1/ As Tuesday's Bitcoin legal tender law looms for more than 6 million Salvadorans, many if not most of them fear a big monetary change.

This is partly because of the dollarization which occurred exactly 20 years ago, in a similarly rushed, top-down way 🧵 🇸🇻
2/ Last week I attended the anti-Bitcoin law protest in San Salvador. This is the secretary of a union for judicial employees.

She was against the law for many reasons, but a big one was that last time the govt changed the money system in 2001, it was bad for the lower classes.
3/ Dollarization was fairly unique in El Salvador's case. The country wasn't experiencing high inflation, or any kind of economic crisis. But policymakers said it would help bring down interest rates and fuel the banking sector. Which it did. But it had unintended consequences.
4/ This 2004 paper shows how dollarization had a negative impact on El Salvador's poor.

The process had a striking similarity in suddenness to this year's Bitcoin law: just 39 days passed between the initial announcement and implementation:

5/ At first, one might struggle to see how dollarization could be bad.

Why wouldn't a country benefit from moving to a stronger currency?

Well, one surprising reason it was a painful experience for many was the result of the new exchange rate of 8.75 colones per dollar.
6/ 21% of Salvadorans couldn't read or write, much less do conversions in their head. So they would fall prey to a system where what *used* to cost seven colones might now be rounded up to one dollar. From seven colones to a dollar is 25% inflation.
7/ There was also the psychological effect of ditching a national currency, familiar to and even loved by many, for the currency of a foreign power that had backed a brutal dictatorship in the 1980s that committed unimaginably bad war crimes like these:

8/ By 2007, as this @latimes article then reported, many unbanked small business owners were still crushed by dollarization, having never recovered.

The stories here are powerful, and one of the women interviewed even called the dollar a "curse":

9/ This is Mama Rosa, one of the first vendors in El Zonte to start accepting Bitcoin back in 2019.

She is the mother of @jorgebitcoinES, a Bitcoin Beach founder.

When I asked her about dollarization, she grimaced, as if someone had hurt her. She said it had been very painful.
10/ Dollarization was brought up by many of the protestors I spoke to in San Salvador.

They had other legitimate fears, of course: virtually no one knows what Bitcoin is, and the government is being highly opaque with its roll-out plans and has provided very little education.
11/ As you can see here, another big fear from critics is that the government is going to use Bitcoin to launder money or steal from the people.

This is not an unreasonable fear, given that the last three Salvadoran presidents all looted the country.
12/ More than anything, it seems that out of the $200M+ being spent on: the BTC rollout, convertibility trust (to ensure merchants who accept BTC don't need to touch it + can just receive $), and ATMs, people don't yet grok Bitcoin and think it's a waste.

13/ This is totally reasonable and shows in recent polls, where virtually all respondents did not agree with such a mandate, and most had unfavorable views of BTC.

Interview 100 people in any random town in America or China or Brazil today and you'd likely get similar results
14/ The lack of knowledge and misinformation being spread among the protestors was staggering. The union secretary, for example, told me you needed $50,000 to buy Bitcoin, and that it would be hard for anyone in the country to use--despite the iPhone in her shirt pocket.
15/ And it's true that the government has been extremely opaque about the plans for the state-run Chivo wallet. Initially, it seemed to be a Lightning-based idea, but now leaked plans seem to point to a Cash App-type dollar app, that can simply receive/send BTC on-chain.
16/ We are going to learn a lot on Tuesday.

Will Salvadorans be able to download the app, claim their $30, and spend it?

Will the ATMs work?

For the first country to attempt national Bitcoin adoption, it could be a boondoggle.
17/ However, the promise of the technological leap is massive. Around 25% of the country's GDP relies on remittances.

If families can receive these funds in Bitcoin from abroad and save in BTC or USD, or cash out at Chivo ATMs across the country, that's a major life upgrade.
18/ Most likely the launch will be buggy, there will be issues, and delays.

It also seems that from talking to local business owners, that some are getting Bitcoin software to be able to accept BTC to be compliant with the law, but that they won't want to touch Bitcoin at first.
19/ So in the early days of this new era, it seems likely that most Bitcoin flowing in to El Salvador from abroad, or being spent at stores in the capital, will go straight to the government. There are also major surveillance and confiscation concerns over the Chivo wallet.
20/ With that in mind, it's critical to help Salvadorans understand that not your keys, not your coins.

Education to help people download non-custodial, non-KYC wallets will be essential and important.

"Si no tienes las llaves, no es tu dinero" should be a rallying cry.
21/ As El Salvador takes a massive technological jump into the financial future, before any other country, there are bound to be mishaps.

The process may be derailed or discredited by Bukele himself, who has taken alarming actions in the past few months:

22/ Most recently, by planning a purge of more than 100 of the country's top judges, and by getting clearance from the new judicial system to run for another term, something that was previously forbidden by the constitution.

23/ All that being said, El Zonte and the founders of Bitcoin Beach remain an incredible inspiration for El Salvador and the world.

