopp.org/el-salvadors-b…
The key article is No. 7: "Every economic agent must accept #bitcoin as payment when offered to him by whoever acquires a good or service." (An exception is later made for those who "do not have access to the technologies that allow them to carry out transactions in bitcoin.")
Article 4 specifies that "tax contributions can be paid in #bitcoin." Article 5 that "exchanges in bitcoin will not be subject to capital gains tax, just like any legal tender." Article 6 preserves the use of $USD "for accounting purposes."
El Salvador's proposed Bitcoin Law makes clear in several places that the government will provide resources to ensure that Salvadorans can be trained in the use of #Bitcoin, and gain access to the technologies (e.g. smartphones, software, bandwidth) necessary to use it.
The policy content of the El Salvador Bitcoin Law is pretty straightforward. #Bitcoin will be instantly convertible into USD, and will have the same legal standing as USD for commerce and legal obligations. If it passes the @AsambleaSV, it will be a remarkable achievement.

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More from @Avik

Avik Roy Profile picture
Jul 19
🧵(1/x): I want to extend my sincerest congratulations to @JDVance1 for nomination as the GOP VP candidate. I have great respect for JD. There are things we disagree on (e.g. ) but many essential things we *do* agree on, as I will explain in this thread.
@JDVance1 (2/x) JD and I first got to know each other a few years after he graduated from law school. He shared my view that free-market alternatives to Obamacare should strive to achieve universal coverage, and that there was a role for government in doing so. nytimes.com/2017/07/21/opi…
@JDVance1 (3/x) The biggest obstacle to health reform isn't the left-right debate, but the contest between reformers and economic elites, the latter of whom benefit from high-cost health care. JD is absolutely right that economic elites, in many sectors of our economy, are self-serving.
Read 9 tweets
Avik Roy Profile picture
Dec 29, 2023
A week ago, popular Substacker @HC_Richardson reiterated the widely held—but factually flawed—view of most on the left that wealthy Americans don't pay their "fair share" of taxes, and that we can fix this problem by adopting European tax policies. (1/x) Image
@HC_Richardson (2/x) It's true that OECD countries generally have higher tax burdens than the U.S. does. But they don't do it by taxing the rich more—but by taxing the *middle class* more through payroll & consumption taxes. U.S. depends much *more* on progressive income taxes. Image
@HC_Richardson (3/x) In your typical EU country, the VAT tax (somewhat comparable to US sales taxes) is 21%. That's what pays for EU welfare states. The lowest standard VAT rate in Europe is Luxembourg's, at 16%. taxfoundation.org/data/all/globa…
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Avik Roy Profile picture
Jul 13, 2023
THREAD: I'm honored to announce today the publication of the Freedom Conservatism Statement of Principles, signed by over 80 leaders of the liberty movement. Its core idea is this: the thing that has made America great is *freedom*. freedomconservatism.org/p/freedom-cons…
As you know, more and more people on the left and the right reject the importance of liberty. Some of these people call themselves "national conservatives" even though they reject the American political tradition in favor of...Hungary's? Forget that.
The Freedom Conservatism statement of takes inspiration from the Sharon Statement, signed by a group of young conservatives at the home of William F. Buckley, Jr., in 1960. (Buckley, the founder @NRO, built the postwar American conservative movement.) yaf.org/news/the-sharo…
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Avik Roy Profile picture
Feb 1, 2023
@JDVance1 The @JDVance1 I know has the potential to be a good, even great, senator someday. So I'll leave the ad hominem alone and stick to data and economics. (1) 1 million Ukrainian refugees don't live in Hungary. 2.12MM have crossed the border into Hungary; 2.08MM (98.4%) then left. Image
@JDVance1 ...Those 2.08 million Ukrainians who crossed into Hungary apparently believed that their families would face better prospects outside of Hungary than inside of it. (2) Hungary has a population of 9.7 million; it isn't plausible that a pop. increase of 0.3% caused 25% inflation.
@JDVance1 (3) The anti-immigration argument natcons usually supply is that immigration is *deflationary*; i.e., that immigrants drive down wages (and thereby prices) by competing with native-born labor. But in Hungary, natcons make the opposite argument: that immigration is inflationary.
Read 6 tweets
Avik Roy Profile picture
Sep 16, 2022
(1/x) Natcons claim to speak for The People™, and not the "cocktail-party class," on all issues but especially immigration. Strangely, however, the views expressed by natcons at cocktail parties don't reflect those of the American public, especially wrt legal immigration.
(2/x) Natcons are not only critics of illegal immigration, but of *legal* immigration, seeking "much more restrictive policies" and even a "moratorium." But only 33% of *Rs* support reducing legal immigration. 61% say it should stay the same or increase. pewresearch.org/politics/2018/…
(3/x) And, as a reminder, Republicans are a minority of the voting public. Overall, only 24% of Americans support reducing legal immigration. 32% support increasing it, and 38% want it to stay the same. Reducing legal immigration is, in fact, an anti-populist position.
Read 5 tweets
Avik Roy Profile picture
Aug 3, 2022
Climate & energy policy debates in the U.S. & elsewhere focus a lot on how to reduce & constrict U.S. energy use (because wind & solar can't meet current U.S. energy needs; in 2022, renewable capacity is 311 GW out of 1145 GW total).
But almost no one talks about how renewables alone are going to meet *future* U.S. energy demand. @EIAGov projects that by 2050, U.S. generating capacity will have to increase by 57% just to meet demand from population & economic growth, electric cars, etc.
In a new paper for @FREOPP, "The Urgency of Rethinking U.S. Nuclear Energy Regulation," @grantadever walks through why nuclear is the only path to a lower-carbon world with affordable, reliable, accessible energy. So what's the holdup? freopp.org/rethinking-u-s…
Read 6 tweets

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