The Bitcoin President
When Jack Mallers took the stage for one final talk at the 2021 Bitcoin conference in Miami, an annual gathering of cryptocurrency entrepreneurs, enthusiasts, and evangelists, he started by making the standard libertarian pitch for the currency over traditional money.
Its fixed supply offered a secure hedge against ever-inflating fiat currencies, the tech CEO said, while the decentralized blockchain network it was built on removed the need for intermediaries that charge fees and surveil users.
Then, an increasingly emotional Mallers started to pivot. Nowhere were Bitcoin’s benefits more evident than the small, violence-wracked Central American country of El Salvador, he said. Through tears he talked about how Western Union fees were gobbling up the remittances that 2 million Salvadoran expats were sending home to their families. What was left over was being eroded by Federal Reserve–induced inflation of the U.S. dollar, which serves as El Salvador’s official currency.
With Bitcoin, the people of El Salvador at last had a chance to participate in a new kind of financial system: frictionless, stable, free from exploitation.
The climax of Mallers’s talk was a recorded message from El Salvador’s President Nayib Bukele, who announced to thunderous applause that he would soon be sending a bill to the legislature that would make Bitcoin legal tender. “We create our own future,” announced the president, and El Salvador is “a country for the future.”
Bukele isn’t a stranger to off-the-wall, attention-grabbing stunts, and his Miami announcement was no exception. It kicked off a wave of Bukele-mania within the cryptocurrency community. A head of state embracing the digital currency was the watershed moment many Bitcoin boosters had been waiting for. Soon enough they’d be flocking to the country to find their own fortunes in this promised cryptocurrency paradise.
Yet by the time that Bukele’s Bitcoin bill became law a few days later, eyebrows were being raised by more sober crypto-watchers. It contained few details and was passed with even less debate. Some of its provisions went beyond making Bitcoin legal tender and instead required merchants to accept it and taxpayers to cover the losses of Bitcoin holders.
El Salvador’s new Bitcoin law thus captures a lot about the style of its presidential sponsor: flashy, bold, heterodox, but also worryingly autocratic. For all his talk about bringing El Salvador into the future, Bukele’s methods often resemble the more traditional tactics of a populist autocrat.
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San Salvador and San Jose might be a world apart, but there are more than a few passing parallels between Bukele and the archetypal Silicon Valley founder typically stealing the show at tech conferences.
His background is that of an outsider. His parents were Palestinian immigrants to El Salvador. His father built the country’s first mosque. In typical millennial fashion, Bukele himself says he believes in God but adheres to no particular religion.
He’s a college dropout who left school to work at his father’s public relations firm. There, in addition to promoting concerts, he was tasked with spinning up youth marketing campaigns for the country’s communist guerilla movement turned leftist political party, the Farabundo Martí National Liberation Front (FMLN).
With that, he apparently found his calling. Soon enough he had the party’s backing to launch an ultimately successful 2012 bid for mayor of the small suburban municipality of Nuevo Cuscatlán, just outside the capital of San Salvador.
Like any good start-up founder, his political fortunes soon experienced exponential growth, and by 2015 he was running San Salvador itself.
It was as the capital’s mayor that Bukele really started to flesh out his political brand as one rich in populist gambits, pseudo-philosophical musings, and irreverent social media posts. He redeveloped San Salvador’s central market, which had been overrun by rival gangs, and posted pictures of his brightly colored socks on Instagram. He donated his mayoral salary to scholarship programs and urged the youth to take up skateboarding as an alternative to crime.
His campaign to illuminate every intersection in the capital with street lamps was pitched as both a straightforward anti-crime measure (fewer dark corners, fewer muggings) and an attempt to brighten the souls of city residents. “I’m talking about inspiration,” Bukele told journalist Lauren Markham in 2016. “I’m talking about something sublime.”
Tying it all together was a fiercely anti-establishment streak that led him to openly criticize the country’s much-reviled elites, even when they happened to be members of his own party.
All of this helped endear him to a Salvadoran voting public that was younger, social media savvy, and sick of the corruption and violence that permeated every aspect of life in the country.
“It’s a political quirk that’s relevant to a millennial identity,” says Mneesha Gellman, a professor at Amherst College, of Bukele’s social media presence. “Young Salvadorians are on Twitter, young Salvadorians are on social media, so I think it does enhance his connectivity.”
