The World Bank has poured cold water on El Salvador’s adoption of bitcoin as legal tender, saying it cannot support the move due to “environmental and transparency” concerns.
But the developmental body may soon be forced to accept bitcoin payments from countries that have embraced the cryptocurrency.
Its founding document, the 1944 Articles of Agreement, outlines the procedures and principles by which the World Bank pledges to engage with sovereign governments. A central theme in the document is its commitment to accept payments from member states in local currencies.
Section 12 of Article V defines acceptable “forms of holdings of currency” as follows:
- The Bank shall accept from any member, in place of any part of the member’s currency, paid in to the Bank under Article II, Section 7 (i), or to meet amortization payments on loans made with such currency, and not needed by the Bank in its operations, notes or similar obligations issued by the Government of the member or the depository designated by such member, which shall be non-negotiable, non-interest-bearing and payable at their par value on demand by credit to the account of the Bank in the designated depository.
So, as well as allowing payments in “the member’s currency”, the charter allows central banks to pay with “notes or similar obligations” backed by their reserves.
These are effectively IOUs from governments. They can be backed by dollars. They can be backed by precious metals (the US Federal Reserve guaranteed its notes with gold until 1934, and with silver until the 1960s). Or they can be backed by bitcoin; perhaps, in El Salvador’s case, the $150m bitcoin fund being established by Banco de Desarrollo de El Salvador, the national development bank.
Things gets more awkward. Section 9 of Article II states that holdings paid into the bank by members should be continually re-valued (presumably against a “real” benchmark like USD). If the local currency has appreciated, it says, the World Bank should do the decent thing and hands the gains back:
- Whenever the par value of a member’s currency is increased, the Bank shall return to such member within a reasonable time an amount of that member’s currency equal to the increase in the value of the amount of such currency
Conversely, if the local currency has depreciated, the member gets margin called and has to “pay to the Bank within a reasonable time an additional amount of its own currency sufficient to maintain the value”. Or, put another way: when bitcoin starts tanking, the World Bank starts stacking. Nice.
All of this depends, of course, on whether or not the body will respect El Salvador’s sovereign right to choose its own currency.
That’s not a foregone conclusion. Reuters asked them about that yesterday and got a decidedly arsey response. “We are committed to helping El Salvador in numerous ways, including for currency transparency and regulatory processes,” a spokesperson waffled. “While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings.”
The World Bank, by the way, has invested more than $12bn in fossil fuel projects over the past six years, representing at least 6% of its total investment portfolio. It also accepts gold payments from members, despite gold mines emitting on average 0.8 tonnes of CO2 for every ounce of gold produced.
Still, they’re worried about bitcoin’s carbon footprint. So they’ll be happy to know that, by some estimates, 76% of bitcoin miners are already using renewable energy.
Oh yes, and every transaction ever made on the bitcoin network is recorded on an immutable digital ledger that is fully visible to all market participants. That makes it, by far, the most transparent monetary network that has ever existed. No funny business allowed.Follow me on Twitter.
Watch part 2 of this interview: https://www.youtube.com/watch?v=Bpsdh… Steve Hanke, professor of Applied Economics at Johns Hopkins University (https://twitter.com/steve_hanke) discussed the practicality of actually using Bitcoin as legal tender in a country like El Salvador with David Lin, anchor for Kitco News (
bitFeaturing Bitcoin Beach’s Mike Peterson.
This episode is sponsored by Nexo.io.
On today’s episode, NLW is joined by Mike Peterson, director of Bitcoin Beach. Bitcoin Beach is a community project in El Salvador that has spent the last two years helping individuals and companies integrate bitcoin into their daily lives and long-term habits. President Nayib Bukele cited Bitcoin Beach in inspiring El Salvador’s bitcoin legal tender law.
In this interview, NLW and Mike discuss:
- How he came to reside in El Salvador
- How the bitcoin community project started
- What drove community adoption at the beginning
- How remittances and COVID-19 solidified the value of BTC to the community
- How bitcoin has changed how people think about investing
- How international bitcoiners such as Miles Suter and Jack Mallers got to know the project
- Where the project stands today (complete with 22 different community initiatives)
- How bitcoiners can get involved
Image credit: Mike Peterson/Bitcoin Beach
What’s going on guys? It is Friday, June 11. And today, I am so excited to bring you a conversation with Bitcoin Beach’s Michael Peterson. If you were on Nick Carter’s Twitter space on Tuesday night, where El Salvador’s President Nayib Bukele popped in to answer questions for about an hour, you heard Mike Peterson talk. You see, Bitcoin Beach is a project in El Salvador that has been running for a couple of years now. And they set out to show that for one, bitcoin could be used day-to-day as well as it could be used as a long term investing and saving technology; and two, that bitcoin wasn’t just for rich people: in fact, the poorest of the poor could often find even more empowerment in it than the rich that we normally associated with.
