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COMMENT: Sorry Bitcoiners, coercive law says El Salvador’s authoritarian ruler is not your hero

OPINION: One of the best use-cases that cryptocurrency fans point to is bringing financial freedom to the huge numbers of people around the world who lack bank accounts.

But if Bitcoin is so “free” … why should anyone be forced to use it?

Make no mistake: That’s just what this law that El Salvador passed does.

“Every economic agent must accept bitcoin as a form of payment when it is offered to him by whoever acquires a good or a service,” it reads.

“All obligations in money expressed in dollars, existing prior to the effective date of this law, may be paid in bitcoin.”

Yes, there are exceptions for businesses that lack the technical know-how to accept BTC — but still, why should anyone need to apply for an exemption? Is this what crypto is all about?

“Elon Musk is now legally required to accept #Bitcoin in El Salvador for Teslas,” tweeted one popular Twitter account, Documenting Bitcoin, with nearly half a million followers.

Excuse me? Is this a good thing? Crypto has always been about freedom of choice, libertarian ethics and fighting coercive state power.

Now it appears Bitcoiners are willing to fellate support an authoritarian leader as long as he’s making his citizens do what they want him to do.
 

Is this your hero, Bitcoiners?

Nearly 20,000 cryptocurrency fans spent time chatting with El Salvadoran President Nayib Bukele in Twitter Spaces on Wednesday. The 39-year-old leader has quickly achieved rock-star status in crypto circles after quickly moving to pass the “Bitcoin law” through the country’s national assembly after just a few hours of debate. Does that sound like democracy?

This is the same man who sent heavily armed police and soldiers to occupy the same legislative hall last year, in a show of force that an Amnesty International director said “reminds us of the darkest times in El Salvador’s history and raises international alarm over the future of human rights in the country”.

According to the Los Angeles Times, “Since taking office nearly two years ago, Bukele has constantly demonized the opposition, the press and most anyone who objected to his bare-knuckles brand of populist politics. He has appointed family members to his government, ignored Supreme Court rulings and legislative directives and sent accused violators of his strict pandemic lockdown into detention.”

Human Rights Watch says Bukele “poses a serious threat to democracy and the rule of law in El Salvador. His actions have made that threat crystal clear.”

While the Bitcoin law was making headlines this week, an El Salvadoran anti-graft commission backed by the Organization of American States was dissolved after it began investigating Bukele’s administration.

Is this your hero, Bitcoiners?
 

Parallels with Pinochet

As one Twitter user pointed out, this has the potential to be like Milton Friedman and his Chicago boys embracing dictator Augusto Pinochet in the 1970s.

Bitcoiners joking about packing up and moving to a beach in El Salvador should remember this is a country that throws women in prison for getting abortions; where people faced arrest and arbitrary detention for COVID-19 quarantine violations; where corruption is rife, including among the President’s allies; and where criminal gangs “hold significant influence over political life“.

Maybe not all of this can be laid at Bukele’s feet — but is this really somewhere any freedom-loving person would want to live? Just so you can save some money in capital gains taxes?
 

Volcano energy? Hot garbage.

And while Bukele’s “volcano-powered Bitcoins” sounds amazing, let’s be honest here.

El Salvador’s state-owned electric company, on orders from Bukele, has a plan to mine Bitcoin using a geothermal energy plant that produces 95 megawatt-hours of electricity.

But global Bitcoin mining consumes an estimated 127 terawatt hours of electricity each year … or 127 million megawatt-hours.

So less than one-millionth of Bitcoin’s energy consumption will come from these volcanos.

This is a gimmick, nothing more.

As Decrypt reported, “El Salvador already imports 25% of its electricity, according to the International Finance Corporation, making it the biggest buyer in the region.

Moreover, IFC reports, ‘Nearly half of Salvadoran firms say that the high cost of electricity is one of the biggest barriers to growth because it increases the prices of products and services.’

“Bukele’s instructions will certainly add strain to the electrical grid and could even require El Salvador to import more electricity — even if the power produced by the Bitcoin mining facilities themselves is clean.”

Should we really applaud a move that is going to cost El Salvadoran businesses money, just because it helps the Bitcoin narrative?
 

Not ready for prime time

And speaking of being honest … what crypto fan can truly say that Bitcoin is ready to be used for everyday transactions?

I bought my first Bitcoin in 2013. I love crypto. I think it has true potential to help the unbanked and give people real financial independence. But at the moment, Bitcoin fees are averaging nearly US$6 a transaction.

Unless wallet company Stripe (which is assisting El Salvador’s Bitcoin efforts) has something really innovative up its sleeve as far as the Lightning Network goes, it’s hard to see how BTC can be used for payments.

Yes, there’s also remittances, which can be costly for the unbanked. But as long as goods and services in El Salvador are priced in US dollars, El Salvadoran expats would be much better off sending back their hard-earned money using a dollar-pegged stablecoin like Tether on Tron or USDC on Algorand. They’ll pay lower fees, send their money quicker and not risk the chance the value of the Bitcoins will plunge during the transfer.

This tweet said it best:

The post COMMENT: Sorry Bitcoiners, coercive law says El Salvador’s authoritarian ruler is not your hero appeared first on Stockhead.

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