Welcome back. Everyone, I'm Caspian Sea and I
am here with my partner in crime, as usual.
Bennett Tomlin, how are you doing?
Well, how are you kiss? I'm doing good.
Thank you. Today, we're going to Broach a
pretty intense topic which is the fact that El Salvador is
adopting Bitcoin as legal tender.
I'm not going to delve too deep into that, right?
At the get-go. I'd prefer that.
We look into every aspect of this as we discuss it.
So then at Tomlin, can you tell us a bit about what this means
in general? Whether it means the standard
definition of legal tender or if we're talking about something
different, give a broad scope of that if you can.
Yeah, so generally, when countries talk about legal
tender, they're using it to mean that the bill, the bank note,
whatever has to be accepted by the government in terms of
paying your taxes. Other debts to the government.
El Salvador's specific definition of legal tender goes
a little bit further and it is required that all economic
agents, who are able must now, accept Bitcoin.
So Merchants business, people stuff like that are now required
to accept Bitcoin if at all possible.
If we reflect on what that means in the US legal tender tends to
mean that you can pay outstanding debts to the federal
government with US Bank notes, Federal Reserve, notes or
coinage. Those rules do not extend to the
state level, and they do not extend to private merchants and
vendors. So this is the Crux of the
issue. I would say for hardcore
bitcoiners who want a toe the line between being pro Bitcoin
and anti statist. Would do you think that's right?
I think this is an important issue in that regard because
often in the Bitcoin ideology and in the narratives, that
surround it. You see this Very much
anti-state and anti coercion philosophy.
And this seems inherently to be coercive by the state.
And so would generally be rejected by bitcoiners, but it
also represents like such an important moment in Bitcoins
history from their perspective. It's a country adopting it as
legal tender, which is thing that hasn't happened before.
And so I think you see a lot of conflict among them because of
that. Dissonance, that's in those two
things. Yeah, and I'm going to go ahead
Give a little bit of background on El Salvador.
El Salvador is really small and I think most people in the
world, don't know a lot about El Salvador.
I myself was pretty unaware of a lot of the history of El,
Salvador issues in El Salvador, kind of started at the same time
that they started with other countries in the region.
So Panama Belize, Costa Rica, Guatemala Honduras.
Nicaragua all of them have had issues with the Western world
and they all started to have issues with the Western World
in. The late 1800s, early 1900s Us
and other Western countries started to have a very
influential role. In El, Salvador and elsewhere in
Central America in this time. And since so, specifically with
El Salvador, if you look at the Civil War that began in the
1980s and ended in the 1990s, the US definitely supported the
more authoritarian. Into regime and at the same
time, Cuba, and the USSR and other Soviet allies supported,
the leftists in El Salvador, but it caused a crisis there.
It's also on the ring of fire which is a geographic region,
prone to earthquakes and seismic activity.
Including you know volcanic eruptions.
This provides a couple good things, it provides geothermal
Electricity. It's provided them with very
nutrient, rich, soil, and the ability to grow fruits,
vegetables, coffee, a lot of wonderful things simultaneously.
We've had volcanic eruptions and super deadly, earthquakes,
because, as usual, when you look at earthquake deaths, you can
look around the world whether it's in Iran.
China, Indonesia, India, the places that suffer the most
deaths and injuries during an earthquake or places that don't
have proper infrastructure. Well, Japan could have a
nine-point whatever earthquake most people would be fine.
But a place like El Salvador when they have like a 6.5, it
results in thousands and thousands of deaths because they
are not properly built for that but Bitcoin is supposed to solve
a lot of this or hopefully solve a lot of this.
Can we talk about what that would look like Bennett we can
try I think what you're seeing here is that because El Salvador
has a lot of these problems in a lot of these.
Problems are rooted in like American imperialism and like
these influence of these other countries from outside to them.