Their website states: “we believe that if a local economy is created with the support of bitcoin, new opportunities will open up for the community members. The project Bitcoin Beach is creating a sustainable bitcoin economic ecosystem on the coast of El Salvador, where the majority of people do not have access to bank accounts, and the local businesses could never qualify for merchant accounts needed to accept credit cards.”
From the early days, bitcoin promised to allow us to bank the unbanked and return power from governments and financial institutions to the individual. However, until recently, this promise has remained elusive. Bitcoin Beach is a movement to make sure that the true potential of bitcoin is realized, and that those who have been excluded from the banking system are the primary beneficiaries.
On that call on Nick Carter’s Twitter spaces, President Bukele went out of his way to say that it was the inspiration of Bitcoin Beach, showing that bitcoin wasn’t just for rich people, that it could improve the outcomes of individuals and a community as a whole that inspired them to start looking into bitcoin in the first place. So with that, I’m incredibly excited to bring you this interview about how Bitcoin Beach came to be, what it’s doing, where it’s headed, and how you can get involved.
I’m so excited for this conversation. Obviously, it comes at a really awesome time. But you and I’ve been talking about doing this for a while. So perfect, that it’s all coming together right now.
Well, I’m glad the president of El Salvador could finally get me on your show.
He did it as a favor. Nah man, I mean, obviously, anyone who’s listening to The Breakdown frequently has context around, you know, a little bit of context around what’s been going on. But I think that one of the things that’s so important is that this didn’t come out of nowhere. And a lot of the place that it came out of is the work that you guys have been doing down in El Zonte and in El Salvador just more broadly, for the last couple years.
But let’s go back even before that, like, how did you end up getting involved in this? How did you end up spending time down there in the first place? I mean, what is your story that got you there?
Originally, I wound up in El Salvador on a surf trip. I mean, they have wonderful waves and warm water. And so, about 17 years ago, I went down and just really fell in love with the country. I’ve traveled all my life, I’ve probably been to like 45 different countries. And it was the first time that I wanted to buy a house. And so I called my wife and said, “Hey, we’re buying a house in El Salvador.” And three weeks later, we flew back down, and we bought a house in El Salvador. So that’s kind of how it started. And initially, we just spent a few months of the year there. But about seven years ago, we made the decision to basically split our time between there and the US and kind of be more full time there.
And that was kind of where it was all born. Once we were there, we saw you know, the needs, we got to know a lot of our neighbors and kind of better understand their experience. And so we became involved in some different educational campaigns, economic development initiatives. And you know, that was kind of parallel to me going down the deep rabbit hole with bitcoin. And then two years ago, in conjunction with a donation to the project we were doing that was done in bitcoin that wanted to see it be used in real ways. We basically bitcoin-ized everything we were doing. And it’s just kind of blown up from there.
I think a lot of things that are interesting about this is one, having a long duration and relationship and experience with the place that you’re interacting with before you decide to do a bunch of programs. That’s something that I think is a little bit too rare in terms of a lot of the kind of global development, global philanthropy work that happens. So it’s really interesting that you came there because of the thing that you loved, which was surfing, fell in love with the place, got to know the community, and then it kind of grew organically from there.
And it feels like a lot of the the bitcoin side of the whole project was also similarly organic, where it sort of started to present itself, you were exploring it, and it just kind of made sense to keep going deeper and deeper. I mean, what were the early pieces of that like? Let’s talk about the point where you guys have a bitcoin donation that comes in, probably trying to figure out how to actually use that, what was that kind of actual turning point, I guess, and what were some of the first steps to bring bitcoin into the work that you were doing?
I definitely don’t think we would have been able to do any of it had we not had that kind of long term relationship already with the community and hadn’t built that trust. Even the guys that I worked with on a daily basis, when I told them, “hey, we’re gonna start using this magic internet money, and we’re gonna give stores to accept it, we’re gonna get people to start taking their salaries in it,” they just kind of looked at me like, “okay, Mike.” So that was kind of the initial response.
But we do a lot of work with the youth, especially in gang prevention. And a lot of these youth didn’t have other job opportunities. So they were actually kind of forced to take bitcoin because they didn’t have any other job options. And so we were paying them in bitcoin, to clean trash out of the rivers, or clean the beach. And once they started using it, I mean, it only took a couple days for it to really click for them that, wow, this is so much better than using dollars. I can send it to my friend across town, I don’t have to worry about putting it in the bank, it’s always with me, because I always have my phone.
