 Hey folks, Adam B. Levine here. This time on Speaking of Bitcoin, we're gonna do a little background work on the El Salvador Bitcoin bill story. First, I'll share with you an opinion piece I wrote early in the week. Then, we'll read the entire bill together, translated into English, as passed a little later. Then, we'll finish things off with a long tweet thread from Alex Gladstein, providing a little more context around the political realities in the country. Then, next week, with the benefit of a little more time having passed, we'll be back with a full panel discussion about this same topic. The week after, we hope to have our much-anticipated conversation with economist John Williams. But for today, let's kick things off with a reading of my opinion piece entitled, Bitcoin is legal tender, while El Salvador's plan isn't as crazy as you think. Enjoy the show. El Salvador president Naib Bukele's proposal to make Bitcoin legal tender in his country has been met with understandable head-scratching and skepticism among observers in the developed world. Speaking to the BBC News, Willamette University College of Law Professor Rohan Gray said a country that made such a move would cede its, quote, degree of autonomy and control over its own policy space to a network that isn't stable, doesn't have accountable actors, and doesn't have a track record of providing the kinds of price stability and liquidity stability that a currency is supposed to provide, end quote. But to understand why this move might not be as crazy as it sounds to those of us privileged enough to live in countries that have enjoyed such relative stability, let's zoom out the lens just a bit. Countries like El Salvador have struggled with trust in their local monetary systems. El Salvador, in particular, and not uniquely, has two official forms of money in its local system already. Locally issued colognes and US dollars. On paper, both are good for all debts public and private, but in practice, one local Bitcoin or tilt coin desk, Salvadorans use dollars for commerce and colognes as table ornaments. The initial adoption of dollars also happened against the backdrop of hyperinflation in the local issued currency. The reason some countries outside the US adopt its currency or dollarize their economies is that the greenback is seen as more stable and trustworthy. It is, after all, the global reserve currency and makes up much of the savings of central banks, companies, and to a lesser extent individuals around the world. This is true even though the US itself still has inflationary monetary policy in the best of times. And the 2008 financial crisis has been pursuing a very experimental form of monetary policy involving tools like quantitative easing and a central bank that now directly monetizes or purchases government issued debt to keep interest rates low. These decisions about how the US dollar is managed may end well or they may end poorly. We don't know yet. But for countries like El Salvador that look to the dollar as a more predictable currency than the one they issue locally, which is more likely to retain its value than the one they issue locally. Washington's ongoing experiment presents a problem. These countries look to the dollar for relative stability and predictable monetary policy. But increasingly they see an experimental currency that is completely outside their control and not being managed for their benefit, which brings us to Bitcoin. For a country like El Salvador, Bitcoin's fixed long term monetary policy, which cannot be changed except by a real majority of network participants may offer an appealing alternative to the almighty dollar. Announcing Bukele's plan at the Bitcoin 2021 conference in Miami last month, Bitcoin entrepreneur Jack Mahler's described the move as a reaction to quote unprecedented monetary expansion and quote, Mahler's, whose startup Zap is working with Bukele's government, criticized the US Federal Reserve for crushing emerging markets such as El Salvador by printing money willy nilly. According to what appeared to be an excerpt from Bukali's proposed legislation, included in a slide from Mahler's Miami presentation, quote central banks are increasingly taking actions that may cause harm to the economic stability of El Salvador. In order to mitigate the negative impacts from central banks, it becomes necessary to authorize the circulation of a digital currency with a supply that cannot be controlled, and is only altered in accord with objective and calculable criteria, end quote. Unlike the dollar, the supply of Bitcoin today next month and 100 years from now can be accurately modeled in advance. The fixed amount of new Bitcoin are created every 10 minutes. Every four years, the number of Bitcoins created are cut in half. There will never be more than 21 million Bitcoin, and that eventual number will be reached more than 100 years from today. That we know all of this is significant and stands in stark contrast to any government issued currency, including the dollar. The problem is not who is in control. The problem is that any one can be in control. In the US, as in most countries, it's a small group of well credentialed individuals doing their best to manage their currency for the benefit of their country. 20 years ago, Bukele's predecessors in El Salvador decided they didn't trust themselves with such a task and made the dollar legal tender alongside the Cologne. And as mentioned earlier, this was less a choice and more a reflection of the reality that their money had already failed and they needed an alternative. When you dollarize your economy like this, you're effectively saying our monetary policy for our local currency is not trusted and stable enough to put all our eggs in that basket. So we'll officially support something outside of our control that allows people to pick and choose without empowering the black market. 