And due to the fact that El Salvador had to basically dollar
eyes and give up their own currency, the cologne, which has
limited their ability to improve their infrastructure and do a
lot of the stuff they would need to start to modernize their
country. There was a lot of incentives in
place for them to look to Alternatives and so if they can
adopt something like Bitcoin and because of that increased, The
number of remittances coming in with remittances counting for
twenty percent of their GDP, that helps them build up an
aggregate, the amount of money in El Salvador or you see it
potentially as a way to attract new investment, new businesses.
And so I think what they're hoping is that the adoption of
Bitcoin will help bring new money into the country.
Well, I think there's also a bet that Bitcoin will continue to
increase in value and so that by having a holding a Bitcoin After
people have exchanged it through the trust that the country's
reserves could also benefit from increases in the price of
Bitcoin. Francis Coppola spoke about
this. The idea being that it seems
risky to bet some of your country's reserves on bitcoin.
But because El Salvador is a dollarized economy without a
mint that can get them dollars or something equivalent to
dollars. They are relying on either
exports being Better than Imports or remittances, giving
them far greater assets coming in than going out.
That that is not what is happening in El Salvador.
And so you look for yield in other places because you're
forced to, it isn't a matter of Desire.
It's not like El Salvador is looking to take more risk on the
little money that it has. I think a lot of bitcoiners and
other people would suggest that the reason they're doing this is
because in a sense They're being forced to.
Do you think there's any truth to that?
I think there is a bit of Truth in that and the current
president of El Salvador buchelli.
He has in large part tried to deal with a lot of the issues El
Salvador's doing by spending pretty rapidly.
However, that has now, put El Salvador in the position where
it's been harder and harder for them to get new money.
Debt to get new debt in their cost of their debt, has
continued to go up, which is put them in a difficult financial
position. They were negotiating for a
large loan from the international monetary fund.
But the IMF generally, when they give you money, there's lots of
strings attached to. It often involving cuts to
programs austerity and other things that can make it
difficult to sustain your economy.
And so, I think in that difficult position they were in,
you can kind of see why trying to find an alternative outside
of. That system would be appealing.
I know that there's a lot of countries that have had to face
the IMF and the World Bank when it came to, the way they are
Distributing wealth or whatever. I think in most of those cases,
they cave to the demands of the IMF or the World Bank but and,
and again, maybe, maybe, you know better than I do.
I know who would know for sure is, Peter, Peter Ryan, but I
feel like a good example of a country saying, no to the IMF
would be Ireland. Did they say no to I am after,
you know, if that's true. I don't remember that specific
story. There was one story that Peter
shared about in Ireland's history.
When a bunch of Bankers went on strike and everyone expected,
the country would shut down and going to like this whole
economic collapse. But instead, the Pub's started,
like, issuing credit to various people and everything like
continue to function on this system by OU's, but I don't
remember specifically about Ireland in 2008.
I guess the only point I'm trying to make here is that when
the IMF and the World Bank turn against you?
It becomes a significant uphill battle, if it wasn't already and
that isn't to disparage, anyone who's trying to put push forward
on this, it's just that it becomes increasingly uphill,
especially in a poverty-stricken country.
I'm growing concerned because I'm seeing the powers that be if
you will turn against a very small country for its decision
to adopt Bitcoin. And while I think Very
legitimate concerns there. I mean we do not know a lot
about naive buchelli, he's clearly done things that are
borderline authoritarian. So I wouldn't put that kind of
move past him. Now, you have to ask yourself
when there's a country that's been in such dire need of help.
And so stricken with corruption, if sometimes the hard
authoritative hand of someone is required and I hate to to
suggest that because it's the classic slippery slope argument.
But I guess what I'm suggesting is that it's too early to call
him a dictator. I will not call him that for
right now. I think marching your military
into the legislature to pass your bills and to fire.
The people investigating, you is certainly an extraordinarily bad
look. And looks a lot, like,
authoritarianism from where I'm sitting.
I also don't want to go too far because he does seem to be A
democratically elected leader of this country.