And so it really started with the youth. And then from there, you know, once the youth had it, and were looking to spend it, we got our first store on board, we kind of cajoled them into accepting it. And they did it kind of reluctantly. But you know, at this point, more than half their sales are in bitcoin. So it’s kind of in that same pathway with everybody. And initially, they’re a little bit hesitant, they’re a little bit skeptical, which is healthy, people should be skeptical, because we don’t want them falling for, you know, scams or other scam coins. And so it was good for them to be skeptical.
But once they start interacting with bitcoin, and once they start doing their own research and realizing there’s this global market, there are people all around the world that want bitcoin that are willing to exchange it for value. There’s doctors and lawyers from the capital city of San Salvador that started driving down to El Zonte to buy bitcoin from people from the youth that they realize, “Wow, we really have something here.”
So I guess let’s talk about like, what the financial profile of folks in these communities, was or is going into this, what percentage of them are actually incorporated in the traditional financial system have bank accounts, how much of it is just totally cash based before that, and then maybe just as another dimension of this, what is mobile or internet penetration, kind of to correspond with that?
I’d say those who do pretty much everything in cash is probably 90%, maybe an additional 10% have bank accounts, but they don’t really use them, but probably 80%, there’s no bank accounts at all. But the internet and mobile penetration is, you know, probably the reverse of that, there’s probably only 20% of the population that doesn’t have at least somebody in their family that has a smartphone that’s capable of having a mobile wallet on it.
And so when you guys were kind of introduced to it, how much was the initial value proposition that was exciting to people, about the comparative convenience of the digital money ecosystem versus kind of a cash ecosystem, versus an interest in the bitcoin assets? Specifically, I think, you know, part of the motivation for the question, too, is, I think people are now really trying to understand how this community that you guys have down there can model other places. Obviously, we’re about to see a much wider experiment across El Salvador, but I’m interested in what clicked for people that got them excited.
Initially, it was just the convenience. I mean, most of them weren’t that interested in bitcoin, if they would have had the option to have the same convenience in dollars, they probably would have chosen that initially. But over time, they started to realize that their bitcoin assets were appreciating and that they would much rather have their money being held in bitcoin rather than holding in dollars. I think that’s important for people to realize, they don’t have to understand everything about bitcoin, they don’t have to sell them on all the aspects of it, what you really need to do is get them using it, once they start using it, they have that “aha” moment.
And then once they start holding it for longer periods, and seeing how much they put in versus what they can buy with it a year later, like, that’s how they flip switches. And that’s how they actually start wanting to put the effort into learning how to hold their own keys, how to custody it safely, the different options for non-custodial versus custodial wallets, and all those things. First, you get them using it, then they’ll do the work.
It sounds to me almost like there’s sort of a twin value proposition that clicked for people. The first part of it being, “this is just easier and more convenient to use, it’s time saving,” all the things that come with any form of digital money in some ways. But then there’s the second piece around actually empowering people to feel like investors and like they have some agency and an ability to design their future a little bit more. I mean, is that a fair characterization?
Oh, 100%. Because these are people who have never had access to financial markets, they’ve never even thought about having access to financial markets. So when they got money, they would just spend it right away. Because why not, it was just going to go down in value over time. So even saving seemed kind of pointless.
And we’ve seen that I mean, it literally changes people’s outlook on life. And always not just about money, like once they start thinking, hey, if I don’t spend this today, it’s gonna buy me more next year, there’s corollaries with education with everything else. Now, they’re starting to think, “Well, yeah, I have to forego, you know, earning a wage this year to go on to university, but longer term that’s going to be in my best interest.”
And so we’re seeing a whole generation that’s just looking at life very differently. And I mean, honestly, you see hope on their face. I mean, I know it sounds kind of corny, but for a lot of these people, this is the first time they felt like hope that they can build a future in El Salvador that they’re not going to have to follow the path of their parents to sneak into the US illegally and work in some dead end job. They can build a business based on bitcoin, they can work for an American company being paid in bitcoin, but still be able to live in the country they were born in. And so it really opens up the world to them.
I think that one of the things that I’ve long felt is that our sense of the possible is shaped by what we see around us. And one of the things that we do extremely poorly, even in the US, is actually treat people of all kinds of economic classes like they should or care, they have the capacity to think about investing in their future in a meaningful way.