20 years ago, that was a thing for which you could reasonably use the US dollar. It was managed for the benefit of the US primarily, but in comparison to other currencies was a rock, boring, reliable, and the least bad option available. Today, the dollar is leading the charge of experimental monetary policy with the supply more than doubling over the last 10 years to 20 trillion as of April, according to the Federal Reserve Bank of St. Louis's data. Close to half that 11 trillion increase was added in just the last 18 months to counter the economic effects of the coronavirus pandemic and related shutdowns. In this light, Bitcoin starts to look like the more stable currency. It's not managed for the benefit of any group or people. It just is. So when people say Bitcoin is volatile, they're not talking about its monetary policy. They're talking about the current price in dollars and in a world where the global reserve currency and seemingly every other currency are dictated by short term government needs. What's the true value of something that isn't? For El Salvador, it's an interesting enough question and we'll all get to find out the answer. So that's the story as I wrote it on Monday of last week. And the days that would follow, we saw first the full text of the legislative bill, which is pretty cool in which I'm going to read to you in just a second. And then we also saw it pass. So we're now kind of in this uncharted territory that we'll be discussing a little bit more next week with the full panel. It's not very long. It's about three pages and obviously not densely packed. But the the full text of the bill so that you have the full context when we have this conversation next week, then next week, we'll just jump straight into it and kind of talk about the implications and kind of the domino effect that we may see and other fun stuff. So this is the legislative assembly for the Republic of El Salvador. This is a translated document. So there may be some slight inaccuracies as it was obviously not written in English to begin with, just reading through, considering that in accordance with Article 102 of the Constitution of the Republic, the state is under the obligation to promote and protect private enterprise, generating the necessary conditions to increase national wealth for the benefit of the greatest number of inhabitants. That under legislative decree number 201 published in official Gazette number 241 volume 349 dated December 22 of the year 2000, the United States dollar was adopted as legal tender, considering that approximately 70% of the population does not have access to traditional financial services, considering that it is the obligation of the state to facilitate the financial inclusion of its citizens in order to better guarantee their rights, considering that in order to promote the economic growth of the nation, it is necessary to authorize the circulation of a digital currency whose value answers exclusively to free market criteria in order to increase national wealth for the benefit of the greatest number of inhabitants. That according to the previous considerations, it is essential to issue the basic rules that will regulate the legal course of Bitcoin, therefore decrees the following. Article one, 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. Article two, the exchange rate between Bitcoin and the United States dollar, subsequently known as USD, will be freely established by the market, so that means they're not trying to fix prices here. Article three, prices may be expressed in Bitcoin, so they're not mandating that prices have to be expressed in Bitcoin, they're probably mostly going to stay in US dollars, but they're saying that they actually can be, which is somewhat interesting. Article four, tax contributions can be paid in Bitcoin. This is an important part of sort of official recognition by the state. Article five, exchanges in Bitcoin will not be subject to capital gains tax, just like any legal tender. This is also hugely significant. It removes a lot of the complexity that's typically inherent in the exchanges that we see in countries that don't really provide any clarity around how it's going to be treated. Article six, for accounting purposes USD will be used as the reference currency, so that means that we're still likely to see prices denominated in dollars, which frankly makes sense in the short term. Article seven, every economic agent must accept Bitcoin as payment when offered to him by whoever requires a good or service. This is a step further than I thought that we were going to see from this, which basically is saying that you have to accept it, which introduces its own set of problems, but then we get to article eight, quote, 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 US dollars if they wish. Further, the state will promote the necessary training and mechanisms so that the population can access Bitcoin transactions. So that's essentially saying that everyone has to accept it when it's offered to them as a form of payment, but they don't necessarily have to keep it. We'll get into this more next week, but my suspicion is this ties in pretty deeply with the involvement of Jack Mahler's and his lightning powered companies. Article nine, the limitations and operations of the alternative of automatic and instantaneous conversion from Bitcoin to US dollars provided by the state will be specified in the regulations issued for this purpose. Article 10, the executive branch will create the necessary institutional structures to apply this