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The new law means every business must accept Bitcoin as legal tender for goods or services, unless it is unable to provide the technology needed to do the transaction.
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This is an interesting detail that wasn't in the earlier articles when the law was proposed. Technically stretching beyond the definition of legal tender there by forcing businesses to accept it in payment. Any idea if El Salvador will allow accounting and reporting in BTC?

How are they going to manage the transaction fees and wait times for confirmations?

Be interesting to see if it is actually adopted over the USD as a currency in practice. El Salvador is a weird place since it has no currency of its own, and has a strategic reason to not be so dependent on the USD.
 
q_w_e_r_t_y said:
Bitcoin was just approved as legal currency in El Salvador.

The change takes effect in 90 days assuming there is no coup in the interim.

www.bbc.co.uk

Bitcoin: El Salvador makes cryptocurrency legal tender

It is the first country in the world to make the move, following a proposal by its president.
www.bbc.co.uk
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That article really is the blind leading the blind. What does “legal tender” actually mean? In this case, seemingly that shops must accept it unless they don’t want to. Sorry, “don’t have the technology to do so.” But that’s not actually what legal tender means anyway. Shops in the UK don’t have to accept pounds for payment, it’s totally up to the shop owner what they accept. Legal tender has got nothing to do with what people accept as payment for goods and services. It’s all about the settlement of debts.
 
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El Salvador Is locked into a USD fix death spiral, announcing a link to crypto is on one level wishful escapism but on a practical basis , it underwrites & facilitates the noxious and murderous trafficking and gangster structure that has made the place what it is.
 
kabbes said:
That article really is the blind leading the blind. What does “legal tender” actually mean? In this case, seemingly that shops must accept it unless they don’t want to. Sorry, “don’t have the technology to do so.” But that’s not actually what legal tender means anyway. Shops in the UK doing have to accept pounds for payment, it’s totally up to the shop owner what they accept. Legal tender has got nothing to do with what people accept as payment for goods and services. It’s all about the settlement of debts.
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Look up a better source than the BBC then?

According to Bukele's announcement, shops must accept unless they do not have the capacity - a street vendor could get away with that, a supermarket not so much. Yes, legal tender is what is used to settle debts, so debts can now be settled in El Salvador with btc (unless settlement means is already written into the contract).

There is some discussion around whether the 2001 Monetary Integration Law, that imposed dollarisation on El Salvador will be updated to include btc. This woudl be a further significant shift. Bukele meets the IMF tomorrow, IMF are not a fan of this move, so its likely that this wont be implemented in the near future, but this development opens the doors to that.

There are quite a few other Latin American countries watching closely to how this plays out and whether the US invades, including Argentina, Paraguay, Mexico and Panama. A successful implementation in El Salvador could well see a domino effect.
 
q_w_e_r_t_y said:
I suppose you could consider it a pawn shop mode; the reason I am describing it as a bank is that its custodial, in that you dont own your btc in cefi, you are giving it to someone else, in defi, you retain primary ownership (unless liquidated) but lose usage#

Typically in crypto loans, you simply repay at the end of the term rather than fixed payments (although of course you can choose to redeem in chunks or only partially redeem it). The oracle problem, is a known issue with oracles that rely on continuous price feeds to monitor liquidations, however there are alternative oracle types that dont rely on feeds, but simply get a price at the time that someone wants it, and typically uses a time weighted average price from multiple markets. which protects you from that, but yes, the reliance of a lot of lending platforms on Chainlink(which relies on a continuous price feed) is an issue which is much discussed.

I'm not sure which "change to the law" you are referring to. The real "law" in blockchain is the smart contract, you cant change a smart contract once it is deployed. There can be changes to governance certainly, and smart contracts can be governance dependent, (eg rely on the governance to set the interest rate), but again, you pays your money, you takes you risks. If you are referring to analogue law tho how is that going to impact on a smart contract?