And some of that’s the language that we use, some of that’s financial media, which I think is kind of designed to be exclusionary and in-group, but I think one of the things that makes bitcoin pretty unique in that is just the divisibility of it, that you can see your stats going up, even if it’s a tiny amount. It feels different than, you know, owning a single stock and a single stock might be out of reach in most contexts, you know?
Yeah, they’ve literally never had that opportunity. I mean, before investing used to mean like, they would buy a bunch of cement blocks, because they knew cement blocks went up over time. So if they had money and needed to build something in the future, they might as well buy those blocks now, so they at least don’t lose value. But for them to be able to buy something that’s going to go up in value over time? Like that really just shifts everything in their mind.
And it’s, I mean, these are just super intelligent, hardworking people that haven’t had these opportunities before. That’s the thing I always want to make sure people realize when they hear about the Bitcoin Beach project, or they hear about what’s going on in El Salvador. It’s not that, you know, I, myself, or anybody else brought Bitcoin down to El Salvador. The Salvadorans proved the use case for Bitcoin. They’re the ones that proved that Bitcoin can be used in the ways that we always talk about that we’ve never seen before, they figured out a way to make it work. And they’re literally upending the world’s financial system. So I just want to make sure that people realize, these are these young people that a lot of people, you know, look at as having no future, but they are literally changing the future.
Yeah, I’d love to hear more about who actually works on this down there, like who’s kind of driving it and what are the different aspects of the project? And then I guess simultaneously, maybe more or first just to kind of a follow up question from from the last question is, have you guys gone through a sustained period of Bitcoin going down? And, you know, have you seen that change people’s perceptions or, you know, how did you help people kind of think through how to think about that experience?
Yes, we have a team of probably about 15 people. Most of them are, you know, ages kind of, 16 to 30, is the majority of them. Jorge Valenzuela is the community leader that heads it all up. He’s one of those guys that, I don’t think he ever needs to sleep. He just runs circles around me. And he has this huge heart and he’s always looking for ways to improve the community.
And so, right now we have 22 different programs that are going on: everything from the lifeguard program, where for the whole region, he launched this professional lifeguard program where we have 62 lifeguards being paid in Bitcoin. We have English classes where people are learning English, but the teachers are being paid in Bitcoin. We have a trash collection service for the whole community where the people collecting the trash are being paid in Bitcoin. So it’s not people being given Bitcoin, like they are earning Bitcoin and they prefer to earn Bitcoin and they’re spending Bitcoin at the local stores and it’s Bitcoin that’s kind of sustaining the local economy.
So it’s, I mean, it sounds like more than anything, it’s a kind of pretty end-to-end community-driven, bottoms-up economic development initiative that happens to have this new asset that serves to kind of facilitate the ease with which the the kind of resources flow through the system and also creates kind of a different mentality and incentive around it.
No, 100% it is, this is very bottom-up and it’s funny because when bitcoiners, you know, when when expat bitcoiners come down, and they see people wearing bitcoin t-shirts or bitcoin hats, they kind of freak out because they’re so used to being you know, ultra secretive, and you don’t want anybody to know you’re in Bitcoin, because they’re gonna rob you because they’re gonna think you’re rich.
I tell them no, in El Zonte if you have Bitcoin stuff, they think you’re poor, because it’s mostly the poor that are using Bitcoin and it’s the wealthy who are kind of the last to adopt it. And so it really is the money of the people. And I think that’s what makes our project different than anything I’ve seen anywhere else in the world is it really is, you know, the people that only have a second grade education, the people that are living in shacks with dirt floors that are interacting and doing most of their life in bitcoin.
You started in 2019. What was the sequence, I guess where did different things come online? What was first, what was next? And where did you guys start to connect with some of these international bitcoiners obviously, Jack Mallers came down Miles Suter from Square came down, how did that connection happen?
Initially, when we started we started with the youth. We have a real focus on the youth because in El Salvador, there’s a huge gang issue. So a lot of the youth from age 10 to 14 are recruited into the local gangs. And so we wanted to provide a more positive pathway forward. And so that was our initial focus, we were paying these young men and women to pick up trash to do other kinds of community benefit jobs, and they’re being paid in bitcoin. And so initially, it was this really kind of small thing.
And we wanted to go down to the LABITCONF, the Latin American Bitcoin conference, which in 2019 was in Uruguay. And so I took Jorge Valenzuela, who I mentioned earlier, and I took another gentleman, who was from another town that we have a project in, a gentleman named Juan. We took them to this conference.
