The Breakdown - Did a Second Nation Actually Just Make Bitcoin Legal Tender?

Starting point is 00:00:00 It's pretty clear that people aren't bidding on Bitcoin right now because they expect more treasury announcements or more nation-level adoption. But that's a lot different than being willing to write off narratives in terms of their place as a long-term reason and motivation for Bitcoin as a whole. It's entirely possible that despite the fact that they are not driving markets right now, treasury adoption among corporations and nation-state-level adoption for a variety of reasons could be some of the most powerful forces for shaping Bitcoin's future. Welcome back to The Breakdown with me, NLW.

Starting point is 00:00:33 It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexus.io, Arculus, and FTX, and produced and distributed by CoinDesk. What's going on, guys? It is Monday, April 25th, and today we are digging into the question of whether a second country has actually made Bitcoin legal tender. as was all the chatter on Bitcoin Twitter this weekend. First, however, a few housekeeping notes. There are two ways to listen to the Breakdown Podcast. You can either subscribe via the Coin Desk Crypto Podcast Network feed, which has this show plus other great CoinDesk shows,

Starting point is 00:01:14 or if you just want the breakdown, you can listen to the Breakdown-only feed. They both come out the same day with CoinDesk's feed coming out in the afternoon and the breakdown-only feed coming out in the evening. In any case, if you're enjoying the show, I would love if you left over, rating or a review, or if you want to get deeper into the conversation, come join us on the Breakers Discord. The Discord is at bit.ly slash breakdown pod. Lastly, a disclosure, as always, in addition to them being a sponsor of the show, I also work with FTX. So here's a pattern that I've observed with a few of the last big Bitcoin narratives. First, a narrative emerges around

Starting point is 00:01:52 what might drive Bitcoin adoption. That narrative is driven by some combination, of speculation and chatter in the normal places like Bitcoin Twitter, and one key catalyst which people start to extrapolate to all the other actors like them. The speculation shifts to all of the follow-on adopters that will come, the dominoes that will fall, if you will. But then they sort of don't ever come. One version of this, of course, is the Bitcoin as a treasury asset for corporations' narrative. At the beginning of fall 2020, micro-strategy set this.

Starting point is 00:02:27 off with Michael Saylor's innovative Bitcoin buy. There were a few small follow-ons. Square added some Bitcoin to its balance sheet, although not nearly in the same percentage as micro-strategy. We also had firms diversifying into the asset class like Mass Mutual's Bitcoin purchase. But really, it wasn't until Tesla the next February put Bitcoin on its balance sheet that the next big domino had fallen for that narrative. Unfortunately, with Elon's seeming back to tracking around Bitcoin a couple months later, which it's worth noting wasn't Tesla selling their Bitcoin, but just simply saying that they weren't going to accept Bitcoin for purchase of Teslas as they had previously promised to do, it really put a halt to that narrative altogether.

Starting point is 00:03:13 Pretty soon, other things took over. In May, we had the Bitcoin mining ban, which really would dominate the next couple of months in terms of understanding how that was likely to play out. And then, of course, there was this big new thing that happened, which was El Salvador's introduction of a law to make Bitcoin legal tender. That new narrative started this whole narrative cycle that I've just been describing over again. Remember, as soon as El Salvador's president, Naïbe Buckele made this announcement, you saw a slew of central and South American politicians who chucked laser eyes on their Twitter profiles and started talking about Bitcoin and Bitcoin policy publicly. There has been a ton of debate about El Salvador specifically since then,

Starting point is 00:03:53 but there's also been a big lingering question of who, if anyone, is the next to the next thing. country to make this sort of adoption. So let's check in on one of the countries that seemed like it might be a good candidate in Panama. At first, people thought this was going to be the next legal tender bill, but it became clear pretty quickly that it wasn't. Instead, Panama's Bitcoin and crypto bill is about adopting a regulatory framework for crypto assets in the country. From the congressman Gabrielle Silva, who introduced it, the bill seeks to, quote, give legal stability to crypto assets in Panama and develop the crypto industry in the country to attract more investments and generate more employment. In addition, the bill seeks to have the