Decentralised finance is not regulated by analogue law in any meaningful sense. Yes, countries can have regulations saying "you must not offer crypto loans", and certainly defi protocols often have "terms and conditions" on their website, (typically saying you agree you are 18+, you do not live in a state subject to economic sanctions and that you do not use it for illegal purposes), but if a 12 year old in North Korea used it to take out a loan to buy crack cocaine on the dark web, firstly who is going to know that they are 12, that they are in NK or what purposes they are using the loan for, and secondly even if "they" (who - protcol? government? financial conduct authority) did find that out, what are they going to do?

How do you put code in prison? How do you impose a fine on the blockchain? How do you shut down a decentralised, distributed global network?
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Genuine question - without all the lengthy links and breathless stuff about what could be possible, can you explain how this is good for your average person? Say you're a single parent struggling on a council estate and you don't particularly have the time to engage with any of this stuff, how is the new world going to be different?
 
Yes, the exemplary El Salvador is about to become the model that other countries will rush to emulate. In the same way that the other countries of the region have already abandoned their own currencies in favour of just using the USD.

If anything, this underlines that money is a representation of the power of the state. El Salvador is struggling and that’s why it can’t support a currency of its own.
 
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q_w_e_r_t_y said:
I suppose you could consider it a pawn shop mode; the reason I am describing it as a bank is that its custodial, in that you dont own your btc in cefi, you are giving it to someone else, in defi, you retain primary ownership (unless liquidated) but lose usage#
Click to expand...
In general you don't need to pledge an item worth 1.5x the value of your loan amount to get access to a bank loan. Cefi operates exactly as an offline pawn shop would. Defi does the same but using a smart contract to reduce the risk that the lender will run off with your security.
q_w_e_r_t_y said:
Typically in crypto loans, you simply repay at the end of the term rather than fixed payments (although of course you can choose to redeem in chunks or only partially redeem it). The oracle problem, is a known issue with oracles that rely on continuous price feeds to monitor liquidations, however there are alternative oracle types that dont rely on feeds, but simply get a price at the time that someone wants it, and typically uses a time weighted average price from multiple markets. which protects you from that, but yes, the reliance of a lot of lending platforms on Chainlink(which relies on a continuous price feed) is an issue which is much discussed.
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My point was a general one. There are lots of things that go wrong in retail lending contracts. Locking the security into a smart contract on the lender's terms is a bad idea because smart contracts remove all of the flexibility from the relationship between the lender and borrower, to the advantage of the lender. There is no scope for renegotiation if anything goes wrong, even if it is something that can be fixed relatively quickly and painlessly, because the contract is self-executing.

I'm glad we agree that the reliance on certain types of oracle creates vulnerabilities.
q_w_e_r_t_y said:
I'm not sure which "change to the law" you are referring to. The real "law" in blockchain is the smart contract, you cant change a smart contract once it is deployed.
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That's like saying that the real 'contract' between me and a vending machine is the dispensing of the product after I push the button. In actuality, me putting my money in and selecting the product is also part of the contract. The vast majority of smart contracts are just subsidiary parts of hybrid written agreements that contain standard contractual language in addition to code. In fact, I would conjecture that almost all smart contracts (apart from those used simply to transfer cryptocurrency from one wallet to another) have a written element.

And as an aside, of course you can change a smart contract when it's been deployed - it just requires specific coding. That may be the way forward for retail lending smart contracts.
q_w_e_r_t_y said:
If you are referring to analogue law tho how is that going to impact on a smart contract?
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I'll just give 3 examples:

1. Bankruptcy
2. An Asset Freezing Order (e.g. an s37 Freezing Order)
3. Supervening Illegality (e.g. the UK government making defi illegal)

In all 3 cases the law changes the status of a transaction. Having an asset bound up in a self-executing contract in any of these cases is a great way to know that something bad is going to happen, but be completely unable to do anything about it. Note that the law in each of these cases doesn't affect the operation of the smart contract. That's not necessary if the law operates at another level to affect the transaction.

