El Salvador passes a bill to accept Bitcoin as a legal currency

President Nayib Bukele's bill to make Bitcoin legal tender in El Salvador has been passed! On June 8, around 8 p.m. local time, the bill passed 62–19, with three abstentions.

The Bitcoin proposal in El Salvador is blatantly clear to be a scam, and the only question is what exactly is being scammed.

A small country's cache of actual US cash would be the reward. A trust that will serve as a bridge between money and bitcoins will extract at least $150 million.

El Salvador's payment network, Strike, is based on tethers, which are barely-backed alternative dollar token utilized in the crypto trading markets. The "dollars" in a Strike account in El Salvador are actually tethers. Real money leaks out as fake money enters.

The Law

Art. 1. The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out.

What is mentioned in the previous paragraph does not hinder the application of the Monetary Integration law.

Art. 2. The exchange rate between bitcoin and the United States dollar, subsequently USD, will be freely established by the market.

Art. 3. Prices may be expressed in bitcoin.

Art. 4. Tax contributions can be paid in bitcoin.

Art. 5. Exchanges in bitcoin will not be subject to capital gains tax, just like any legal tender.

Art. 6. For accounting purposes, the USD will be used as the reference currency.

Art. 7. Every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.

Art. 8. Without prejudice to the actions of the private sector, the State shall provide alternatives that allow the user to carry out transactions in bitcoin and have automatic and instant convertibility from bitcoin to USD if they wish. Furthermore, the State will promote the necessary training and mechanisms so that the population can access bitcoin transactions.

Art. 9. The limitations and operations of the alternatives of automatic and instantaneous conversion from bitcoin to USD provided by the State will be specified in the Regulations issued for this purpose.

Art. 10. The Executive Branch will create the necessary institutional structure to apply this law.

Art. 11. The Central Reserve Bank and the Superintendency of the Financial System shall issue the corresponding regulations within the period mentioned in Article 16 of this law.

Art. 12. Those who, by evident and notorious fact, do not have access to the technologies that allow them to carry out transactions in bitcoin are excluded from the obligation expressed in Art. 7 of this law. The State will promote the necessary training and mechanisms so that the population can access bitcoin transactions.

Art. 13. All obligations in money expressed in USD, existing before the effective date of this law, may be paid in bitcoin.

Art. 14. Before the entry into force of this law, the State will guarantee, through the creation of trust at the Banco de Desarrollo de El Salvador (BANDESAL), the automatic and instantaneous convertibility of bitcoin to USD necessary for the alternatives provided by the State mentioned in Art. 8.

Art. 15. This law will have a special character in its application concerning other laws that regulate the matter, repealing any provision that contradicts it.

Art. 16. This decree will take effect ninety days after its publication in the Official Gazette.

This is sloppy drafting - “bitcoin” isn't defined — and Art. 15 appears to be a ticking time bomb. It provides the Executive branch far too much power to create the necessary institutions as it sees fit (probably a feature for Bukele). But, whatever!

The Act goes beyond the traditional definition of "legal tender," which only refers to the payment of debts. Unless they don't have the technology, businesses will be compelled to accept Bitcoin, even for purchases.

Accounts will still be stored in US dollars, El Salvador's official currency; bitcoins will be used as a dollar alternative.

The law, obviously, does not specify the operating organization. Bukele did a Twitter Spaces call where he talked about how they thought it would all come together. In truth, bitcoiners had set up the call on their own; when Bukele called in, they saw him and began questioning him. [One-hour Bukele portion on YouTube; entire three-hour session on YouTube]

I recommend Bukele's Spaces call if you have an hour to spare and some forks to stab into your ears. In real-time, he was conjuring up new aspects of the scheme. Bukele was given the notion to mine Bitcoin using volcano power during the call, and he later tweeted that it was now policy. El Salvador gets 25% of its power from geothermal sources.