Starting point is 00:04:31 Panamanian government adopt blockchain, quote, to increase transparency and efficiency in procedures. Well, last week, that bill moved forward. Panama's Legislative Assembly's Economic Affairs Committee approved the bill. Silver tweeted, Crypto law approved in first debate. This project is important because gives legal clarity to the optional use of crypto assets and digital economy platforms, creates employment and promotes financial inclusion. Look for blockchain technology to be used in the public sector. The project underwent some changes in the first debate. For me, it can be improved. We await your comments so that we can improve it in the second debate. Moises Ghali, a Panama government blockchain advisor, also did a threat about the bill. He wrote, and I'm summing all this up,

Starting point is 00:05:16 not directly quoting, that some of the key points include the use of crypto assets as payment as a, quote, means of expression of contractual and monetary freedom in Panama. Basically, crypto can be used for normal payment things. He, like Silva, goes to pains to say that this law is not compelled, suggesting to me that they have been acutely aware of the criticism of El Salvador's Bitcoin legal tender law compelling merchants and individuals to use it. The bill also specifically calls out what is frankly a sort of weird set of assets as those who can be used for this type of payment, including XDC, XRP, Algon, Stellar, Iota, Elron, Bitcoin, Ethereum, and Lightcoin. frankly, it feels like a leftover list from a bill that might have been started a few years ago.

Starting point is 00:05:58 However, one, it's possible to remove cryptos from that list or add new ones. And two, Moise says, quote, these crypto assets were not selected randomly. It's a combination of first, second and third generation technologies that provide utility to the current financial system, Web 3, trade and finance, settlement between currencies, smart contracts, fast transactions, etc. I still have my skepticism about that list, but that's the word from this official government advisor. Now, on top of all this payment stuff, this bill would also create a license regime for crypto companies so that they could operate knowing where they stood. It makes provision for the

Starting point is 00:06:32 government to create its own exchange and or a wallet. It provides for more education for the public, and generally tries to set Panama as a leader in this space. The end of the thread reads, Panama seeks to be the hub of Latin America regarding these new technologies, to be a positive example for the region and even the world. We have seen how the international monetary Fund, the World Bank, the BID, the World Trade Organization, central banks around the world, and giant institutions have studied, analyzed, and even implemented these new technologies. Just as humanity evolves, so do the economy and technology. We are experiencing the fourth industrial revolution and at the same time a paradigm shift

Starting point is 00:07:09 with the new financial system. As if two worlds collide into a new one with a brighter sun. Gradually, then suddenly, let's make the world a better place implementing these new technologies with the focus on the positive growth of humanity. So what happens now? Well, the bill will now be discussed by the full assembly during a second debate, during which it can be modified, and then it's reviewed at a third and final session, and if approved, sent to the Panamanian president who can veto or sign it. So this is clearly a more modest bill than something like El Salvador's Bitcoin Legal Tender Bill.

Starting point is 00:07:40 It looks to me like a government grappling with how to include these new assets while still trying to be a little early to attract capital and business. Given that they're name-dropping some of the international institutions that have been most critical of El Salvador, they're also clearly taking cues from how those bodies have received El Salvador's move. However, over the weekend, rumors started blowing up that we were also seeing another even closer to El Salvador-style Bitcoin adoption. Looking for ways to step up your crypto game? Then go with Nexo. For starters, you get free crypto for each purchase or swap.

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Starting point is 00:09:15 The breakdown is sponsored by FTXUS. FtXUS is the safe, regulated way to buy and sell Bitcoin and other digital assets, with up to 85% lower fees than competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. When you trade NFTs on FTCs, you pay no gas fees. Download the FTCS app today and use Referral Code Breakdown to support the show. On Sunday, Forbes Monaco published, First African Country adopts Bitcoin currency.