It was the first time they’ve been out of El Salvador, first time they’ve been on a plane, and definitely the first time they’ve been around a bunch of crazy bitcoiners because we were in this big convention hall, and I think Max Kaiser was the first person that came on. And, you know, he did his whole shtick and was totally obscene. And they’re looking at me, like, “What in the world have you brought us to?” Fortunately, it got a little more in depth after that.
And, you know, they came out of there dyed in the wool, you know, bitcoiners. I was able to bring them back with that experience, with that view that this is an international thing. And then they started kind of spreading that in the community.
And also, during that time, I ran into Peter McCormick. And I told him, “Hey, we have this little project, we’d love to have you come check it out.” And you know, I was thinking, like, in a year, maybe he’d come by. And so he looked at me and said, “Okay, well, I’m going to Bolivia tomorrow, so I can be there on Thursday.” I was like, oh, okay, yeah, let’s do this.
So, Peter McCormick actually was the first one that kind of put us on the map. We did a podcast with him and he put some videos out, I think he quadrupled my Twitter account with one video that he sent out from my, you know, 30 Twitter followers at that time to 120. He put us on the map there.
And then, you know, it was growing, we were instigating some new programs and kind of methodical way. And then COVID hit. And when COVID hit it was a combination of there was a huge needs. But also it gave us an opportunity to use Bitcoin in a way that otherwise would have been irresponsible.
I’m really a big believer that when you do any type of development work, or any type of aid work, you have to be very careful to not cause more damage than good. You have to be very careful not to distort the local economy, you have to be careful not to dentists, dissent, disincentivize work. And so generally, for us to just give bitcoin out is something that we, you know, we try to avoid. But during the COVID lockdown, nobody was allowed to leave their house, they weren’t allowed to work. And nobody had any money for food. And so we kind of switched at that time.
We started doing basically like a universal basic income, to all of the town, there were like 500 families, and we were sending out about $40 worth of Bitcoin every three weeks. And that kept the stores in business because there was money flowing through, they could buy their basic food goods, it gave them enough to buy at least the basics of food. And they got all of them using Bitcoin and seeing how easy it was to use, not just in person, but they could also you know, send the payment to the store, and then have the store come deliver food to them, which was a huge issue during the COVID lockdown. So that supercharged it.
And then coming out of that we had Miles Suter was kind of the second person that came down. And he was originally only planning to come down for a couple weeks and he stayed for six months. And obviously huge help somebody with his experience, his network. And then Jack Mallers kind of followed, and to bring Strike with him, and just, I mean, what a huge asset to have that system for people to be able to send remittances, because remittances is kind of the Holy Grail. It’s the thing where bitcoin really shines.
And so, you know, that’s kind of all these things have been happening. And at the same time, our local programs have just been turbocharged also. So now we have 22 different community programs where we’re doing all this. And we also have probably a few 100 people that are actually getting their salaries in bitcoin now. Some of them that work with us, but a lot of them that work for other companies, both local and international.
How much has this been able to be funded from that kind of initial donation? Or have you guys had more donations? I mean, it sounds like, obviously a ton of work that’s gone into this.
Yeah, a lot of that was from that initial donation, but then there’s been a lot of subsequent donations from a lot of different bitcoiners you know, something as small as you know, a couple of 100, a couple 1000 SATs to you know, people sending large chunks of a bitcoin. And so it’s enabled us to sustain it.
But what our goal is, is to really make it so that we’re not having to raise funds. We want individuals earning bitcoin, we want people that have jobs with bitcoin companies. So the fact that now we have a number of people that are employed by Strike, Strike’s actually paying rent on the office building of ours that they’re using. And so that’s, you know, helping fund the project.
And then we have a number of other companies that have started hiring people from El Zonte to help them with everything from ongoing or onboarding new customers, to doing marketing. We even have another bitcoin related company that’s having an architect student down here helping them put together construction bids.
Super interesting. I mean, this obviously gets into I think some of the stuff that’s happening now. So maybe just to kind of transition into that, let’s actually talk about your perception of Salvadoran politics and how that’s changed. You’ve obviously been going down there for a seriously long amount of time. You saw the transition to the New Ideas party. Holding aside everything that we know now in bitcoin, like, how would you describe the shift in political sentiment over the last, I don’t know, 5, 10, years?
Well, the shift really happened a few years ago with the New Ideas Party and the rise of Nayib Bukele. Before that, everybody was very cynical about politics, you know, kind of go back and forth between the right and the left there, you know, reminds me a lot of the US system. So I was really surprised when Nayib Bukele rose to power because, you know, we’ve seen third party candidates in the US, but we’ve never seen them be able to get that type of traction.
