El Salvador is a USD-based economy and does not have their own currency. This means they're at the whims of the US Federal Reserve, which they have representation with. And any USD reserves that are abroad can be seized by the US, as Afghanistan ($7B seized) and Russia ($300B seized) learned recently.
Bukele is promoting BTC as a way to attract talent and capital, and also to modernize El Salvador's economy. Similar to how Africa skipped landlines and jumped right to mobile phones. It remains to be seen how effective that part is. But, either way, it gives El Salvador some more independence from the US and sovereignty in a world where alliances are shifting fast.
> And any USD reserves that are abroad can be seized by the US
That doesn't have anything to do with USD. Any reserves (or really any asset) that is outside the country's jurisdiction can be seized by a foreign one. El Salvador could as easily lose all their Bitcoin reserves if they held them in a Coinbase wallet, for example.
It absolutely does have to do with USD. Other than actual physical dollar bills, which do not scale and are not practical to use for long-distance international transactions, the only form that real redeemable USD can exist in is deposits with the Fed which can be seized by the US. This is a fundamental property of using the US dollar as your country's currency.
Comment you're responding to is saying this is not unique to U.S. dollars. All currencies are controlled by their issuing sovereigns.
Separately, the idea that Bitcoin is unsanctionable is laughable. It may require enabling legislation. But marking wallets as sanctioned, and threatening any wallets that transact with it to be either similarly sanctioned or subject to heightened scrutiny, would diminish the value of those coins relative to coins which can be freely traded with anyone. Given the public nature of the blockchain, enforcement would likely be easier than e.g. enforcing an Iranian oil embargo.
> But marking wallets as sanctioned, and threatening any wallets that transact with it to be either similarly sanctioned or subject to heightened scrutiny, would diminish the value of those coins relative to coins which can be freely traded with anyone
Doesn't this already happen? Basically any bitcoin that comes out of a tumbler or any wallet address that has transacted with tumbled coins is banned on KYC exchanges: https://sethforprivacy.com/posts/fungibility-graveyard/
It’s why it’s so important to taint and mix the history of all coins. Given enough time, eventually all UTXOs are tainted, thus nothing is tainted. Most of the supply of BTC can be linked to SR taint from early 2010s. Doesn’t matter now.
Litecoin just introduced a sidechain called (mimblewimble extension blocks) MWEB, it permits “cut-through” transactions where UTXOs can mix. It looks like a single UTXO on the main chain. Very Fungible!
“What it instead of normalizing privacy, you just don’t have privacy.”
The problem is one of pragmatism. All money is dirty. All great fortunes are founded on exploitation.
Every dollar in your pocket has been used for crime many times.
The system works because we choose to ignore this. If we could programmatically enforce rules, the system would be fail in a day.
So it’s not about money laundering, it’s about achieving some kind of pragmatic equivalence, while permitting the system to continue to function.
I guess the problem for me is that the immediate action being normalized is just too ethically suspect. The closest analog outside of the cryptocurrency space is a crime that is generally only committed to get away with another crime. That feels categorically different from, say, normalizing using HTTPS or encrypted messenger apps.
It’s the dilemma of cryptography, in that you cannot have a secure system that doesn’t also allow bad guys to use it too. The only victim of weakening a system to fight bad guys are the good guys, as the bad guys will just use the original secure version of the protocol, etc.
My point is that eventually the major cryptocurrencies will have some fungibility enhancement mechanisms to deal with the practical limitations of taint and chain analysis. Tornado cash, Coinjoin, MW, etc. Its not about normalization of crime. It’s the default ignorant status quo.
> It’s the dilemma of cryptography, in that you cannot have a secure system that doesn’t also allow bad guys to use it too.
I hear similar things from the NRA about how we'd all be safer if everyone carried a concealed firearm. I just don't want the world to be a place where we all have to be armed and launder our money after every transaction.
There is always a balance that needs to be struck between privacy and accountability. Bob Woodward violated the privacy of the Nixon white house, but we generally believe the public interest there outweighs the privacy concerns at stake. I am always particularly skeptical of financial privacy maneuvers, since they are of considerably greater interest to the already rich and powerful.
I am not super pro guns, but I am super pro encryption. There are parallels. We are all safer if we encrypt our traffic and data at rest. Safer when we use end-to-end messaging schemes.
I don’t know if I agree about accountability balance — accountable to whom?? It is better if everyone is equally blind. Technology that takes power from the powerful is our weapon. You don’t need accountability if there is nobody to be accountable to.