Starting point is 00:09:55 quote, the Central African Republic has become the first country in Africa to adopt Bitcoin as a payment currency. In a worldwide first, the National Assembly unanimously adopted the bill to help with the country's plan for economic recovery and peace building on track. The article says that the two parliamentary groups, the MCU and the MOU and I, were initially skeptical but then voted in favor, quote, to support the nation's best interest, to benefit from prosperity and stability. Now, if that doesn't sound to you like super real journalism, you're not alone. Most of the pushing of this narrative initially cited this piece and was filled in by what is a popular engagement spot, which is, of course, the Bitcoin headline guy. This has been filled by various actors throughout time. It tends to shoot first and correct later, if at all. And boy, were they all over this one.

Starting point is 00:10:46 Of course, some folks were more skeptical and interesting. but waiting for more details. Danny Scott, the CEO of Coin Corner, writes, so Central African Republic are rumored to have made Bitcoin legal tender. Seventh poorest country in the world by GDP, 4.8 million people. This will be interesting, if true. Bitcoin I Haudel writes, it's hard to really know much about CAR. It's a large country, but government services, electricity, and roads aren't really widespread outside of the capital. Any data from CAR is usually nothing more than a best guess. Alex Gladstein from the Human Rights Foundation writes

Starting point is 00:11:21 Trying to get clarification on what is happening in the Central African Republic regarding Bitcoin. We'll try to gather info and post an update later. Either way, interesting to note, this is one of 15 countries in Africa still controlled in part by France through the CFA system. Bitcoin are friends in French-speaking West and Central African say the announcement is not newsworthy, so likely not another El Salvador. But I guess we'll find out more this week. Now, the CFA Monetary Alliance is an economic system we should really do more.

Starting point is 00:11:48 on sometime on this show. But as Alex points out, one country from that alliance breaking out of it would be somewhat surprising. Now later, other sources were cited that made it seem like this is actually a little bit closer to something like Panama than El Salvador. Samson Mao, formerly of Blockstream, who is now completely focused on nation-state level adoption, tweeted, here's a better source than Forbes on adoption in the Central African Republic. It's crypto, not Bitcoin. There is a law, and it passed, not a draft. They want new tech to buy. bypass legacy financial systems. Central banks are bad. Mixed bag. On top of any of the real details, there's also a lot more skepticism in the context of the Central African Republic about the viability

Starting point is 00:12:30 of a Bitcoin plan than even there has been in a place like El Salvador. Fuzzy trousers on Twitter writes, other fund Central African Republic facts for context. GDP per capita equals 448, among the 10 worst in the entire world. 75% have access to running water. 27% have access to to a toilet. 14% have access to electricity and 13% have access to the internet. But sure, Bitcoin is the answer. Now, it's hard for me to exactly get a handle on this one without knowing more about the situation in the Central African Republic. Despite its small size, the political situation is immensely complex. They are currently embroiled in something of a civil war or at least low-grade but ongoing armed violence. I will try to stay on top of this

Starting point is 00:13:14 story to see if and what more comes out. And if it really does advance our understanding of the game theory of these smaller countries trying to pass pro-Bitcoin and pro-crypto legislation. One more that's kind of on the opposite end of the economic spectrum, given that we're sort of doing a geopolitical Bitcoin roundup. In France, the sitting president Emmanuel Macron has beat his biggest contender, Marine Le Pen, for the French presidency. The final tally in the second round of elections was Macron with 58.54% and Le Pen with 41.46%. This election was being watched with more intensity than usual. Part of that is the context of a fear in markets of another Brexit-style shock should Le Pen have been elected. But the other read on it was that there was a lot of Putin's fingerprints

Starting point is 00:14:00 in this election as well. One take was that this was a victory against him. Rick Wilson, who's the co-founder of the Lincoln Project in the U.S., said, McCorn didn't just beat Le Pen, he crushed her. There's no upside for the end of the decades-long Le Pen investment by Putin and others. The phony populism couldn't hide the inner core of her pro-Putin, anti-immigrant, not-so-covert racial appeals. Putin was, as Macron ably pointed out, in one of the most decisive debate performances in history, her banker. Michael McFaul, the former U.S. ambassador to Russia, says Le Pen in France and Jonsa and Slovenia losing on the same day is a giant victory for the renewal of democratic values