law. Final and transitional provisions, Article 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, which we'll get to in a second. Article 12, for those who by evident or notorious fact do not have access to technologies that allow to carry out transactions in Bitcoin are excluded from the obligation expressed in Article seven of this law. The state will promote the necessary training and mechanisms so that the population can access Bitcoin transactions. So again, that's saying that people who don't have, again, the country is 70% unbanked and has other challenges from an infrastructure perspective is saying that they're not in violation of the law if they don't have the ability to comply. And basically it's the government's responsibility to provide them with the easy path to comply. Again, probably tying in with Jack Mahler's and his lightning companies. Article 13, all obligations in money expressed in USD is existing before the effective date of this law may be paid in Bitcoin. This one has some of my libertarian colleagues up in arms because effectively it's saying that contract law where typically if I send a contract with you and that contract says that you're going to pay me in bags of grain, then I don't have to accept that contract, right? I don't have to sign that contract. But if I do sign that contract, then I am in fact committing myself to that exact form of value transfer. This is a pretty well codified part of most contract law. Individuals can choose to do these sorts of things. I'm not a lawyer, but I've gone down some of these roads before. And this is effectively saying in article 13 that if you've contractually agreed to pay for something in US dollars, now you can actually go around that term by nature of this national law and pay in Bitcoin if you want. I don't know if this is actually a thing that's going to happen. I sort of doubt it. It goes again to this argument that they are very much making Bitcoin part of the financial infrastructure and making Bitcoin equivalent to the dollar, which is again very, very interesting in context. Article 14, before the entry into force of law, the state will guarantee through the creation of a trust at the El Salvadorian central bank, the automatic and instantaneous convertibility of Bitcoin to US dollars necessary for the alternatives provided by the state mentioned in article eight. So this is basically saying that their state bank is going to maintain reserves of dollars and be able to kind of like BitPay does, enable people to accept Bitcoin, but then to have them receive dollars pretty much instantaneously and setting the government in place as the agent that does that conversion, which is again kind of interesting. Article 15, the law will have a special character in its application concerning other laws that regulate the matter being repealed, any provision that contradicts it. So this is saying that irrespective of what laws might pop up that already exist, none of them are going to derail this, which again indicates that this thing is probably going to move forward pretty quick, which is further cemented by article 16. This decree will take effect 90 days after publication in the official Gazette. As far as I know, since this has passed and is I believe published, but I'm not quite sure. That means the clock is ticking and if it's not ticking now, it's going to be ticking soon. So anyways, like I said, this is a bigger story. It's actually pretty significant. Long time listeners will know that we've talked about something similar to this. I've certainly had it on my mind since basically 2013 when we saw Greece and kind of events around Cyprus sort of demonstrate that there was going to be this very appealing nature about Bitcoin, you know, for countries that historically had had a lot of trouble managing their own currency and had a lot of trust issues with external investors who frankly didn't trust their economy as a result of those of those currency challenges. So this is actually now passed into law. It hasn't taken effect yet, as I said, 90 days from sort of publication in the Gazette. But we're moving along. And for one more perspective in advance of our conversation next week, I'd like to read a tweet thread from Alex Gladstein, who's the chief strategy officer of the Human Rights Foundation and a good friend of the show. In a long tweet thread, he said, quote, Bitcoin is a powerful tool for human rights. What is happening in El Salvador will have a huge impact on the lives of people there and across the world. A nation adopting Bitcoin is a big step forward for global human freedom, but that's not the full story. It's important to separate appreciation for this historic milestone and celebration for the march of open source technology with any such appreciation or worship for the president of El Salvador. In Bitcoin, we don't trust, we verify that approach is needed more now than ever. Today, I spoke to a Salvadorian lawyer and law school teacher. She is representative of many Salvadorans living in the capital with family in the country. Many of her students do not have internet access. The last year has been very hard on them. She is not against Bitcoin, the technology, but she is against the way the bill is being abruptly introduced into the country and has fears of her new powers the government may gain. I felt like it was important to share her perspective with all of you here for the ongoing discussion. Please note many or possibly most Salvadorans disagree with her about President Bukali, including several that I've talked to personally. Bukali is very popular. Many support the Bitcoin bill. Do your own research. Our friend has received death threats from congressmen in Bukali's