q_w_e_r_t_y said:
Decentralised finance is not regulated by analogue law in any meaningful sense. Yes, countries can have regulations saying "you must not offer crypto loans", and certainly defi protocols often have "terms and conditions" on their website, (typically saying you agree you are 18+, you do not live in a state subject to economic sanctions and that you do not use it for illegal purposes), but if a 12 year old in North Korea used it to take out a loan to buy crack cocaine on the dark web, firstly who is going to know that they are 12, that they are in NK or what purposes they are using the loan for, and secondly even if "they" (who - protcol? government? financial conduct authority) did find that out, what are they going to do?
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They're regulated by so-called analogue AML/CTF rules and data protection rules to name a few. As I mentioned, any written sections of a hybrid agreement will be governed by a particular legal system too. Indeed, there's a whole section in the defi report that you just linked to that talks about how existing regulations and new regulations can and are applied in the defi context.

The second part of your post deals with regulatory enforcement, not regulation itself. That's moving the goalposts - like saying that murder is legal in Afghanistan, and when challenged arguing that the lack of central state power in isolated areas makes law enforcement difficult.
 
I gotta say that these use cases for Bitcoin are kinda having the opposite effect to the one I think Bitcoin believers are hoping for. A small tax shelter that allows a very small settlement of tax via Bitcoin? A failed state with no currency of its own with a dictator making pronouncements that Bitcoin must be acceptable in shops that have no infrastructure to enable it? This is all just evidence that Bitcoin is the perfect vehicle to allow the consolidation of property rights in the hands of the exact people we should actually want the light to be shining on.
 
Monkeygrinder's Organ said:
Genuine question - without all the lengthy links and breathless stuff about what could be possible, can you explain how this is good for your average person? Say you're a single parent struggling on a council estate and you don't particularly have the time to engage with any of this stuff, how is the new world going to be different?
Click to expand...

ok...what you are asking is "what can you do now as a person of limited means, no capital assets and ongoing financial responsibilities" assuming a spare £10 per week and a smart phone.

The lowest risk, easiest and least time consuming would be to save £10pw and gain 9% annual interest on gbp, way above any interest rate a bank will offer you (assuming of course that you even have a bank account.

If you are comfortable with exposure to the dollar, you can save for a year (£500) that way, transfer it to synthetic dollars just before Xmas ($700) and deposit it in Alchemix for a self-repaying loan for $350 - turn it back to £250 and thats your Xmas spend. Keep doing that for a couple of years to fund your Xmases and you have a nice little nest egg to pass onto your kid when they turn 21.

Those are both very simple use cases, but if you do have time to engage the possibilities are pretty endless.
 
kabbes said:
I gotta say that these use cases for Bitcoin are kinda having the opposite effect to the one I think Bitcoin believers are hoping for. A small tax shelter that allows a very small settlement of tax via Bitcoin? A failed state with no currency of its own with a dictator making pronouncements that Bitcoin must be acceptable in shops that have no infrastructure to enable it? This is all just evidence that Bitcoin is the perfect vehicle to allow the consolidation of property rights in the hands of the exact people we should actually want the light to be shining on.
Click to expand...
One of the interesting things about the El Salvador case is that it's supposed to help financial inclusion. However the percentage of the population that is unbanked is roughly equivalent to the percentage of the population that has no internet access (they're both at roughly 70%) and we can assume a significant level of overlap between the two figures. Absent a massive infrastructure building programme the same people will be left unbanked by bitcoin as will be unbanked in the traditional banking system.
 
q_w_e_r_t_y said:
ok...what you are asking is "what can you do now as a person of limited means, no capital assets and ongoing financial responsibilities" assuming a spare £10 per week and a smart phone.

The lowest risk, easiest and least time consuming would be to save £10pw and gain 9% annual interest on gbp, way above any interest rate a bank will offer you (assuming of course that you even have a bank account.

If you are comfortable with exposure to the dollar, you can save for a year (£500) that way, transfer it to synthetic dollars just before Xmas ($700) and deposit it in Alchemix for a self-repaying loan for $350 - turn it back to £250 and thats your Xmas spend. Keep doing that for a couple of years to fund your Xmases and you have a nice little nest egg to pass onto your kid when they turn 21.