Starting point is 00:14:35 in Europe and a huge setback for populist nationalism. Maybe the global tide is turning. However, many were quick to point out that that populist nationalism just keeps getting more powerful, although it didn't in this case overturn the center-right Macron. Five years ago, Le Pen got 34% of the vote, and this time it was 41.5%. Now, clearly, there's a much larger European and global geopolitics story, but that's also a bit outside of the scope of today's show. However, since there is going to be an old new president in France, it's worth looking at his opinion of Bitcoin. First, his competitor, Le Pen, was anti-Bitcoin back in 2016, stating that it was an idea that emanated from, quote,

Starting point is 00:15:14 the powerful Wall Street business lobby, which is a bit of a head scratcher. Since then, her stance has softened somewhat, but she still wanted strict regulation. Now, in terms of Macron, the block actually recently did a piece all about this. The TLDR is that Macron seems to be broadly for this pan-European policy approach with Mika out of the EU parliament and a robust regulatory environment while also still couching it in the language of France supporting innovation. In a recent interview with a French crypto website, Macron said France will pay close attention that the text does not prevent innovation and remains as neutral as possible in terms of technology, referring to the Mika legislation. He also said,

Starting point is 00:15:51 What is happening should also lead us to move much faster on the subject of the digital euro. My desire is for Europe to be a central player in contrast to what has happened so far. I want to specifically ensure that European players master the technological building blocks associated with Web 3 and the Metaverse so as not to depend on American or Chinese giants. He said that broadly this was a part of developing France's entrepreneurial and technology, sector. Quote, this is why I've set the objective by 2030 of emerging 100 French unicorns and 10 European giants. French innovation, audacity, and genius have made our greatness and our success. So I sort of think more business as usual when it comes to what France is likely to represent in the

Starting point is 00:16:31 European crypto discussion. Now, finally, as we wrap up, I want to go back to the point that I was making about these Bitcoin narratives, and I want to be clear that I'm not cynical. These last two narratives in terms of Bitcoin as a corporate treasury asset as a reserve asset, and Bitcoin as a national asset for countries or even just emerging markets. These both involve extremely laborious change processes with a huge number of stakeholders, tons of consequences, and many pitfalls and traps along the way. Of course, all of us who are on Twitter day and day out and listening to this podcast and reading newsletters, we live in a world of expectations of speed. We live at internet speed. We want change to happen at that speed as well, but that's just not how it works.

Starting point is 00:17:15 I certainly think that in the short term, we can judge narratives on their ability and favorability with market participants. It's pretty clear that people aren't bidding on Bitcoin right now because they expect more treasury announcements or more nation-level adoption. But that's a lot different than being willing to write off narratives in terms of their place as a long-term reason and motivation for Bitcoin as a whole. It's entirely possible that despite the fact that they are not driving markets right now. Treasury adoption among corporations and nation-state-level adoption for a variety of reasons could be some of the most powerful forces for shaping Bitcoin's future. For now, I want to say thanks again to my sponsors, nexus.io, Arculus and FTX. And thanks to you guys for

Starting point is 00:17:57 listening. Until tomorrow, be safe and take care of each other. Peace. Hey, breakdown listeners. Come join CoinDesks Consensus 2020, the festival for the decentralized world, June 9th through the 12th in Austin, Texas. This is the only festival showcasing and celebrating all sides of blockchain, crypto ecosystems, Web 3, and the Metaverse, and is designed for crypto-newbies, investors, entrepreneurs, developers, and creators. Don't miss speakers like Kathy Wood, SBF, CZ, Punk 6529, and Joe Lubin to name just a few. Use code breakdown to get 15% off your pass at coindesk.com

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The Breakdown - Did a Second Nation Actually Just Make Bitcoin Legal Tender?

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