By 2017, Bukele was expelled from FMLN. The party claimed he had verbally abused a female member. Bukele said he was being punished for criticizing party leadership. Whatever the truth, his expulsion only bolstered his credentials as an uncorrupted, independent-minded doer.
In 2018, at the age of 37, he ran an independent bid for El Salvador’s presidency. His political platform, to the extent he had one, was narrowly focused on eliminating corruption, adopting the slogan, “There will be enough money when nobody steals.”
Bukele’s electoral opponents tried to paint him as a megalomaniac and an empty suit. His single-minded focus on corruption demonstrated that he lacked real ideas for how to fix the country, while his reliance on social media showed a worrying hostility to traditional press.
The charges didn’t stick. In February 2019, Bukele was elected with 53 percent of the vote, trouncing the candidates from the two major parties who’d held power since the end of El Salvador’s civil war in 1992.
In office, he has proven remarkably popular. Opinion polling frequently puts his approval ratings north of 90 percent, something almost inconceivable for most democratic politicians.
His continually avid social media presence explains part of his appeal. His Instagram posts mix intimate shots of Bukele with his wife and daughters with memes only the “too online” will get. TikTok videos show him “dabbing” in presidential regalia and inspecting the troops while rock and reggaeton music play in the background.
He calls himself “the coolest president in the world,” and while that might be a low bar, he seems to have earned the title.
It’s not all memes, of course. Bukele has also benefited from more standard sources of popular approval. Crime, and particularly murder, dropped sharply following his assumption of the presidency. He has expanded food aid to the poor and run a successful Covid-19 vaccination campaign.
His brash, youthful style has a dark side too. Bukele’s impatience with traditional republican checks on his own power has led to more than a few authoritarian episodes.
When the opposition-controlled Legislative Assembly rejected a massive loan he was seeking to buy police equipment, Bukele responded by briefly occupying the assembly floor with an escort of heavily armed police and soldiers.
That stunt provoked a rebuke from the country’s Supreme Court, which ordered him to cease his attempts at intimidating lawmakers. Bukele agreed. But when his infant New Ideas party won a supermajority in the assembly the following year, their first act was to vote to replace the attorney general and members of the Supreme Court’s Constitutional Chamber with Bukele loyalists.
His administration has also been no friend to the press, launching money laundering investigations into critical outlets, expelling reporters on supposed immigration violations, and announcing plans to “monitor” media figures.
Concerning as these developments might be for supporters of traditional democratic institutions and classical liberalism, they don’t seem to much bother the vast majority of El Salvadorans, who still hold their president in high regard.
“Many of his supporters basically think he is them, and his subjugation of his enemies feels, to them, like their personal victory,” wrote journalist Felipe De La Hoz for the Washington Post in May. “By extension, his supporters also take any criticisms of Bukele personally, or dismiss them as the feeble complaints of an indistinct mass of haters.”
That knack for forging a personal connection with his chosen audience has since come in handy as Bukele has set about attracting cryptocurrency investment to El Salvador.
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Within a few days of Bukele’s taped remarks in Miami, a bill making Bitcoin legal tender had been sped through committee without discussion and was approved overwhelmingly by El Salvador’s legislature.
The new law, which will go into effect on September 7, is exceptionally brief for such a major reform. It allows prices in El Salvador to be expressed in Bitcoin, lets the country’s residents pay their taxes with it, and exempts Bitcoin from capital gains taxes. It also requires merchants to accept Bitcoin for all transactions but entitles them to exchange the digital currency for dollars at whatever the exchange rate was when a transaction was completed. Many of the regulatory details were left to the executive branch to hash out at a later date.
Bukele celebrated the law’s passage with characteristic flair. Instead of a press release, he posted a picture of himself on Instagram with lasers shooting out of his eyes, a meme denoting one’s devotion to the digital currency.
His enthusiasm was widely shared within the cryptocurrency community. Bitcoin Twitter was soon humming with people asking about details of moving down to El Salvador. Waves of “Bitcoin delegations” started to make their way down to the country to meet with government officials and scope out business opportunities.
The general sense “within the industry is that this is unambiguously an amazing thing and everyone is really excited for it,” says Rob Viglione, cofounder of the blockchain platform Horizen. “I see in my Twitter feeds and my LinkedIn feeds that colleagues and people I know are going to El Salvador. Physically going. They’re super excited. They want to make investments. They want to help out.”
Part of that appeal, Viglione says, is the fact that a head of state, any head of state, is embracing cryptocurrency when so many other governments look on it with suspicion in the best of times.