And he really shook things up. I mean, he didn’t, he didn’t do any of the traditional debates. He didn’t use the traditional media, he used Facebook, he used TikTok, and I was shocked to see how much support he was able to rally through that. So you know, in El Salvador, I’m very apolitical. I’m not a Salvadoran, and I stay out of the politics. But I just as an observer, I have never seen people more excited. And I’ve never seen people more hopeful of the future.
And so I in general, I’ve liked most of the stuff that he’s been doing. You know, there’s always a concern when somebody has that much popular appeal that it could go sideways. But so far, I’ve been very pleased. And even over the last six months, we’ve met with his Minister of the Economy, Minister of Tourism, the Minister of Education, and I’ve never met with bureaucrats before that were so forward looking, and who really wanted to help the people, and weren’t just kind of stuck in the past.
So I know he’s getting a lot of flack from certain quarters. But so far, from what I’ve seen, it’s been all positive. And especially in light of the history in El Salvador, where the three previous presidents blatantly robbed the country. One died under house arrest, one’s in jail now and one, you know, fled the Nicaragua for asylum. So that tells you, you know, the bar wasn’t very high. But he definitely has the people behind him.
So do you have a sense of when the things that you guys were doing, when they get on his radar or his administration’s radar? Was there someone who was kind of paying attention? Who was sort of beneath him? Or what was that process?
Actually, on that Twitter space call last night, I got some new information. I think a lot of it was when there was a Forbes article that was done last summer. And I think that caught the government’s attention. They’re not used to getting positive articles, you know, from publications like Forbes. So I think that got them starting to take a look at what we were doing. And there’s been a lot of subsequent good press.
They’ve also been very open to allow us to meet with them. I mean, we’ve had several meetings where not just with the ministers, they would bring in all their aides, they were really looking and considering what we were talking about. Miles Suter from Square went to the meeting with us when we met with the economic minister. And, you know, he was telling from their perspective of what El Salvador would need to do to attract companies, for companies wanting to headquarter here. And they took it seriously. So I’ve never really run into that before with the government.
I think that obviously, there’s a huge element of this that’s attracting bitcoin businesses. And that’s something that, you know, has been a constant refrain and question, I mean, really, ever since COVID hit, especially this kind of global competition for talent for tax revenue in the form of companies. But do you know when the legal tender idea got on their radar?
I’m not sure. I mean, I’d like to think that we had some part of that, you know, anytime we had a chance with, to do an interview or meet with any of the government ministers, we kept pushing that, that they could be that, that party, the politicians that go down in history for putting the world on a bitcoin standard. They’re already on the US dollar, so they don’t have to worry about it competing with their currency. So they really had nothing to lose, but so much to gain. I don’t know when they started taking that seriously or what kind of got them to go in that direction. But of course, we’re thrilled they did.
Well, one of the things that I think is remarkable in that is a lot of people are noticing is, I think that if you had polled the average, super engaged, enfranchised bitcoiner on Twitter, you know, at the beginning of 2021, about whether a country would adopt bitcoin as a legal tender as a currency first or bitcoin as kind of a reserve, right, I think almost everyone would have said reserve. And instead, it’s very clear that the example that you guys set of a fully functioning, you know, economy, that includes using it for some people as a long term investment for others as a medium of exchange that really kind of obliterates the lines between these things, was influential. I mean, you know, President Bukele made that clear, even on last night’s call.
Well, I think the bitcoin community has become a little too just locked into the “digital gold” narrative. I’m not against that narrative, obviously, I think that’s where everybody should be doing their savings. But bitcoin’s also money.
And especially with the second layer protocols, like Lightning, like it works, it’s easy, it’s easier for me to buy something online, and scan a Lightning QR code than the point my, you know, physical credit card, and give them my name and address and my credit card number and who knows where that’s going to go. So it works for transactions, it works in El Salvador, we’ve seen that and these are people in kind of the hardest of environments, you know, they’re living in places, some of them have electricity, but they can still get online, they still have smartphones, and they’re still transacting. So I think people need to realize it doesn’t have to be money or digital gold, like it is both.
So I mean, on this front, I actually forgot to ask this question, and then we got talking about something else. The question around what happens when bitcoin goes down? Like, have you seen people be stressed out? How does it impact it as a medium of exchange? I mean, this is the critique that we’re constantly from people who don’t think that bitcoin is viable for this type of setting is, it’s way too volatile. What is your experience with that?
That’s been a real big concern of ours from the beginning, but it’s actually been much less of an issue than we anticipated. We’ve seen like, even in this last big drawdown, the people that just recently got into bitcoin, they’re kind of freaking out. But the people who, you know, have only been at it for six months, they’re like, “No, we understand this is how bitcoin works. This is kind of the history of it, we think longer term, it’s going to go back up.”
