Last Wednesday, in El Salvador, a historic and pioneering vote took place at a global level. But as in a brilliant dystopia, the most important part of the event did not take place in the national parliament, but in a Twitter “space”. There, in the “clone” of the Club House created by Twitter, the controversial president of the country, Nayib Bukele, gave many more details about the law to thousands of listeners compared to the points of the bill that the deputies were debating in the chamber. The Central American country had just become the first on the planet to legalize bitcoin as a legal currency. And what does that mean? It is still too early to tell, but this is what the bill says.
What does the bill say?
It all happened so fast that it was impossible to stop and think about the effect such a measure could have on the country’s economy, but perhaps not even Salvadoran politicians did if you read the bill. According to what the decree says, the regulation will not go into effect until 90 days after its approval by Parliament, so there is time to learn more, but at first glance, it leaves several loopholes or unanswered questions. A 3-page, 16-point decree does not seem sufficient to address a change like this, which is also mentioned by experts such as cryptocurrency lawyer Cristina Carrascosa in her blog.
Among these 16 points there are points such as the second, which states that the exchange rate of bitcoin and the US dollar (the country’s official currency since 2000) will be established “freely by the market”, the fourth that bitcoin will be accepted as a currency to pay taxes, the third, that all prices may be expressed in cryptocurrency, or the seventh, which states that all economic agents will have to accept this means of payment when a citizen offers it. Of course, this last paragraph has exceptions; further on it is specified that those who, in a notorious and evident way, do not have access to the technological tools that allow the transaction, tools that the State will be in charge of promoting and expanding, are exempted from the obligation to accept bitcoins.
The bill also frees bitcoin from any additional charge on capital gains, like any other legal currency, and announces the creation of a fund to guarantee citizens’ access, while making it clear that it will not be a substitute for dollars but just another asset in the system. But at least three sections leave technological and regulatory gaps, and that is where Bukele’s rant on Twitter comes in.
Although the regulation does not go into details about, for example, what kind of tools the country will promote or on what technological base it will rely on to extend its use, it does have some ideas. And there are even some previous experiences that were essential to reach the current situation and that will be strictly necessary.
Strike, the key name
Mallers, a child prodigy who is now 27 years old, and who also excelled in chess, has managed to exploit this technology like no other at the moment. Lighting, as explained by Fernando Gutiérrez, investor and cryptocurrency expert who has participated in several leading projects in this sector, is a decentralized system that generates a layer below the bitcoin blockchain and allows transactions without the costs of continuously recording everything in the blockchain.
What Strike also does is that, at least for now, it allows you to forget about all these technicalities and the app does them for you for free. By downloading their ‘app’ and having a phone number and a US or El Salvador identifier (at the moment they have only opened this broker intentionally) to pass the anti-money laundering checks, you can make payments in dollars and your recipient receives them in the same currency, only the system takes care of changing everything to bitcoin and perform the exchange for both parties. Obviously, it also allows you to put the money in bitcoin and receive it in the same way. You can link bank account to bank account, although it is designed for people who do not have any type of financial product and want to move with cash and ‘crypto’ ATMs. All for free even, and here comes the key for El Salvador, internationally.
Its use, as Gutiérrez comments, is not perfect and has problems and drawbacks. For example, you need to have money in the channel so that the commission generated when withdrawing the money is not left unpaid and it is still in an early version of development, but the truth is that it could solve many of bitcoin’s problems. “It is the example that bitcoiners have been waiting for years to prove that their idea works. The issue of commissions generated even a big war within the community creating the separation between bitcoin and bitcoin cash and this solution shows an alternative way and that, the truth, I think it can work.”
The truth is that in Bukele’s own country this application has already become one of the most downloaded and has an experiment started in recent months called Bitcoin Beach. A project in the beach El Zonte in which an entire village works with bitcoin and, therefore, with Strike. In other words, although Bukele’s rule is new and seems to break with what has been seen so far, the truth is that it makes his relationship with Strike official and promotes the situation of a small country like his, with barely 6 million inhabitants, as a place to experiment.