The Breakdown - It’s Official: A Second Country Has Made Bitcoin Legal Tender

Starting point is 00:00:00 Even if this is an opportunistic move that is more about trying to move away from the CFA Fran than trying to move towards Bitcoin, the fact that Bitcoin exists and is a tool for that attempt to gain more monetary independence is in and of itself powerful. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.com. Arculus and FTX, and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, April 27th, and today we are talking about the second nation

Starting point is 00:00:42 to officially make Bitcoin legal tender. Now, a couple quick notes before we get into that. First, you know the spiel, give the pod some love wherever you listen to it, and if you want to get into the conversation, join us on the Discord. It's truly an awesome community, and I'd love to see you there. But second, if you have not yet registered for CoinDesk's consensus event, I sincerely suggest you do. It's happening between June 9th and the 12th in Austin, Texas, and is the event that covers the full spectrum of what this industry has to offer from Bitcoin to blockchain to Web 3 to Metaverse to all these different buzzwords. It's for new people, old people, and everyone in between. What's more, they just announced that Bologi Shrinivasan has been added and you know he

Starting point is 00:01:26 always has something interesting to say. If you do want to register, use code breakdown to get 15% off your pass, and you can do that at coin desk.com slash consensus 2022. All right. So today, we have an absolute flurry of jurisdictional engagement with Bitcoin and crypto. It is just so clear that this is one of the biggest themes, if not the biggest theme for the industry this year. Governments from city to the nation state level and even beyond are taking this technology. seriously, grappling with how to fit it into public policy regimes and figuring out if it needs to change those regimes. So let's start with an exciting follow-up to a story we discussed earlier this week. The Central African Republic does, in fact, seem to be adopting Bitcoin as legal tender.

Starting point is 00:02:14 A bill that had been jointly prepared by the Minister of Digital Economy and the Minister of Finance and Budget, and which the National Assembly had previously passed, was just signed into law by the president. The bill establishes a legal and regulatory framework for cryptocurrencies in general, but also makes Bitcoin specifically legal tender alongside the existing CFA franc. A little bit of quick background here. I still owe you guys a full show about the CFA at some point, but CFA is an acronym for the African financial community, but in French, and it's the name of two currencies, the West African CFA franc and the Central African CFA franc. Between them, these currencies are used in 14 countries in the middle and western part of the continent. These francs were created in December

Starting point is 00:02:57 1945 at the close of World War II. As part of ratifying Breton Woods, the French franc was devalued in order to set a fixed exchange rate with the United States dollar. France then created these new currencies ostensibly, or reportedly at least, as a way to spare their colonies that devaluation. However, since 1960, these CFA currencies have been devalued 99.9% against first the French franc and later the euro. Their biggest criticism remains post-colonial control and influence. The currency is still deeply tied up with the French treasury, making it not really a sovereign currency for the nations who use it. In January 2019, after the Italians criticized France for the CFA franc, accusing them of impoverishing Africa with it, France booted Italy's ambassador to Paris.

Starting point is 00:03:45 That said, later that year, the president of France and the president of the Ivory Coast, announced a wave of reform, including replacing the West African CFA franc with a new currency called the Eco. In May 2020, the French National Assembly also voted to end French engagement in the West African CFA Frank, which means that the countries using it will no longer have to deposit half of their foreign exchange reserves with the French Treasury. Still, there is clearly here an incredibly complicated post-colonial relationship, and that makes the CAR's decision to add Bitcoin as legal tender all the more interesting. The financial Minister Ervay Ndoba said last week, there's a common narrative that sub-Saharan African countries

Starting point is 00:04:24 are often one step behind when it comes to adapting to new technology. This time, we can actually say that our country is one step ahead. Noel Atchison from Genesis says it is interesting that it is the first of the CFA countries to take a step away from French monetary hegemony. There are 13 others, not to mention several other small economies that are probably paying attention here. Anita Approach makes another interesting point. Quote, I can't tell how sincere this move by the the presidency is, how much they understand Bitcoin, time will tell. But it's interesting to see how one country after the other thinks about how Bitcoin could help them gain independence. Anita's point which I really like is that even if this is an opportunistic move that is more about trying

Starting point is 00:05:05 to move away from the CFA Franc than trying to move towards Bitcoin, the fact that Bitcoin exists and is a tool for that attempt to gain more monetary independence is in and of itself powerful. This one isn't getting the same sort of press and play as El Salvador, partially because it's not the first, partially because there isn't a naive Buceli who has such a command of social media, and partially just because of just how poor the Central African Republic is. But it's still going to be another fascinating case study to watch in the months to come. Looking for ways to step up your crypto game? Then go with Nexo. For starters, you get free crypto for each purchase or swap. How about earning guaranteed yields? Up to 17.