El Salvador’s dependence on remittances (they make up 20 percent of the country’s GDP) and a population that is mostly unbanked, he adds, offers a huge opportunity for crypto businesses to attract customers eager for faster, cheaper ways to receive money from abroad.
“If you can get it right at a country-level, this could potentially scale and cascade across” the developing world, Viglione says, adding that Salvadorians would save millions of dollars in financial transaction fees.
Bukele’s individual attention to Bitcoin is also helping to boost investors’ confidence.
“He is overseeing the entire thing. He’s very excited to get this done,” says Darren Franceschini, COO of BlockBank, another cryptocurrency company that is currently looking to set up an operation in El Salvador. “The people we’re dealing with have direct contact with him. It’s not just a PR play from our experience there.”
Bukele has promised $30 in Bitcoin to anyone who downloads the government’s new digital cryptocurrency wallet, Chivo. He challenged companies to roll out thousands of Bitcoin ATMs and even touted El Salvador’s volcanoes as a cheap source of geothermal power that could be used for energy-intensive Bitcoin mining.
Helping the president sell it all is the same hip, ironic, pop-culture-literate persona that has endeared him to his own country’s voting public.
In his Miami speech, Mallers mentioned how his initial conservations with Bukele ranged from the promise of cryptocurrency to anime and life generally. When the president appeared on popular Bitcoin podcaster Peter McCormack’s show for an hour-long interview, the discussion flitted between their mutual love of Pink Floyd to whether Bukele would be able to accomplish his grand vision in the one term El Salvador’s constitution gave him.
But just as Bukele’s charisma often helps mask the president’s own authoritarian impulses, his charm offensive in the cryptocurrency community was also obscuring some unsavory elements of the legal tender law he forced through Congress.
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Examine any of the Federal Reserve notes you carry in your pocket—if you still carry cash—and you’ll see the words “for all debts public and private” printed on the front.
This phrase is commonly misinterpreted to mean that anyone you might decide to do business with is obligated to accept those bills. It does not. Unless you’re settling a previous debt denominated in dollars, U.S. law generally doesn’t force anyone to receive dollars as compensation. Such a requirement is outside the scope of typical legal tender laws.
Bukele’s Bitcoin law, in contrast, does obligate merchants to accept the digital currency, provided they’re technologically capable of doing so. It’s an awkward provision in a law widely celebrated by the libertarian-leaning cryptocurrency community.
“The motivating spirit behind Bitcoin was this idea of encouraging more free choice in currency and having currencies that are independent of government,” says George Selgin, director of the Cato Institute’s Center for Monetary and Financial Alternatives. “Here you have some Bitcoin enthusiasts applauding a law that would impose Bitcoin on people.”
Bukele has waved away these criticisms by pointing to the clause in his legal tender law that entitles people to receive dollars from the government in exchange for the Bitcoin they’re now forced to accept. The same clause, he stresses, locks in whatever the dollar-to-Bitcoin exchange rate is at the time that a transaction is completed. This prevents merchants from losing money if they are holding onto Bitcoin when its value against the dollar drops.
That might protect the individual holders of Bitcoin, says Selgin, but it does so by shifting the downside risks of the volatile currency onto Salvadoran taxpayers as a whole. The potential losses they’re exposed to are huge, given that people will be most eager to get dollars for their Bitcoin when the price of Bitcoin is falling.
“It’s the smaller people, the less well-to-do, who are ultimately bearing the risk,” says Selgin, something that’s reminiscent of the worst fiat currency regimes in history.
Combined, these features make El Salvador’s Bitcoin law a neat encapsulation of Bukele’s governing style. It’s an experimental policy sourced in the president’s youthful fixation on all things digital and popularized to its intended audience by his own charisma and exceptional promotional talents.
The speed with which the law was passed shows just how much power the young head of state has managed to secure for himself during his short time in office. The coercive aspects of the law, meanwhile, speak to Bukele’s broader willingness to use force and state power to further his vision for his country.
Whether El Salvador’s experiment with Bitcoin will prove a success and a model for other countries is still a big “if,” something Bukele himself seemed to hint at during his brief comments to that crowd of Bitcoin enthusiasts in Miami.
“Great ideas are beautiful and have great power,” he said. “Like most beautiful things, they can also be more fragile than we think.”
Christian Britschgi is an associate editor at Reason magazine.