In today’s Exponential Investor

  • It’s law
  • Seeing the future
  • Country-competition

It’s official.

Bitcoin is legal tender. Just like US dollars, bitcoin is officially a currency. That’s the situation in El Salvador now, by law.

On 22 December 2000, El Salvador adopted the US dollar as legal tender in the country.

And around 7am (UK time) on 9 June 2021 the El Salvador Congress, by a supermajority, passed laws that approved bitcoin as legal tender.

Worth noting about this law is:

  • Prices (for goods and services) can be expressed in bitcoin
  • Taxes can be paid in bitcoin
  • Exchanges in bitcoin won’t be subject to capital gains tax (like any legal tender)
  • Every “economic agent” (merchant) must accept bitcoin as payment when offered by an acquirer (purchaser).

Also, the state itself will ensure there’s sufficient liquidity for the economy to convert from bitcoin to USD if they so wish. That means El Salvador is about to buy up bitcoin to hold in its treasury.

This may be a smart move for the country, but I also see it as a declaration of war.

The future is easy to see if you know where to look

El Salvador’s move is primarily to ensure it can lift the living standards of its citizens, to push the country forwards as a leader in innovation and development. It’s to be commended.

But as I explained earlier in the week, this isn’t unexpected.

Although many people over the years have disagreed with my views on crypto, I’ve remained steadfast in how I see the world adopting it.

I’ve had countless emails saying that governments will simply ban bitcoin and then the “party will be over”. Time and time again I’ve tried to explain that it will a country (such as El Salvador it seems) that will have the courage to use this as an opportunity rather than see it as an impediment to their country.

In 2019 I wrote the following in an article titled “What happens if the government bans crypto?”:

… there are countries that see crypto as a way to pull themselves and their economies forward into the modern era. And on the way lift the living standards of their citizens. This alone is creating country competition to encourage and foster innovation in this nascent industry.

I went on to explain:

The point here is that crypto is a challenge to the financial powerbase of central banks and government. But it’s also an opportunity for them to realise economic potential and to lift living standards in a difficult world.

That’s the kind of opportunity that crypto presents. And it’s why you shouldn’t be dismissive of its potential to impact the world long term.

This is exactly what El Salvador has done.

And it seems, it is not going to be alone for long…

South American laser eyes

El Salvador may be an early mover by introducing into law bitcoin as legal tender. But here are a few countries that could be on the way next:

  • Paraguay
  • Panama
  • Argentina
  • Brazil
  • Colombia
  • Mexico.

Notice anything about that list?

They’re all South American. That’s not a coincidence. In fact. I see it as a dedicated, organised shot across the bow of the United States. A declaration of economic war.

I see this as an opportunity for South America to wrestle free financial controls of the US and interference in the economies and policies of South American countries.

The list of countries above has seen legislative representatives all change profile pics to those with “laser eyes”. This is a popular meme-based alteration people make when fully supporting a bitcoin-based economy. It means laser-focus on the bigger end goal, which is bitcoin as a global reserve currency.

Mexican politicians are already proposing to enter legal frameworks for crypto in Mexico. That alone is significant. Considering that Mexico is around the 15th largest economy (in terms of GDP) in the world, that would be a massive development.

In terms of GDP, Mexico is roughly as big as Spain and Australia and considerably bigger than countries like the Netherlands and Sweden.

Brazil would be the big fish though. The world’s ninth biggest economy (in terms of GDP) Brazil moving to a bitcoin friendly economy would reshape the entire world’s view on it.

These bigger economies may take some time. But I see it as an inevitability they will also adopt bitcoin as legal tender in the way that El Salvador has.

And it’s not just South America to focus on. Expect countries in Africa to start to get laser eyes and move legislative proposals into government. Soon enough, you’ll find there will be more countries adopting bitcoin than the small few trying to figure out how to ban it or control it.

This is the country-competition I’ve seen coming – it’s exactly how I expected this story to unwind. And it’s the most excited I’ve ever been about the future of bitcoin and crypto around the world.

Sam Volkering
Editor, Exponential Investor

PS For all the positive news about bitcoin and the adoption in South America, you will still see ridiculous articles about bitcoin being hacked and being an environmental disaster. They’re wrong. All of them. Just, wrong.

In fact, bitcoin is leading the way when it comes to new, innovative and breakthrough energy usage. Its move into how energy can be used, recovered and recycled will help propel the green energy transition forward.

The energy transition is so huge, so exciting, that I recently recorded a special interview with our inhouse energy experts to discuss the incredible energy technology I’m seeing right now and how investors can get a slice of the action before these breakthroughs become mainstream – click here to find out more.