Jack Mallers announced yesterday that he’s helping El Salvador adopt bitcoin as legal tender. This is huge news for many reasons, most importantly that it proves bitcoin’s ideology of banking the unbanked, helping people take sovereighnty over their lives and giving equal opportunities to everyone.
Jack also said a very important thing after the announcement, the president of El Salvador is just another node on the network. Bitcoin doesn’t care. We’re all equal.
Here’s an analysis by Caitlin Long. Great thread on why El Salvador adopting Bitcoin as legal tender may have big implications wrt commercial law, banking, & accounting, beyond its borders: https://threadreaderapp.com/thread/1401334421773504517.html
1/ THREAD ABOUT A HISTORIC DAY in #bitcoin: #ElSalvador president publicly announced support for legislation to make #BTC legal tender. *IF* it does become law, it wld have many secondary effects. Steel yourselves bc a big fight on this probably coming tho
2/ I dunno anything about politics in #ElSalvador, but the world is about to pressure it given what’s at stake (see details below). But before turning to that, SERIOUS HATS OFF🤠to President Bukele, @JackMallers & @Blockstream for pulling this off. Guys this is REALLY big!!! 🙏👋
3/ OK let’s dig in. Here’s a tl;dr: *IF* #ElSalvador adopts legislation to make #bitcoin legal tender, bitcoin:
* likely gets status as “money” so treated on par w/ foreign currency by banks
* possibly gets “cash” accounting treatment under USGAAP/IFRS (solves #BTC adverse acctg)
4/ That’s why this is likely gonna be a knockdown fight: it MAY be a back-door way to enable banks to handle #bitcoin + MAY solve #bitcoin‘s lower-of-cost-or-market acctg problem. Politicized immigration debate in US probably comes into play too. Incumbents WILL try to block this
5/ What’s the big deal–what’s “legal tender” anyway? It’s a commercial law term (means citizens must accept “X” if offered in payment of an obligation in exchange for delivering property). Legal tender is key to commercial law, which is THE foundational layer of any legal system
6/ In 2018, some in #Wyoming wanted to make #bitcoin legal tender, as Wyoming had already done w/ gold & silver. Article 1 Section 10 of US Constitution mentions gold & silver explicitly, but making anything else legal tender in US requires amending the US constitution.
7/ So, it wasn’t possible to make #bitcoin legal tender in the US without amending the US constitution. I thought at the time another country might do it though, & thereby open the door to treatment of #bitcoin as “money” under commercial law + “cash” under acctg rules.
8/ TO BE CLEAR, I’m not an accountant so making an educated guess. Accountants, please chime in!! #bitcoin is treated as an “indefinite intangible” which means lower-of-cost-or-market, but if it’s a foreign currency it gets mark-to-market up & down. @michael_saylor will be happy.
9/ And, if I’m right, other corporate treasurers could also buy #bitcoin w/o facing its punitive accounting treatment–they’d now account for it like any other foreign currency. No more adverse accounting=>more companies start holding #bitcoin. But accountants, please chime in!
10/ Back to the law. Commercial law lays out the rights & obligations of parties when exchanging property + establishes a road map for judges to adjudicate disputes. @Andrea_Tosato was first to identify the REALLY REALLY BIGGIE 🎉🚀:
11/ YEP YOU GOT IT–*IF* #ElSalvador does pass legislation to recognize #bitcoin as legal tender, #BTC would v likely become *MONEY* under US commercial law (law.cornell.edu/ucc/1/1-201: “Money means a medium of exchange currently authorized or adopted by a domestic or foreign govt”)
https://www.law.cornell.edu/ucc/1/1-201
12/ What’s the significance? Well, it means #bitcoin would gain special status in banking systems globally. Banks would likely treat it as any other foreign currency. #Bitcoin *MAY* get back-door favorable treatment under bank capital requirements (Basel 3, etc).
13/ The knock-on effect of #ElSalvador‘s announcement is that other countries may now follow. One likely candidate has always been Russia, which has been gradually de-dollarizing since before the 2008 financial crisis. Will be v interesting to watch the foreign policy moves🍿👀🧐
14/ However this plays out, it’s a historic day for #Bitcoin & it advances adoption no matter how it plays out. Wonderful for all involved. Congrats to everyone–most especially to the people of #ElSalvador! 🇸🇻💪
Of course, Peter Schiff had a different opinion about the announcement:
Bitcoin bugs have heralded the announcement that El Salvador, one of the poorest and smallest nations in the world intends to adopt #Bitcoin. Yet they have dismissed as insignificant the decision of China, one of the wealthiest and most productive nations in the world, to ban it.
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