One Day Until El Salvador Makes Bitcoin Legal Tender
On September 7th, a day from now, in El Salvador something unprecedented in human history will happen: a decentralized cryptocurrency, namely Bitcoin, will become legal tender.
It's one of the most anticipated events in the crypto world, for way more than one reason. I'll try to briefly talk about 4 of these.
There are speculative reasons, first of all. Like what will happen if the majority of the recipients of the $30 worth of Bitcoin airdropped by the government, will sell. There might be just $150 million worth of volume being moved, but still, it's not the amount but the number of transactions. Most will happen on Lightning, but there will be settlements on-chain, and that will be picked up by bots and trading algorithms. In layman words, it's not how much money being moved that makes it a signal, but the rough number and predictability of transactions. Look at the mempool, how options are moving and at on-chain analysis tools.
There are also legal implications. I'm not an expert at that, but from my inherently limited research it looks like once a currency is legal tender in a country, it becomes automatically legal tender in all the countries. Legal tender means you can accept debt to be paid in it. So, El Salvador may choose to pay its debt to the US, for instance, in Bitcoin. I doubt it will be doing that, though, they look quite savvy of the nature of this asset, and they may just keep it in their balance and probably loan USD against it. Or at least that's what I think the smart thing to do would be (and I may be wrong, obviously).
There are also political implications. I'm not, again, up to date with the situation in El Salvador, but it still looks like an unstable country, at least for Western standards. There is a long "tradition" of volatility at the highest political level, and, should the current president will be replaced - which happened, oh, so many times before - then probably the next one will amend this law. Or, let's suppose there won't be any internal political instability, but there will certainly be international implications, especially with the IMF. They, IMF, made clear a few weeks ago, they don't agree with this move, still considering crypto "risky". Not commenting on the cronies narrative, way too tired of that, but just because I'm tired of it, it doesn't mean the narrative is over. On the contrary, they keep clinging to it, harder and harder.
There are regulatory implications too. The recent infrastructure bill in US was just a flex of the muscles, and a clear signal of what the establishment wants to do with crypto. Translation: they will tax absolutely everything, IF they will consider it legal. If they can't tax the hell out of it, they will classify it as "terrorist" money, and make it illegal. The recent probe into Uniswap is another signal for that.
So, let us enjoy they last silent 24 hours before the storm.
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