In a press conference a few hours ago, El Salvador’s president, Nayim Bukele, announced something that would have been no less than Science Fiction just a few months ago: every citizen of El Salvador will receive $30 equivalent in Bitcoin, by using a wallet called Chivo. It is not the biggest airdrop in history, far from it. If we look back at how many trillions US printed when Covid-19 circus started, this almost doesn’t even count.
Almost.
Because, in fact, it counts big time.
First, let’s run some numbers.
At the current price, $30 in Bitcoin means roughly 0.0009 BTC. El Salvador has a population of 6.8 million people (Wikipedia). I don’t know the exact numbers (and couldn’t find in such a short time a reliable source), so I would assume the adult population is somewhere around 4 million. If every adult citizen will opt in for this, there will be 3600 Bitcoin in circulation, liquid, transferable, with a real use case. The total amount in USD is roughly 123 million, so I think this is the “fund” that president Bukele talked about when he first announced the Bitcoin Law, a few weeks ago. So basically the government bought 3600 Bitcoin, that it transfers to its adult population.
Countries print money out of thin air all the time, only it’s the first time a country chooses to airdrop Bitcoin, instead of paper money. Bitcoin has a limited supply. You cannot airdrop more, if you don’t buy more.
Starting September 7, these 3600 Bitcoin will be out of exchanges, out of cold wallets, and into the hands of real people who will use them just as they use USD right now. Buy things, invest, exchange for other currencies, etc.
I don’t expect the establishment to watch this peacefully. The “best” outcome would be that IMF will frown upon and tighten their money hose, putting some strain on El Salvador economy. The “worst” outcome, the one that I’m more worried about, is to see a wave of international sanctions surrounding El Salvador, all coming from the “good” part world, which will suddenly realize El Salvador is a country filled with terrorists, money launderers, enemies of democracy or whatever reasons may appeal to the sleep-walking, paying taxes, afraid citizens who are waiting for the government to save them. From anything.
We live in interesting times.