I actually like it when we have these big drawdowns, because it it kind of squashes the speculative fever, when we’re having that big run up, then I was starting to get concerned because then people were, you know, thinking about borrowing money to buy bitcoin, or selling their family land to buy bitcoin. And we’ve always really discouraged that we want people to dollar cost average in, or for the stores that are accepting bitcoin, like set aside a part of that as their savings. But we don’t encourage people to be overly leveraged.
And we also encourage them to make sure they understand the ups and downs before they go into it deeper. And we do see a little bit of shifts, like most recently, when we saw this big pullback, we did see less people spending their bitcoin at that time. They weren’t, you know, selling it, but they were just holding on to it and not spending it and waiting for it to go back up. So you see slight shifts, but most of them have been pretty adept at, you know, kind of riding the waves and knowing how to manage the volatility.
When it sounds like that’s like, that’s a natural, mature tension that people have to make decisions on for themselves, right? Like, you’re not getting, it sounds like there’s no denying you guys aren’t trying to obfuscate the fact that bitcoin is this asset that’s likely to appreciate over time based on its particular dynamics and global adoption. But at the same time, the whole point is like people get to make their decisions day in, day out about how much they can use, how much they can save. And that’s just kind of an individual process that everyone in every family has to go through.
Exactly, what I will say is it has really, really switched the mentality about savings. El Salvador is a very spending culture. It’s not a savings culture. And we’re seeing people for the first time in their life, like they’re really focused on savings, because they have this sense that well, “what I’m spending today is probably gonna be worth double in the future. So I’m going to spend as little as possible.”
I think one of the things that I always think about is, I don’t know, if we never talked about this, but I spent the first I don’t know 5, 10 years of my early career thinking that I was going to be focused on global development and global social change. And it’s unbelievable how frequently our kind of good-intentioned thoughts towards other people lead us to infantilizing them, and not giving them decisions. So, something like “people can’t deal with the volatility of bitcoin or they can’t make the decisions for themselves about how much to save versus spend,” like, “we shouldn’t give them the availability to spend it because you know, everyone’s going to want to save it.” Well, that’s just patronizing. Right? You’re not assuming that people have the ability to make decisions for themselves about how to strike those balances. And it’s not something that people do intentionally. Often, it’s just something that kind of happens.
I’ve seen that when people come down, they’re kind of shocked at how sophisticated these users are. Especially for a lot of them, they’re living in poverty. And I tell them, hey, these people have made 10 times as many bitcoin transactions as you have, like in real world settings, they know what they’re doing. Even when Strike came down, they were wondering, “why do people keep sending money back and forth between the Strike wallet and the Bitcoin Beach wallet?” Well, they’ve used it as their bootstrap trading engine. When they want to go into bitcoin, they send it out of Strike into the Bitcoin Beach wallet, when they want to go to dollars, they send it out of the Bitcoin Beach wallet into Strike. And they were kind of blown away, like, “wow, we never thought people would use it like that.” So I think it’s really been a showcase for just how much intelligence there is in the region, and that they have just been held back by, you know, bad circumstances. But how much this can change in a short period.
How, what has the mood or sentiment been like, since the announcement a couple days ago, about this bill, in the places, you know, in the communities that you work?
I think it’s been well, obviously, within our team and our community, people have been ecstatic. I think, in the broader country, there is some confusion, you know, there is going to be a learning curve. I was actually at the conference in Miami for the announcement. So I wasn’t in El Salvador, and I’m in San Diego now. So I haven’t been back in the country since the announcement. But I’ve been talking with my team. And overall, they, especially in El Zonte, everybody’s just thrilled because, you know, this this little podunk, you know, beach town, that’s never been that important, you know, in the greater scheme of things in El Salvador, and now it’s the focus of the whole country. And there’s real good paying jobs that are moving in and people that want to be there. And so it’s a real dynamic time for the people in El Zonte.
How do you guys think about this transition, like, you guys are likely to be looked at as a model, people are going to want to have information from you, you’re going to see more companies that want to come in. I mean, you’ve been very deliberate, intentional, it sounds like and how you’ve rolled these things out, how you’ve helped people figure them out, you know, how you’ve let the programs grow, how you’ve let people take charge of how these different programs are going to evolve. How do you think about this mass new force, both domestically, you know, but also internationally, that could be coming your way?