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Starting point is 00:07:20 Let's hop back across the Atlantic to Brazil. The Brazilian Senate has approved a bill regulating crypto transactions. This is the institution regulation bill which sets up a regulatory. framework and designates virtual service providers as having similar responsibilities to prevent financial crimes as regular financial institutions. The bill removes regulatory oversight from the Brazilian Securities and Exchange Commission in favor of a new regulatory agency and also establishes a new class of digital asset financial crimes that are punishable by a penalty of between two and six years in prison. The bill has passed the Senate and will now go to the Chamber of Deputies,

Starting point is 00:07:55 which is the Lower House of Parliament, for a vote before being passed to the executive branch to pass or veto the bill. In some ways, this one is notable for its boringness, which is not too dissimilar from our discussion of Panama a few days ago. This is simply a country looking at these things that certainly exist and continue to grow, and figuring out how they have to adapt their regulatory framework to accommodate them. Now, staying in this region, we move down to Buenos Aires. They're undergoing a city program called Buenos Aires plus a digital modernization and streamlining plan. The rhetoric of the program focuses on the idea of streamlining city bureaucratic interactions for citizens in the private sector. Unofficial leading the project says, enough of wasting time,

Starting point is 00:08:35 you have to give it back to the people, to the private sector, so they can use it to work, to undertake, to develop, to generate work. One part of this that we knew previously about was a digital identification program, which hopes to centralize various state documentation and identity functions into a self-sovereign digital identity application hosted on smartphones and using blockchain security. We don't know all that much about it, but we know there are going to be some interesting people like Santiago Siri who are working on it. Another part that was just announced, however, is that residents will be allowed to make tax payments in crypto. The way that this will work is that the city will accept pesos from local crypto companies who will manage the conversion.

Starting point is 00:09:11 In other words, they're not taking crypto directly, and they're very clear that they're not holding crypto on their balance sheet at this stage. But in many ways, it feels to me that in these three stories that we've just covered, we've heard three distinct and different parts of this larger jurisdictional crypto conversation. In Buenos Aires, as we just discussed, we have crypto as a forward-looking technology that can both make things more efficient, but also attract or support forward-lookers in the economy. In Brazil, we have legislation that recognizes that crypto is here. It's not going away, and so it needs to be fit into a public policy framework. And in the Central African Republic, we have crypto as a mechanism to pry power away from former colonial and geopolitical

Starting point is 00:09:49 entanglements. So what about the U.S.? Two different things happened or were announced this week that show the breadth of debate in this country. In Fort Worth, the city is setting up to become the first city to mine Bitcoin. They're partnering with the Texas Blockchain Council to set up three antminer S-9s within the Information Technology Solutions Department Data Center at the Fort Worth City Hall as a pilot program. The blockchain council donated the machines and the city council voted unanimously on Tuesday to set up the program. Mackenzie Seagalos, a tech reporter at CNBC, says, Fort Worth mining Bitcoin inside its city hall building is seen by some as effectively de-risking both Bitcoin mining and Bitcoin treasury strategies for every other mayor in the country.

Starting point is 00:10:33 Now, I've seen some criticism of the small size, just three miners, but come on, this is how all things start in the public sector. My take is that this was always going to be what the first steps to a city mining Bitcoin would look like. What matters is not how much Bitcoin the city mines, but the transition from Bitcoin being something to be feared, to something to be ridiculed, to be something to be interested in, and eventually adopted. Mayor Maddie Parker said, with blockchain technology and cryptocurrency revolutionizing the financial landscape, we want to transform Fort Worth into a tech-friendly city. Today, with the support and partnership of the Texas Blockchain Council, we're stepping into that world on a small scale while sending a big message. Fort Worth is where the future begins.