"Accountability" here is the public's right to know some facts, like if corporation X dumped toxic waste on public land or if individual Y funded a spoiler candidate in a major political race.
Creating a new form of privacy means creating a new arena in which to conceal malfeasance, and some will inevitably take advantage of that. Privacy can become a means of entrenching power as easily as it can become a means of distributing power. Wealthy people and organizations in the US sue journalists for invasion of privacy to prevent embarrassing information from being published. In the US, some parties have been lobbying and suing for decades to be able to spend unlimited sums with no public disclosure on political and influence campaigns.
Sounds like a variant of the prisoner's dilemma: the best outcome is if no civilians are carrying guns, but needing and gun and not having one is a worse outcome than needing and having one?
This is because the Taliban is a terrorist organization that captured the capitol, not a government. You don't give $7bn to al qaeda, ISIS or lashkar-e-taiba either.
You can thank Trump and Pompeo and their plan to withdraw 100% of US forces by a fixed deadline for that (removing all support for the afghan government's armed forces), and Biden for going along with the foolish plan.
I really don't want to defend the Taliban, but the core of any government is the group that maintains a monopoly on violence in a realm.
The pre-Taliban government of Afghanistan as well as the US puppet state in 2021 failed in this core responsibility, and consequently lost the right to govern. Whether or not the Taliban will produce a stable or good government is a different question. I personally weep for those forced to live under it's rule.
It would make about as much sense to say the United States in 1783 was not a government, but a terrorist organization that attacked the rightful British government of the American colonies. The British lost the right to govern when they failed to maintain their monopoly on violence in the American colonies, and a new governmental organization formed from the ashes of the war that proved it.
The Taliban is not a terrorist organization. The Taliban was the government of the country of Afghanistan before we invaded it, and it is the government of the country of Afghanistan after we've left. "Terrorism" isn't a euphemism for killing US soldiers. If they're invading your country, the proper word is "patriotism."
The Taliban is both. I agree that killing invading foreign soldiers on your own soil isn't terrorism, but that's not where the Taliban stops. Plenty of attacks on their own populace over the last two decades.
Russia also defaulted because it can't pay (in any currency) parties that are barred by sanctions from transacting with the Russian government. It wouldn't matter if Russia were able to ship paper USD to their creditors; the creditors cannot accept that payment.
I would also blame Trump's relentless political attacks about Obama returning Iran's assets. And Biden's political cowardice after the Afghan collapse. All of it is reducing trust in US's supposed rules-based institutions. US is speedrunning through the fall of an empire
Calm down with the theatrics. Money continues to flow into the US during this current crisis because the US is still seen as the most stable place in the world. Rich people around the world wouldn't be rushing to park their money here if they thought the US was going to collapse.
It's a patently stupid strategy over the long run though. Abandonment of ones own currency is suicide regardless of whether it's USD or Bitcoin. And clearly, Bitcoin did not help El Salvador improve it's financing situation: the Bitcoin bond they tried to push was a complete flop. Argentina has a way better model: they control their money, they've defaulted repeatedly, the currency has magically remained stable, and everyone comes back after each default.
Another massive issue is that as a currency with an inelastic supply Bitcoin price volatility is guaranteed to remain unstable. This is not a desirable feature for any currency.
I'm not sure why you view Argentina as a "better model". They're in the middle of (another) currency crisis right now which is causing their economy to collapse and social unrest:
The annual inflation rate in Argentina is ~76%. It's basically impossible to do business in Pesos when it's devaluing so quickly. Every contract programmer in Argentina is doing business in Bitcoin or stablecoins because they would lose ~40-60% if they were paid in USD from abroad. People are stashing savings dollars (and Bitcoin) to keep it out of government hands and protect it from becoming worthless.
If historically your government has breached the trust of its people from careless money printing local
currency, using a major world currency as your money is something to keep you honest.
Bitcoin is like this for all governments and currencies. It is honest true hard money that cannot be devalued by the money printers. It’s the hard money of last resort and you bet this will be more and more important as we lose trust for each other’s currency.
Bukele is promoting BTC as a way to attract talent and capital, and also to modernize El Salvador's economy. Similar to how Africa skipped landlines and jumped right to mobile phones. It remains to be seen how effective that part is. But, either way, it gives El Salvador some more independence from the US and sovereignty in a world where alliances are shifting fast.