El Salvador and bitcoin: A new Senate bill sounds the alarm

Hello and welcome to Protocol Fintech. This Wednesday: naked bitcoin in El Salvador, #ChangeTheCode and the Axie Infinity DeFi hack.

out of the chain

Can you hear them?
They talk about us
Tell lies
Well it’s no surprise

The Go-Gos play Crypto.com Arena in Los Angeles today. That’s it, that’s the tweet.

—Owen Thomas (E-mail | Twitter)

Bitcoin is political in other ways

El Salvador’s adoption of bitcoin has been hailed by the crypto world. But it also set off alarm bells at home and abroad. Those bells are ringing now on Capitol Hill, where the Senate Foreign Relations Committee is asking how dangerous the Salvadoran bitcoin experiment could become.

Bitcoin is now a foreign policy concern. The committee passed a bill, El Salvador Cryptocurrency Liability Law, which would direct the State Department to assess the risks of El Salvador’s bitcoin policy and write contingency plans. It enjoys bipartisan support.

  • Senator Bill Cassidy of Louisiana argued that bitcoin as the official Salvadoran currency “opens the door to money laundering cartels and undermines American interests.”
  • It could “weaken U.S. sanctions policy, empowering malign actors like China and organized criminal organizations,” warned Sen. Jim Risch of Idaho.
  • The senators, including Bob Menendez of New Jersey, also repeated warnings about financial instability and the risks expressed by the bank of englandthe world Bank and the IMF.

The Salvadoran president says he trades bitcoin naked, and we don’t think he’s talking about his hedging strategy. It doesn’t help El Salvador’s case that its bitcoin policy is being pushed by an eccentric”bossy hipsterPresident with a controversial reputation.

  • Salvadoran President Nayib Bukele said he did not expect the US government “to be afraid of what we are doing here”.
  • The dollar was the country sole legal tender from 2001; bitcoin is now an alternative. Remittances are important to the country’s economy, and the high costs of money transfers are one of Bukele’s stated motivations for the Bitcoin movement.
  • Cassidy sparked an entertaining exchange on Twitter arguing that Salvadorans in the United States oppose the policy. A 2021 survey also found that most people in El Salvador do not want bitcoin.
  • “Maybe they don’t trust a president who brags that he traded Bitcoin ‘naked,'” Cassidy joked, referring to another tweet where Bukele bragged about how he traded Salvadoran bitcoin on his phone. Sometimes, Bukele replied, he even does “while in the toilet.”
  • Beyond his toilet business, Bukele isn’t exactly seen as a model of good governance. He got mixed up with the justice of the country and would have entered into agreements with notorious gangs.

El Salvador is a test case, in many ways. Is the Senate proposal exaggerated? “It’s not like El Salvador is displacing the global currency markets,” Rob Siegel, a professor at the Stanford Graduate School of Business, told Protocol. But again, bitcoin was seen as small and irrelevant once too. El Salvador’s bitcoin craze could set a dangerous example for other countries that resent their dependence on the dollar. The real goal could be to “nip in the bud” anything that jeopardizes the greenback’s role as the world’s reserve currency, Siegel said.

—Benjamin Pimentel (E-mail | Twitter)

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on the money

On protocol: The Greenidge Power Plant, a bitcoin mining facility, causes a ruckus in a small town next to Seneca Lake, and a group of locals don’t go down without a fight.

Socios have signed a sponsorship deal with Lionel Messi. the three-year deal for Messi to be the fan token company’s global brand ambassador worth 20 million dollarsaccording to Reuters.

Also on Protocol: The FTC says Intuit tricked customers into promising free tax with TurboTax, when many of them don’t. Intuit denied the allegations, saying the FTC’s arguments “just aren’t credible.”

Australian celebrities and the government are angry with Facebook, this time over crypto. The country’s celebrities and its Competition and Consumer Affairs Commission have said the social media giant don’t do enough to prevent crypto scams via fake advertisements.

$620 million in Ether was stolen from Axie Infinity’s Ronin Network. In one of the biggest crypto hacks, attackers stole 173,600 ether and 25.5 million USDC from the bridge used for the NFT-based game. Axie Sky maker Mavis has promised that customers’ money will be recovered or refunded.

Robinhood offers more trading hours for investors. The app is extending its trading day of four hours, allowing people to trade from 7 a.m. to 8 p.m. ET every day. The company reportedly intends to eventually allow 24/7 trading.

Apex Crypto has obtained a coveted BitLicense. Professional clients of the crypto investment service can now leave their users in New York State trade after acquiring the state’s virtual currency license, which is notoriously difficult to obtain.

Hashtag of the day: #ChangeTheCode

After climate groups including Greenpeace USA and the Environmental Working Group launched a campaign called #ChangeTheCode, the climate versus bitcoin mining debate has heated up again. But some members of the crypto community were upset with one person in particular: Ripple co-founder Chris Larsen, which contributed $5 million to the campaign. (It should be noted that Ripple promotes greener nature XRP’s consensus mechanism, which differs from the more energy-intensive proof-of-work mechanism used by most cryptocurrencies.)

Ryan Selkisfounder of Messariis not a fan. “Chris Larsen – who, in a fair society, would be in jail for the bad faith investor misrepresentations he and his team made regarding their XRP sales – is spending money attacking the industry that created its ill-gotten multi-billion dollar fortune. Judas,” he tweeted.

Coin center communication director Neeraj Agrawal questioned Larsen’s commitment to DeFi. “Perhaps he prefers a world where CEOs can centrally control the future of a cryptocurrency network,” he wrote.

Jake Chervinsky, policy officer at Blockchain Associationopted for the simple and impersonal route, implying that the campaign as a whole was flawed. “Bitcoin will always use PoW, end of story,” he noted.

—Lindsey Choo (E-mail | Twitter)

Just a question to Shamir Karkal, co-founder and CEO of Sila

Before launching Sila, a payment infrastructure service, Karkal co-founded digital banking service Simple in 2009.

When do you see crypto really being widely adopted for payments?

Financial services are a gigantic ocean, so crypto is only a very small part of it. Financial services are so huge that it takes a long time to change, and you might not notice the change for a while. Crypto for international payments has been around for a while with companies like BitPesa and BitPay and a few others – much more outside of the US than in the US. There is this old adage: “The dollar is our currency, but your problem”. It’s not that hard to find dollars if you’re in the United States, but in most parts of the world there’s a demand for dollars, but no way to get them. And that’s why crypto, especially stablecoins, has been super helpful.

I’ll give you an example: I bought a router for Helium protocol. I bought it from a manufacturer in China, and paid for it with USDC and thought, I don’t know what traditional payment systems might have worked other than cards. I mean, crypto isn’t cheap in many cases, especially with gas fees and all, but often times it’s actually comparable and much cheaper than using cards.

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Thanks for reading – see you tomorrow!

Norman D. Briggs