Starting point is 00:11:15 These small but powerful machines mark Fort Worth's larger commitment to becoming a leading hub for technology and innovation. Mayor Parker said in a video that she wants to make Texas the crypto capital of the world. But as I said, there is another end of the spectrum, and on that other end is the New York State Assembly. Last night, they passed a bill to block new crypto mining facilities that use non-renewable energy sources from setting up in the state. It's a two-year moratorium on new firms that mine using a carbon-based energy source. It also prohibits renewals for existing permits if the renewal applicant wants to expand their mining using these types of sources, and it also calls for a generic environmental impact statement. As has become the norm, the crypto industry fought

Starting point is 00:11:58 tooth and nail on this one, and it passed very narrowly 95 to 92. I've seen a fair bit of reporting that this is the crypto industry not being willing to be regulated at all, and that's not my interpretation. The reason that I, for example, pushed against it as a New York State resident was that, one, I want more, not less crypto business here and we're already behind, thanks to the BitLicense. Two, I think that a lot of the opposition comes from a knee-jerk Bitcoin equals bad for environment sensibility, rather than deep engagement with the issues. Jake Trevinsky tweeted, the infrastructure bill debate in D.C. was notable for many reasons, but chiefly because Congress didn't really learn about crypto until they had to take that vote. Watching the New York Assembly

Starting point is 00:12:39 right now, it's obvious the same happened in Albany this week. The third reason I fought against this bill was that I think this sort of understanding and research should come before, not after moratoriums. Again from Jake. Good legislative process is conduct a study to fully understand the issue, consult key stakeholders and experts in the public and private sectors, and then start drafting. New York State on crypto mining, we need a total and complete shutdown on permits until we can figure out what is going on. Now, all of that said, I do not think this is some cataclysmic thing, and I don't think that the people pushing it, including the bill's architect, Anna Kelly's, represent anything close to anti-Bitcoin villains. This is a relatively narrow bill. Doesn't prohibit

Starting point is 00:13:20 people from mining in their homes. It doesn't even prohibit the existing miners from doing what they do. It's hardly a ban in any stretch of the imagination. That said, I do think it will send a signal to crypto firms and individuals that New York still isn't welcoming. However, there is a chance that it sets up an opportunity to actually show how the crypto industry can work with progressives in a sort of hostile state to make progress on these issues. Now, that hope is clearly coming from the perspective of someone in the state who wants to see it improve, and I don't expect most of the industry to feel the same way or be willing to be patient. I do think that it's useful to flag something here that I saw as a prospective fault line for these types of debates going

Starting point is 00:13:59 forward. One notion that I saw from many Bitcoiners was that this legislation was dumb because it just means miners will move to less hostile places, and actual climate goals won't be met. That isn't wrong. It's absolutely what will happen. But it also fails to recognize the inherent regionalism of politics. New York state politicians are not primarily concerned with the environment. They're concerned with their state's impact on the environment. They're focused on the part of the environment that they have jurisdiction over. That's not being cynical, by the way. I'm sure there are a of politicians in New York who actually do wish to think in terms of the big picture and achieving overarching climate goals, not just to check some box saying they did something. But the mandate of

Starting point is 00:14:38 there and in fact any political office is limited to what they can control. I think in the same way it's naive for New York politicians to think that Bitcoin mining won't just flow to where it's more welcomed. It's naive for us Bitcoiners to think that New York politicians or any politicians are going to in any regular situation put the overall good ahead of their specific purview and field of vision. Still, I do think the quote-unquote right policy for a progressive, environmentally focused jurisdiction regarding Bitcoin mining is to attract it, engage with it, and incentivize it to use renewables, to learn how it can actually be a useful tool in the renewable industry. I don't think we're as far away from that as

Starting point is 00:15:15 it might seem. And I hope that during this moratorium, New York State can move a little bit closer. But to wrap up, it's clear that across all of these stories, the one common thread is that crypto is on the agenda. Bitcoin is becoming. more woven into the fabric of global currency systems. Mining is an issue that every jurisdiction that has energy will have to deal with at some point in time. And the crypto lobby is loud and growing stronger every day. That means for us, among other things, is that it's going to continue to be interesting. For now, I want to say thanks again to my sponsors, nexus.io, arculus and FTX. And thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.

Starting point is 00:15:56 Hey, Breakdown listeners, come join CoinDesk's Consensus 2022, the festival for the decentralized world this 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, C-Z, Punk 6529, and Joe Lubin to name just a few. Use code breakdown to get 15% off your pass at coindesk.com slash consensus 2022.

The Breakdown - It’s Official: A Second Country Has Made Bitcoin Legal Tender

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