We definitely want to be careful for how that rolls out. We don’t want to disrupt the community, we want to see growth happen in ways that’s good for the environment, that’s good for the quality of life for people. But we really view good paying jobs coming in is really life changing for the people there. A lot of them, you know, five years ago, their only plan or their only thought of how they can make it in life was to sneak into the US and work in some dead end job, and hopefully, eventually come back and retire in the country that they love, you know, having their kids grow up with them, hardly seeing them. Now they feel like “I can become an engineer and get a good paying job here, I can start a company that maybe it’s not directly bitcoin, but it’ll provide services to these bitcoin companies that are coming in.” And we’re seeing people kind of move their way up the food chain. And so for the first time, they’re really dreaming and thinking about how they can help lead the world.
Has anything particularly surprised you about what you’ve seen from President Bukele and his team over the last couple days?
To be quite honest, I’ve been kind of blown away by how aggressive and full-throated their plan has been. I mean, I think even if I had put together a proposal, it might have been a little more timid. And so I’m glad I wasn’t the one putting the proposal together. I mean, they, they really went for it, they’ve really swung for the fences. And I think that’s going to be what it takes for them to win in this. I think there’s going to be a lot of governmental and non-governmental forces that are going to come out and try to thwart this, I think there’s a lot of vested interests that are not going to want to see this work. And so I think they really did have to swing for the fences. And I think if they are successful, it’s gonna just be the first in many countries to go that route. If the forces that be can stop them, I think it’s going to be really hard for the next country to make that decision.
What’s the best way for bitcoiners who are now interested in investing in this experiment who want to be helpful? What should people be doing other than just paying attention to it?
We’d love for people to come down. I mean, El Salvador is a beautiful place to come on vacation, to come work remotely. Especially if you’re stuck in an environment where it’s cold for half the year, you know, why not spend that half here in El Salvador, surfing and doing yoga in the evenings, and, you know, living with other bitcoiners. So, we encourage people to get out there. But also to, to really reflect on what the promise of bitcoin is, for people in the developing world.
A lot of Americans think, “Wow, bitcoin, you know, is good as a store of value, but we have PayPal, we have Venmo, we have all these other things, the banks are fine, you know, I don’t see why you need to use it for payments.” That’s only the case for like 5, 10 percent of the people in the world, the majority of people in the world have horrible banking systems, if anything at all. And so I think Americans are really going to underestimate how quickly bitcoin is going to take over the world. And I think if we’re not careful, we’re gonna be kind of the last one on the boat.
Mike, this has been an awesome conversation. I love hearing about this project and how it’s evolved. And obviously, your work has not only not gone unnoticed, it’s now been a catalyst for one of the most significant events in bitcoins history. Anything else that we should talk about before I let you go and get back to everything you’re working on?
Just let me know when you’re planning on coming down. Because I know you’d like the international scene. And I can’t believe you haven’t been down to visit us yet. Because it is right up your alley. So in so many ways, you need to come down and spend a couple of months there in El Zonte. at Bitcoin Beach. We actually just built out a podcast studio for people like you that want to come down and work from there, so just let me know when you’re coming.
Michael, thank you so much for your time. And I’m really excited to see what happens next. One really quick thought to wrap up this conversation. There’s obviously so much inspiring about the Bitcoin Beach story. And it’s a story that’s still being written right now. I just want to highlight how significant it is, how much it is a testament to the power of people to create ripples that change the world, just by doing things that make sense to them, and then telling the world the story of those actions. To reinforce this point, let’s just listen to the clip of President Bukele, discussing how Bitcoin Beach was influential in this whole movement.
Clip from President Bukele
You guys demonstrated that this is not something for rich people only. I mean, this is for everybody. And you guys demonstrated that a community can actually benefit from bitcoin. And now we’re going to demonstrate it in a country-wide scale. But of course, you’re the pioneers here. And hats off to you guys, because you had the courage to be the first here and you have done great. And actually, you have provided us with arguments, and with pictures, and with stories, and with everything that we need to have this bill passed.
More than El Salvador, what I’d love for you to take away from this is that if you have some idea, some way to change the world, some way to impact your life or the lives of people around you, just go for it. Figure out how to get the people who agree with the way that you see things to join forces and do something great, and then talk about it, because you never know where it’s going to lead. I don’t think that in 2019 when they started to do community projects funded by bitcoin, Mike and the folks at Bitcoin Beach thought that it would lead not only to helping a community survive COVID but then to a nation becoming the first nation to implement the bitcoin standard in the world in less than three years. But here we are. Anyways guys, I hope you’re headed into a great weekend. I appreciate you listening. Until tomorrow. Be safe, take care of each other, peace!