- There's a bit of buzz regarding El Salvador making BTC legal tender. But first, what is legal tender, legal and illegal?
- Illegal - can't hold, use, buy, sell, trade BTC (Algeria, Egypt, Morocco).
- Legal - can hold, use, buy, sell, trade BTC but subject to restrictions eg. banks won't accept BTC, trade must be via regulated exchanges or only P2P (most countries).
- Legal Tender - can hold, use, buy, sell, trade BTC and if BTC is offered for payment or deposit it must be accepted (El Salvador).
- Except, El Salvador isn't making BTC acceptance mandatory (the street ice-cream seller can't be accepting BTC). In other words, in practice, BTC is just legal, like most other countries.
- Nevertheless, El Salvador and her prez is making an effort to give some legs to BTC (whilst more advanced countries are still working on bespoke digital currencies).
- El Salvador's base currency remains the USD. The Salvadorian government will set up a initial fund (USD 150 million) to guarantee price stability (likely for smaller businesses only).
- If a burger is sold for 5 USD (0.00015 BTC, say) in the morning, and if BTC drops by half in value by evening when the burger seller tallies his daily sales, the government will guarantee he receives USD 5 and not USD 2.5.
- A relatively unknown e-wallet/neobank startup, Strike, has been appointed BTC payment processor including foreign remittances (many Salvadorians work abroad).
- To bootstrap a BTC ecosystem, El Salvador is offering permanent residency for crypto entrepreneurs for 3 BTC (roughly USD 105K at time of writing).
- Many challenges remain eg no mention of AML, KYC. If laissez-faire refuge is the principle, it might be a magnet for, say, ransomware bros to launder proceeds. Or if USD is the base currency, ordinary folks will likely stick with it locally, instead of having to convert mentally, administratively and electronically, between USD and BTC.