Two weeks ago, the infamous “Volcano Bitcoin Bond” finally made its way to the El Salvador legislature for final approval — a legislature entirely controlled by Nayib Bukele’s New Ideas Party.
Although the final rubber-stamping was done almost exclusively by the economic commission of the New Ideas party, it is worth talking more about why the Volcano Bitcoin Bond is widely derided by financial experts. Specifically, Why two companies deeply involved in the cryptocurrency industry – Bitfinex and Blockstream – are supporting a fascist.
Bitcoin volcano bond
Although naive and not properly promoted to anyone who understands bonds, the concept of bonds and de-dollarization for El Salvador is not bad at all. After numerous horrific, violent and often US-instigated civil wars, El Salvador faced a currency pegged to the US dollar and finally decided to simply dollarize in 2001.
While dollarization is great for having a stable currency (USD), it is not in the interests of non-US territories because these countries do not have access to US Treasuries or Federal Reserve banks. In other words, they cannot claim more dollars when they run out.
This is a particular problem for a country like El Salvador, which depends heavily on remittances for its citizens to earn enough to live on, and which always has more imports than exports.
So, in a sense, the Bitcoin Volcano Bond (and bitcoin as legal tender) was seen as the first step towards “dollarization”. An attempt to remove El Salvador from the US dollardefine its own currency (perhaps backed by an asset like bitcoin) and reverse the economic conditions that have existed for decades.
Read more: Bitcoin trackers show both Saylor and El Salvador
Why the garden does not work
There are better explanations for why the Bitcoin Volcano Bond is stupid, the best I’ve read is Matt Levine’s over at Bloomberg: “Is it a good investment? I dont know; it depends on (1) whether El Salvador pays you and (2) if bitcoin goes up over the next 10 years. Other investments that depend on the same factors are also beneficial. For example, you can just buy Bitcoin. Or El Salvador has other international bonds; you can buy them.”
Basically, the main thing about a bond is that its main benefit is— exposes buyers to bitcoin — can be completely replaced by simply buying bitcoins. Meanwhile, the alternative bonds Levine mentioned are struggling, selling at discounts and being offered as a nice buy to Chinese investors and the Chinese government.
Front fascism
On all other scales except the economy, Nayib Bukele almost disappeared while assuming the title of dictator ironically. a complete fascist.
Indeed, he amended the constitution so he could run for president again, moved the military into the legislature to pass his proposed bills, and used the military to target anyone he decided was an enemy of the state.
“It brings back memories [violence of] 70s and 80s,” said Oscar Salguero, a Salvadoran-American software engineer with decades of experience in finance. “History is repeating itself and it’s really sad.” In the past, Salguero said. Salvadorans, “they had some human rights, they had Miranda rights… but now, with the Bukele regime, all of that is gone.“
There is nothing cute or funny about Nayib Bukele being an authoritarian, fascist dictator. Really, it’s bad for almost everyone, especially the people of El Salvador.
So what’s in store for Bitfinex and Blockstream?
Recently the troops surrounded Soyapango and killed and imprisoned many people indiscriminatelyBitfinex and Blockstream executives pose for cute photos with the dictator-in-chief.
Read more: Nayib Bukele takes Bitcoin to the United Nations General Assembly
Appearing front and center with Bukele are Bitfinex and Tether CFO Giancarlo Devasini and Bitfinex and Tether CTO Paolo Ardoino. Also displayed on the far left dictatorial taste Max Keiser.
Which has left many people, including those who support the crypto industry, scratching their heads and asking, “Why? Why are Bitfinex and Blockstream friends with a fascist government?“
The answer may be simpler than it seems.
99 problems, but citizenship is not a problem
One of the changes to the Bitcoin Volcano Bond that is not being called a glaring red flag is that by purchasing enough bonds, a person can acquire El Salvadoran citizenship.
While El Salvador currently maintains extradition treaties with countries such as the United States, its move toward an alliance with China and disagreements with the International Monetary Fund (IMF) are questionable. How firmly the extradition policy will be enforced with Bukele in the future.
“Bukele needs strong allies internationally,” said Salguero, “powerful people have always sought allies in the private sector.”
And it seems that in exchange for the promise of citizenship and an ever-hospitable country, The Bitfinex, Blockstream and Tether teams are happy to make the techno-fascist dream come true..
“What you’re seeing now is the same as the previous regimes,” said Mario Gomez, a Salvadoran software engineer who was forced to flee El Salvador after being arrested for criticizing the bitcoin legal tender law. “It’s called ‘Mano Dura,’ essentially a ‘tough hand on crime.'”
Gomez continued, “It’s only natural that Bukele finds allies across this spectrum of political ideologies. It’s not too surprising to me that this includes Bitfinex, Tether and Blockstream.”
Sad situation
Bitcoin Volcano Bond, which has not yet started trading or is fully approved, likely to bail out the cash-strapped regime quickly. “Bukele is needed for the image and the possible liquidity it can get to help the government function,” Salguero said, “and obviously for the election campaign in 2024.”
“All these corrupt cryptocurrency companies are dying to go to El Salvador,” he said.
There is little room to deny Salguero’s claims. Bukele has done it all, losing huge amounts of money on bitcoin purchases (actually no confirmation), parting ways with many NGOs, simply ignoring the constitution and using military force to maintain control over the population. in the power to openly express that he is a dictator.
Salguero ended the interview with a tone of defeat. “As a tech guy with a financial background,” he said. “I feel powerless.”
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