El Salvador Pushes Its “Bitcoinization” Case at Conference

In the United States, cryptocurrency is seen as a speculative asset class — a bet against monetary irresponsibility and central banking; and a bet for personal autonomy and liberty. If you ask a crypto investor why they invested in crypto, they’ll probably speak plainly: to get rich.

However, for the rest of the world, cryptocurrency (and digital assets at large) have garnered a different reputation — they are increasingly seen as a safe haven asset. In countries destabilized by poor monetary policy, or ones challenged by geopolitical conditions, cryptocurrencies have offered both elites and working class people a way out.

Two countries have already dove head-first into their embrace of crypto: the Central African Republic recognized Bitcoin as a form of legal tender on Apr. 22, 2022. However, long before that, the South American country of El Salvador was the first country to recognize the world’s largest crypto as a form of legal tender.

Now, El Salvador’s controversial leader, President Nayib Bukele, is trying to export Bitcoin-ization policy to other countries. This week, he rolled out the carpet for more than 44 countries to attend a conference in his country. Among them were “32 central banks and 12 financial authorities.” 

The finer details of the conference are unknown, but Bukele wrote that the conference will pertain to “financial inclusion, digital economy, banking the unbanked, [and] the #Bitcoin rollout and its benefits in our country [El Salvador].” Bukele also shared a shortlist of the countries and agencies attending the conference, which is almost exclusively emerging markets such as Pakistan, Bangladesh, Egypt, Nigeria, Paraguay, Angola, Jordan, Costa Rica, Ecuador, and others.

None of these countries can hold a candle to the strength of even the weakest EU and U.S. states… yet. Many of them are burgeoning population centers — and more people (population growth) usually translates to more money. Take the country of Pakistan for example: the country is expected to become the third-largest country by the middle of the century, with over 380 million residents. Angola is another excellent example: it is expected to see its population double the mid-century.

Many of these countries are possibly looking at El Salvador’s Bitcoin adoption and eying its potential for their own economies. At the least, they might be mulling its use-cases as a dollar replacement. However, Nayib Bukele hasn’t been very lucky since YOLOing a portion of the country’s reserves into the cryptocurrency… and a debt default is not an outlandish possibility.

That sets tenuous grounds for other countries to look positively at Bitcoin and El Salvador’s adoption of it.

And if you zoom out even further, the world’s largest cryptocurrency isn’t garnering a very good reputation as a “free monetary system” next to the controversial Bukele, who has been the object of protests in the country since reportedly replacing judges in order to secure a future election. In fact, it might be doing quite the opposite… but we’ll have to wait and see if there are any conclusions after the conference.

On Friday, UAE-owned airline Emirates announced that it planned to add Bitcoin as a payment method. It also announced that it would launch an NFT collection, among other web3 ventures.

At face, there’s not very much interesting about this — it’s just another company offering support for the world’s largest cryptocurrency. In fact, airlines have been doing this for years. Latvia’s airBaltic began accepting Bitcoin in 2014. And El Salvador’s airline, Volaris, announced that it would accept Bitcoin in October 2021 (that has not come to pass yet, but this makes sense given El Salvador’s positions on Bitcoin…)

However, Emirates’ decision to accept Bitcoin and embrace the world of web3 makes a lot of sense if you understand its positioning: 

Emirates is, by many measures, an ultra-luxury intercontinental airline. And its leadership, Princes in their own rite, know full and well that the wealthy elites of crypto don’t want to sell their Bitcoin to fly first class — they want to pay in their preferred currency.

That might seem like an extremely obvious deduction from this offering, but given Dubai’s positioning (and the broader United Arab Emirates’ positioning) on crypto, it’s fair to assume that accepting crypto — or speculating in the world of crypto and digital currency payments — might be an acquisition strategy for a treasury.

Or, at the least, a low-barrier method to dabble in this emergent asset class and test its waters.

Alongside their plan to accept Bitcoin, Emirates also plans to spend “tens of millions of dollars” on metaverse, web3, and NFT apps. 

Ding-dong, Terra is dead… (and so is its namesake stablecoin.)

And Ethereum’s co-founder, Binance’s CEO, and FTX’s CEO have now marinated in its untimely demise for enough time. This week, they’ve voiced their two cents: 

Binance CEO Changpen Zhao (or “CZ” for short) tweeted that Terra is ngmi. He said that “forking does not give the new fork any value”, which can be made out to say that Terra would be worthless regardless of how many times they decided to start over. He voiced his desire for small users to be compensated first.

FTX CEO Sam Bankman-Fried tweeted that Terra was “very transparent” about its riskiness, but indicated that the “mass enthusiasm” around the product, which was used to delude unaware retail investors into YOLOing in was “… probably bad.” 

Ethereum co-founder Vitalik Buterin voiced that Terra should make good for its smallest holders first — citing influencer culture and misleading advertising about how high-risk of an investment it was.

But as we’ve said before, old habits die hard — and the chain’s creator and foremost figure, Do Kwon, insists that Terra will rise once again… In spite of leaving dozens of money managers and thousands of scrappy retail investors with a stablecoin that isn’t very stable. (You know things are bad when unwanted strangers are visiting your home.)

Though many of crypto’s most prominent voices have echoed the desire for Terra to compensate small retail investors first, and strangers showing up to his house, Do Kwon has proposed an even worse “Terra revival plan” than was already proposed.

We wrote about Do Kwon’s v1 proposal last Friday. Today, Do Kwon released a v2 proposal. Some elements (such as a 1 billion LUNA cap) were the same. However, Do Kwon proposed “forking” the chain and starting anew… and he wants to make sure that nobody runs for the door too quickly.

As part of his new proposal, 35% of the 1 billion LUNA supply will go to “all bonded and unbonded Luna”, which will be paid out in a “1 year cliff” and variable vesting schedule. Wow, that’s not confusing at all…

25% will be paid into a community pool, which will be controlled by “governance” (code for: whoever stakes their Luna and votes on proposals).

25% will be paid to $UST holders as of May 27, 2022, and they will also be subject to a 2 year vest…

Really, frankly, who cares about the rest? You can read the whole proposal here. 

Allow us to spoil the comments, though: nobody likes this plan. People are not happy with it. Two of crypto’s most foremost figures have already come out against prioritizing whales… And yes, it’s extremely easy to see why they’re mad.

Terra imploded. $50 billion worth of market capitalization, including ~$19 billion which was presumed by many misinformed retail investors, went up in flames last week. Now, instead of trying to restore credibility, Terra’s foremost leader is trying to think about a sustainable future for a chain that has neither sustainable market mechanics, nor presumably a future at all if that future is predicated on keeping people locked in a burning building (the vesting schedule).

As of this writing, the Terra chain is valued at $1.3 billion. There’s still reportedly more than 10 billion $UST in circulation, which is only worth $1.3 billion. And this “revival plan” has not been received well at all. Terra fell -14% today and TerraUSD, which has turned into a sh*tcoin in recent days while trading below the peg, is down -30.8%.

Do Kwon’s proposal is expected to go to a governance vote on May 18. Assuming its passed, the plan will come to pass… and in spite of its massive unpopularity with the community, it looks likely to pass seeing as though the whales of Terra’s “classic chain” still command outsized influence in building its new chain. 

We’ll report on this event as it progresses.