The reality is, the situation is messy. There is no black and white, no "hot take" possible of capturing the full picture.
24/ For Salvadorans who are open-minded and willing to put in work to understand Bitcoin it could yield enormous fruits.

Mama Rosa, for example, has operated her business in Bitcoin for the past 2 years, and has been able to afford assets like this truck for the first time ever:
25/ Either way, I look forward to reporting on the story of El Zonte and El Salvador's Bitcoin transition for @BitcoinMagazine.

Look out for my article to drop on September 15th ✌️
26/ P.S. all of these photos were taken by me personally on my trip last week.

The charts are from the Instituto Universitario de Opinión Publica.

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More from @gladstein

16 Sep
1/ My latest essay "The Village and the Strongman: the Unlikely Story of Bitcoin and El Salvador" is now live.

How did the smallest country in Central America—most known for its civil war and gang violence—become ground zero for a monetary revolution? 🧵

2/ It all started in the seaside village of El Zonte. With a population of just a few thousand, dirt roads, tarp and sheet metal roofs, and no supermarket, most residents don't even have bank accounts. Historically, it was a place where residents were caretakers or fishermen.
3/ Twenty years ago, no one would have thought such a place could change the world. But two young men in town received a gift—the ability to dream—from a social worker, who taught them how to hope for a better future. @jorgebitcoinES and @romanmartinezc began to build.
Read 61 tweets
14 Sep
1/ Today @HRF announces 375 million satoshis in Q3 gifts from its Bitcoin Development Fund to 10 projects spanning the globe.

This round focuses on Bitcoin privacy, ⚡, dev education in emerging markets, improving user onboarding experience, and continued core development 🧵 👇
2/ 50 million satoshis to @bernard_parah, @actuallyCarlaKC, Tim Akinbo, and @ihate1999 for the creation of qala.dev, a program to help train and grow new Bitcoin developers in Nigeria and wider Africa. Special thanks to @paxful for making this gift possible.
3/ 50 million satoshis to @diopfode for his efforts with bitcoindevelopers.academy to help individuals in West Africa and especially those living under the colonial CFA franc system to build and use Bitcoin applications. Special thanks to @ManuelStotz for making this gift possible.
Read 13 tweets
13 Sep
“The plan is for Ukraine to make Bitcoin legal tender by the start of 2023 and create a ‘duel-currency country’ where Bitcoin sits alongside the fiat hryvnia before potentially being phased in as the dominant financial structure”


Note: this seems like speculation based on recent public statements and actions of the Ukrainian government, which is pro-EU/NATO. What’s interesting to consider is that Ukraine today is very much a key piece of US foreign policy, and on America’s side vs Putin, etc
As @anilsaidso reminds us, some politicians in Ukraine have disclosed owning hundreds or even thousands of Bitcoin:
Read 4 tweets
10 Sep
1/ New @WSJ article laying out the statist case for Central Bank Digital Currencies and the war on cash:

“If people can’t hoard physical money, it becomes much easier to cut rates far below zero”

🧵 with key quotes👇

2/ “If people can’t hoard physical money, it becomes much easier to cut interest rates far below zero; otherwise the zero rate on bank notes stuffed under the mattress looks attractive. And if interest rates can go far below 0, monetary policy is suddenly much more powerful”

3/ “Initially, CBDCs will almost certainly be designed to behave as much like ordinary bank notes as possible, to make their adoption easy and minimize disruption, while use of physical cash will be allowed to wither away. But... monetary caution is unlikely to last.”

Read 9 tweets
5 Sep
@joshtpm 1/ Josh, what's remarkable is your arrogance, ignorance, and financial privilege. 1.3 billion live under double or triple digit inflation and 4.3 billion live under authoritarianism. Millions of them have turned to BTC as a way out. That you would mock them is bizarrely cruel.
@joshtpm 2/ To give you an idea of the scale of what's happening here, @paxful is just one BTC p2p marketplace. They have ~ 2M users in Nigeria alone. Exchange operates in India peg Bitcoin users at north of 10M. There are millions more from Argentina to Turkey to the Philippines.
@joshtpm @paxful 3/ Why would they turn to BTC? Unlike you--who lives in a liberal democracy with a reserve currency--they live under weak currencies without proper rule of law and civil liberties. Hence they turn to an open-source money that can't be censored, remotely confiscated, or debased.
Read 7 tweets
2 Sep
Flawless experience using @MuunWallet here in El Zonte to buy all sorts of things with Bitcoin 👌

If you visit, make sure to stop by for a coffee with Karla, an excellent barista.

You can tip her instantly from anywhere in the world with Lightning here:

Wow! Karla has received more than 80,000 satoshis in tips since I shared this post.

Those are seeds which will grow into a big tree 🌳

Grateful for you all 🙏 🧡
Update: it looks like she has received more than 300,000 sats by this point.

From more than 20 countries.

You're all amazingly generous, thank you!
Read 5 tweets

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