Those are both very simple use cases, but if you do have time to engage the possibilities are pretty endless.
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And what's the risk associated with that?
 
kabbes said:
No, it’s absolutely fine for a loaf of bread to cost $1 today and $3 next week or $0.33 next week depending on which unit is kept level.
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I guess it is a bit mad that a loaf can cost

25,000 sats on 1st Jan 2019,
14, 000 sats on 1st Jan 2020,
3,100 sats on 1st Jan 2021

but I'm not really complaining :)
 
q_w_e_r_t_y said:
I guess it is a bit mad that a loaf can cost

25,000 sats on 1st Jan 2019,
14, 000 sats on 1st Jan 2020,
3,100 sats on 1st Jan 2021

but I'm not really complaining :)
Click to expand...
You can’t base a market for good and services on that kind of fluctuation. You’re happy to buy at that level of deflation but who would be mad enough to stock the goods needed for you to buy them?
 
q_w_e_r_t_y said:
ok...what you are asking is "what can you do now as a person of limited means, no capital assets and ongoing financial responsibilities" assuming a spare £10 per week and a smart phone.

The lowest risk, easiest and least time consuming would be to save £10pw and gain 9% annual interest on gbp, way above any interest rate a bank will offer you (assuming of course that you even have a bank account.

If you are comfortable with exposure to the dollar, you can save for a year (£500) that way, transfer it to synthetic dollars just before Xmas ($700) and deposit it in Alchemix for a self-repaying loan for $350 - turn it back to £250 and thats your Xmas spend. Keep doing that for a couple of years to fund your Xmases and you have a nice little nest egg to pass onto your kid when they turn 21.

Those are both very simple use cases, but if you do have time to engage the possibilities are pretty endless.
Click to expand...
So the use of this currency is that you don’t spend it?
 
Athos said:
And what's the risk associated with that?
Click to expand...
for the savings account,
- you have contract risk with tGBP (tokenised GBP on ethereum), but the code-base is audited, so pretty low-risk
- the token is designed to be fully backed by fiat, there is risk that it is not (cough, Tether, cough), however the regulatory audit of assets is performed by Cohen & Company on a monthly basis, so pretty low risk
- the fiat base is dollars, so you have risk of dollar collapse, low risk, but not as safe as holding it in btc,but hey people trust fiat (shrug!)
- the assets are held in US bank accounts, so you have the risk of a bank run, but all holding bank accounts are FDIC insured, so again low risk.

for the self-repaying loan
- you have contract risk, code was audited by Certic, (looks good to me).
-you have dollar exposure, if the dollar falls against sterling you lose out
- you have contract risk governance risk and peg risk with the Dai stablecoin, but its pretty battle tested with approx $5bn entrusted.
 
Colin Hunt said:
One of the interesting things about the El Salvador case is that it's supposed to help financial inclusion. However the percentage of the population that is unbanked is roughly equivalent to the percentage of the population that has no internet access (they're both at roughly 70%) and we can assume a significant level of overlap between the two figures. Absent a massive infrastructure building programme the same people will be left unbanked by bitcoin as will be unbanked in the traditional banking system.
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Internet penetration for El Salvador was 59% as at 1st Jan 2020.

Why do you think there has been a decrease to 30%?
 
q_w_e_r_t_y said:
Internet penetration for El Salvador was 59% as at 1st Jan 2020.

Why do you think there has been a decrease to 30%?
Click to expand...
2021's statistics from the same source say that 49.5% of people in El Salvador have no internet access (link) and they also note in their report that the World Bank (where I got my figures) says 34% of people in El Salvador have internet access, as does the UN. The same report also says that only 6% of Salvadorans make online purchases, and only 6% pay bills online, while only 3.5% have a mobile banking account.

So to reiterate my point, whether the figure is 66% unbanked, or 49% unbanked (and I trust the 66% more than 49%) the same people will be left unbanked in a bitcoin system as are already unbanked in the conventional system. The people who will benefit most from this news will be the wealthy 6% that conduct regular financial affairs through the internet.
 
I suppose there's nothing to stop China pulling the plug on it in and starting their own state owned/run version. Must be tempting to become the world bank for dodgy money and hidden wealth, and charge for it too.
 
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