El Salvador is making Bitcoin legal tender

Is this positive for cryptos? At best insignificant.

During the #Bitcoin 2021 convention, El Salvador, small Central America country declared #Bitcoin to be legal tender (i.e., recognized as satisfactory payment for any monetary debt, including to the government).

The timing is quite funny as it was obviously arranged between the different parties.

Let’s have a look in more details.

El Salvador 🇸🇻

• Population: 6M

• GDP: $25 billions or 0.03% of global GDP

• Currency: USD, BTC

• Murder Rate: 52/100K (#1 globally)

  Not really what I call impressive statistics (apart for the murder rate).

  

If you wonder why there were using USD in the first place, here is one element:

The President

El Salvador president is Nayib Bukele, he was elected in 2019. Since he was elected, he was involved in some scandals, and he is acting more and more like a dictator.

Wikipedia

Not your usual president.

The Economy

Remittances from abroad accounts for 21 % of GDP (Worldbank) or roughly $ 5Bn, 45% of which are coming from the USA.

Bukele is claiming that one of the reason for making Bitcoin legal tender is that it will cut off remittance fees. This is without counting that usually Bitcoin also have high fees (with the exception to the lightning network).

Drugs & Crimes

As mentionned above, El Salvador has the highest homicide rate in the world. Two gangs control the country: MS13 & Barrio18. In an attempt to reduce murders, Bukele stroke a controversial but unofficial deal with them.

These gangs operate a network of cocaine trafficking routes between Nicaragua & El Salvador to move drugs North. You can find a map below.

Drug Trafficking in El Salvador

Map of Cocaine trafficking

The relationship between drug lords - Bukele - Bitcoin is striking.

The fact that a corrupt and dictatorial government directly interacts in the process of money laundering (remember, legal tender = they can pay the government in Bitcoin) is definitely not a positive development for the crypto community.

On a side note, it doesn't pose a threat to the dollar, but likely the FBI, CIA & DEA won't be happy to know drug lords in El Salvador can get drug money from the US money and launder it freely there. More scrutiny to come. These are more serious guys than the SEC.