party, so I will not be using her real name here. We'll call her Anna. Anna's two main questions. One, how can we Salvadorans learn about Bitcoin? The government has said nothing about the details. No one, she says, knows anything. She says the spaces event was the first time that's a Twitter spaces event that happened earlier this week, was the first time Bukali spoke publicly about it and has not spoken to the people since. Two, how do we know that the government won't be stealing or committing money laundry with its Bitcoin? Last year, Bukali famously sent troops to the parliament to force them to sign off on a hundred million dollar bill to expand the security state and then he posts a photo of that which looks like what they're saying. She says that no one knows how they spent the money. Likewise, the country took on nearly four hundred million dollars from the IMF to fight COVID and she says the public doesn't know how they spent that money either. So they are concerned about the use of any new Bitcoin funds. She also warns that Bukali will do anything for more power. Between 2012 and 2017, he served as mayor in two cities for the socialist leftist FMLN party. In 2017, he was expelled from the party. He says it's because he was rooting out corruption. The party says it was because he was causing internal strife and in particular because he got into an altercation with a female colleague. He later launched his centrist party, Nuevo's Ideas, and used a smaller politically right party, Ghana, as a vessel to run for the presidency. In 2019, he became the first post-war president to win outside of the two-party system. This is significant as the two main parties are extremely corrupt. But, and it says, Bukali has done very little to reduce corruption amongst his own allies. Bukali recently sacked five of 15 Supreme Court judges and the Attorney General removing checks on his power. We have the eternal conundrum. Was it to root out corruption or to go after opponents? Ana says it's the latter. Others say it's the former. A major issue in El Salvador is violence against women and it points to a mass grave uncovered recently with up to 40 women in it. She thinks the Bitcoin bill is a way of distracting from the investigation, where the main suspect is a former cop. When women get disappeared, raped, or killed in El Salvador, there is very rarely any punishment. She is worried that this will continue under Bukali's administration and he's not really shown any interest in reforming the police forces. Again, she herself has received death threats from members of Bukali's party in Congress. They have told her to stay silent or else they will find a way to silence her. She fears that her voice will get her killed, especially since these congressmen have immunity. This much is certain. Bukali is an incredible politician. She says he knows how to read people. He has the Clinton Obama talent for making it seem as if you are important and doing things that the public likes. Look at the way he's played to Bukali's interests online. But Anna's fear is that he will become another Hugo Chavez, that he cares not about ideology, having gone left to right, but about power. The big test will be in a few years, will he use his supermajority to try to change the rules and run for a second term. But for now, Anna's main concern is transparency. The people who don't understand what Bukali is or what Bukali is talking about with the volcanoes, they don't know where the money will go. There should be more communication, more dialogue. Everyone has a political agenda. The truth is usually somewhere in the middle between both sides. Either way, we should be asking hard questions and keeping Bukali as honest as possible. Let him prove his claims through actions. Eighty percent of Salvadorans don't speak English. What can we do to ensure that they have access to information about what is happening? We can share info in Spanish on how Bitcoin works, how to use non-custodial wallets, how to use lightning and how to use multisake for starters. But the situation is nuanced. Does Bukali deserve credit for the choice to use Bitcoin? Absolutely. He could have chosen to ban Bitcoin to go with a China coin or a surveillance CBDC. Instead, he went with the money that he cannot control. This action is to be celebrated. The geopolitical context is also important. In an age of dollar hegemony and Washington consensus, Bitcoin could be a powerful force to help smaller nations gain more autonomy. And BTC is an infinitely better independence rallying cry and uniting message than communism. No one can predict the future. Bitcoin can change people. Maybe Bukali will be the reformer he says he will be. Maybe he will increase transparency over national finances. But he should have to earn that acknowledgement over time from us. In the meantime, I will do what I can to spread the word about Bitcoin as a tool of empowerment in El Salvador and in every other country worldwide. Ultimately, Bitcoin will work against authoritarianism. But in the meantime, let us push back against it everywhere. It's worth noting that my new friend is excited about Bitcoin. I have a call with her soon to teach her more about it and show her how to set up a wallet so she can learn and share with her students and family and friends. Remember, Bitcoin is for everyone. The work Bitcoin beach and in strike have done is amazing. They have sparked a financial revolution. On Bitcoin's journey, it will co-opt many leaders. But remember, Bitcoin exists to separate money from state. As we liberate the former, let's remain cautious of the latter. And that's the thread in our show for today. Thanks for listening. We'll be back with you next week.