He is still extraordinarily powerful.
And like we mentioned previously, there is a bad
history of American and other intervention in El Salvador and
so I don't want to do anything that would suggest that I think
that is necessarily the solution here.
We've touched the surface of a couple issues here.
There's one that we don't know the implications of Bitcoin
being forced upon the populace to.
This is a very volatile region and it is prone to big problems,
whether its political or economical three, we don't know.
The intentions of the current leader though, it's okay to hope
they're good but also expect the worst.
I think both of those things are fine.
But we haven't touched on another major issue which is
that this all seems to have been at least partially instigated by
strike and Jack mahler's. Can we talk about how this is
actually being implemented? Like can we talk about strike
and and lightning and layer to your much more informed than I
am about this stuff? I can try.
It's still a little bit unclear, exactly how this implementation
is going to work the previous implementation.
Of Strike, Global basically involved, someone having cash in
account at strike at one end, it being converted to bitcoin the
Bitcoin, being transferred, and then sold for tethers.
And the person than having to others in their account, that
they can withdraw the newer implementation.
According to mailers, when he was on Peter McCormick's
podcast, is that it will not depend on Tether.
They're integrating directly with both the banks and the cash
point services in El Salvador but there's still some other
questions. What exactly this is going to
look like El. Salvador's said, they're putting
up a hundred fifty million dollars in a trust with the
state bank, so that businesses and Merchants will be able to
instantaneously convert is what they said, but it hasn't been
explained how that's going to work technically, where the
exchange rate for that is going to be derived from or any, or if
it can go the other way. Can someone put dollars into
that count and purchase any Bitcoins that have been
exchanged since the trust? There was also a recent
announcement that they're doing effectively, like an airdrop of
Five dollars in Bitcoin to anyone who signs up and that
totals out to each, El Salvadorian.
Citizen at a little over, a hundred million dollars.
Odds are not, everyone is going to sign up, but it's with the
150 million dollars for a country with El Salvador, with
pretty thin reserves. That's potentially a lot of
money to be putting into a project like this.
The other thing with strike in general is that it is this
custodial lightning solution, right?
And so you don't control your private Keys, you don't control
Your lightning node here. You're basically, depending on
strike to provide these services for you strike opens up a couple
of channels to other liquidity providers, so that you can often
find a route to other nodes and other providers but not
necessarily and Strikes nodes themselves.
Are you cannot connect two strikes nodes without permission
from strikes. Oh it's so you're somewhat
Limited in what other channels can be added.
All of this together leaves us kind of confused at this moment
about how all these different different pieces are going to go
together and that's particularly troubling because they're all
supposed to be totally implemented, like, 60 days from
now. And, when the bill was passed it
at this timeline of 90 days, we're like 15 or 20 days past
that from now. And So within like, two and a
half months, they expect to have this entire system, integrated
across all these Banks into the State Banks and all the cash
point services and have training set up with equipment to give
out to people, so that they can start accepting Bitcoin and that
sounds Narrowly difficult. I also heard another point and I
don't know how much this has been refuted or how well it will
be refuted by the time this comes out but strike by zap,
doesn't have the proper licensing, for all the US states
that it claims it does, I've heard there's there's ways to
get around that. So it's so it might have no, no
ripple effect whatsoever, it's certainly a thing.
I was questioning when I saw that, I think the article is
from decrypt and they got some It's from like some of the
Anderson cruel lawyers on it and basically their take was it
looks like strangers and kill but I do like that.
You said Anderson Krill just because Pally is always talking
about hearing. Yeah, and so it seemed their
interpretation was it is that strike was likely not in
complete compliance. And that's, especially
difficult. If you're hoping to get a lot of
your remittance dollars coming back from the United States,
right? You don't want the company
providing that service to end up in the A series of us
Regulators, I'm not a lawyer. I don't feel qualified to a pine
and whether or not they're fully compliant, but my impression was
that there may be issues there. Same impression you had.
I don't know if we've come to any kind of conclusion about
this. I don't think we have, I think
we're trying to hedge our bets. The aspect that has been most
interesting to me, is that coiners, who I fully expected to
support this move, have largely been against it and individuals,
Owls, like Francis Coppola and others have been not supportive,
but not opposed. And I think that is surprising
for me. And I opening to, because the
reasons that for instance, Francis Coppola gives for
supporting this are not out of like some Pro status
perspective, she's not saying like good.
I'm glad the state is getting involved in Bitcoin, that's not
her argument at all. It's a very monetary Fiscal to
perspective. And also I see people like Niraj
talking about it and saying like this is fucked up and gross, not
that loudly and I find myself agreeing with both of them and I
don't know what to make of it in the end.
I do think this could very well be a good thing for El Salvador.
I actually want to say that I do think this could be good for El
Salvador, on the other hand, it's very scary and I think
there's a lot of reasons to be incredibly worried about Out it
I agree with a lot of that. I think we've seen reasonable
objections from a lot of people across the Bitcoin or ideologies
thought Spectrum object to especially the article in the
bill that requires people to accept Bitcoin that specifically
seems to be against basically everyone's philosophy and what
should be included in a bill like this, but it's been
included. And so, my biggest fear with
this is actually a little bit different and it's related to
like the position El Salvador's in.
They don't print their own money.
They so they're unable to print to pay their debts to handle
their spending to do some of that.
And so I am curious if at some point for Kelly or someone like
him would not use like a combination of dollars in
Bitcoin, in the reserves to try and start their own fiat
currency again. And that's like, what the
long-term play is as a chance to give El Salvador, their own
Sovereign currency. Again beyond that I hope that
when the money comes into the country to set up the volcano
Bitcoin minds and to provide these various wallets in these
Services. I hope enough of that money ends
up going to build out infrastructure to strengthen the
power grid to improve access to the internet and technology, and
to help modernize El Salvadoran. That those ways because I'm
optimistic that those investments in the
infrastructure could benefit, El Salvador, Regardless of how this
experiment turns out. I think there's a lot to like
about this. And there's a lot to dislike
about this, from what I'm hearing.
You have people who support this move in some sense, but really
do not like a lot of the aspects of this bill and I think a lot
of people throughout the world can empathize with that.
So maybe you support building infrastructure in America but
you think climate change isn't real like these these things.
Has become political and weird and it happens very quickly.
So we don't know. Intentions and we don't know the
future. So we we have to hope that this
is going to be good for, for everyone, in El Salvador.
And I do hope that I think I'll Salvador is gotten the short end
of the stick for a very long time and it has been no help of
the United States where I live and we're not being held
accountable for that. And so if that means that they
have to seek a way to free themselves, Of being dollarized
that's fine. Unfortunately there's no example
of any country that has ever dollarized, D Dollar Rising
successfully. So I hope this is a first and I
hope also that buchelli doesn't do more tactics that feel
authoritarian and then eventually become authoritarian.
I can have my thoughts on it but who cares unless you speak to
the Salvadoran people. The one thing I want to add is
that That well this does seem to be an attempt to D dollar eyes,
that is a prospect that's far out in the future.
They still have a huge amount of their debt currently denominated
in u.s. dollars and they're going to 0 U s-- dollars on that
debt for the foreseeable future. And so I'll Salvador's still
going to be dependent on getting US Dollars into their country to
continue paying those but I as well, hope that this plays out
well for El Salvador, and is a useful tool for their population
and for their country as a whole, So complex issue we don't
have the hardest opinion on this as opposed to most other things
that we care about, but we wanted to kind of explain it to
everyone in the most critical, but careful way possible.
We're actually going to be releasing two episodes this
week. So this episode is going to be
our first episode and then in a few days we're going to be
releasing an episode about regulatory capture, yeah to
episode week enjoy.