Speaker 1: He Bitcoin. I'm Stacy Marie Ishmael, Managing editor of Crypto
Speaker 1: for Bloomberg News, and this is Bloomberg Crypto at Daily
Speaker 1: Bloomberg I Heart Podcast. It's Wednesday, June two. El Salvador's
Speaker 1: millennial President, Naive bo Kelly, is no tourist when it
Speaker 1: comes to bitcoin. Last year, under his leadership, El Salvador
Speaker 1: became the first country in the world to approve bitcoin
Speaker 1: as a form of legal tender. Here they approved a
Speaker 1: bitcoin law in the Assembly that means if you want
Speaker 1: to pay for something there, you have two currency options,
Speaker 1: bitcoin or the U. S. Dollar. Since then, President Boo
Speaker 1: Kelly has bought more than two thousand bitcoins using public funds,
Speaker 1: and whenever there's a particularly sharp decline in the crypto market,
Speaker 1: which happens pretty frequently, President Boo Kelly is fond of
Speaker 1: tweeting that he's buying the dip and adding to those
Speaker 1: bitcoin holdings. He doesn't appear to be stressed at all
Speaker 1: by the market volatility or by the drumbeat of international organizations,
Speaker 1: including the I m F, who have criticized his crypto decisions.
Speaker 1: Now he's once again pitching a so called bitcoin beach
Speaker 1: in the coastal town of El Zante. Joining me today
Speaker 1: to talk more about the sustainability of El Salvador's bitcoin
Speaker 1: strategy is report to Mike McDonald. Mike, Hello, Hi Stcy.
Speaker 1: How are you? I am great? Well, So you have
Speaker 1: for Bloomberg been reporting pretty extensively on El Salvador's experiments
Speaker 1: with crypto and specifically bitcoin. In one of the stories
Speaker 1: that you did for Markets magazine back in April, you
Speaker 1: even sort of landed in the country and then spent
Speaker 1: the rest of your time. They're trying to pay exclusively
Speaker 1: in bitcoin. Am I remembering that correctly? That's right, That's right.
Speaker 1: How did that go? Yeah, so it's it's not really
Speaker 1: that easy to spend bitcoin widely in El Salvador, is
Speaker 1: kind of what I found. Um. You can find some
Speaker 1: places that accept it, um, but you know, it's not
Speaker 1: really advertised very widely among businesses. I mean you kind
Speaker 1: of have to go from business to business and ask
Speaker 1: you accept bitcoin, do not accept bitcoin. Most of them
Speaker 1: will tell you know that they're working on it. The
Speaker 1: problems were a lot of the businesses didn't have the
Speaker 1: infrastructure set up to accept it. They didn't have wallets
Speaker 1: to accept bitcoin from customers. In some cases there was
Speaker 1: no Internet signals, so even if they do accept bitcoin,
Speaker 1: there's no way for them to actually get the wallet
Speaker 1: to work because the Internet signals down. And there were
Speaker 1: some businesses that also told me that they didn't want
Speaker 1: to accept it because of the volatility, because they would
Speaker 1: receive twenty dollars in bitcoin today and it would be
Speaker 1: worth ten dollars in bitcoin tomorrow or or something like that.
Speaker 1: So it's not as widespread. There are some businesses that
Speaker 1: that accepted there were there have been a couple of
Speaker 1: surveys out recently that show about ten to fifteen percent
Speaker 1: of businesses do accept bitcoin in El Salvador. So it
Speaker 1: has caught on a little bit, but it's not that
Speaker 1: easy to really spend it. You know, there are a
Speaker 1: lot of technical problems with the government's wallet. Chievo doesn't
Speaker 1: always work properly, so some of the businesses that do
Speaker 1: accept it have actually switched over to other wallets, to
Speaker 1: third party wallets, which seemed to work a little bit
Speaker 1: better than Chievo. So you've said a couple of interesting
Speaker 1: things that I want to just tease out a little
Speaker 1: And there has been this idea that if you want
Speaker 1: to make your country or your state or your whatever
Speaker 1: crypto friendly you just kind of like wave a magic
Speaker 1: wand and voila, like bitcoin is possible. But it sounds
Speaker 1: like what you're saying is there's actually a lot of
Speaker 1: you know, fairly challenging operational things that folks have to
Speaker 1: get over, including to your points, actually setting up the
Speaker 1: software infrastructure to be able to accept bitcoin, but also
Speaker 1: things that you can't individually solved, like internet access right exactly.
Speaker 1: And you know, El Salvador is a country where most
Speaker 1: businesses are small and medium sized businesses. There are a
Speaker 1: lot of mom and pop shops in El Salvador, so
Speaker 1: for them, the learning curve for setting this up is
Speaker 1: pretty big, so um a lot of them, you know,
Speaker 1: they just don't have the technology. The one person who
Speaker 1: thinks bitcoin should catch on a lot faster is, of course,
Speaker 1: the country's president, Nai bu Kelly. I don't know what
Speaker 1: the exciting number, but I would think around five million
Speaker 1: SAVA build right now. Can you tell us a little
Speaker 1: bit more about him? I feel like whenever I see
Speaker 1: him or he's in a news conference, he's always wearing
Speaker 1: like a backward flipped baseball cap or you know, trying
Speaker 1: to emphasize his youthful, millennial nous. But what is he
Speaker 1: like as a president and what's his perception in the country. Yeah,
Speaker 1: he's um. He you know, he broke with um sort
Speaker 1: of two party rule in El Salvador that had you know,
Speaker 1: there were these two political parties that had ruled the
Speaker 1: country for a long time, and he broke away from
Speaker 1: one of those parties and formed his own party. He
Speaker 1: came into power as an outsider, promising to change government. Um.
Speaker 1: You know, he has a bit of a populist stance
Speaker 1: towards a lot of different policy issues. You know, there
Speaker 1: are a lot of people on a Salado are really
Speaker 1: tired of the two party rule and what seemed like
Speaker 1: gridlock in government, and so he came in promising to
Speaker 1: break that with this sort of hip new look. He
Speaker 1: kind of has this cool vibe. I think even his
Speaker 1: Twitter feed at one point said like the coolest president
Speaker 1: in the world or something like that. So, you know,
Speaker 1: he he is a bit different in the way he governs.
Speaker 1: He is quite popular in El Salvador. Actually not because
Speaker 1: of bitcoin, because most of the Salvadorians have said in
Speaker 1: the surveys we've seen that they don't want bitcoin in
Speaker 1: the country. But he's really popular because he's built hospitals
Speaker 1: in rural areas where there were no hospitals before. He's
Speaker 1: built schools in rural areas where there's no schools before.
Speaker 1: You know, he has a lot of social programs and
Speaker 1: social spending, you know, food rations, monthly food rations for
Speaker 1: really poor families. He's cracked down on violence and gangs
Speaker 1: in El Salvador, which is a sort of a top
Speaker 1: concern among voters. So he's been able to tackle those
Speaker 1: issues and not just pushback like protests. Right. You've reported
Speaker 1: on his political ponents using the opposition to bitcoin in
Speaker 1: the country as a way to try to re establish
Speaker 1: themselves a bit. We had some attacks of the opposition.
Speaker 1: Believe it or not, we have an opposition and they're started,
Speaker 1: you know, complaining about bitcoin, and they started miss for
Speaker 1: the misinformation to the people, telling a bitcoin was bad
Speaker 1: and you know, you shouldn't use that currency because you
Speaker 1: know it's invisible, you cannot see it. But they're free
Speaker 1: to do it. That's good. Also, free countries. They can protest,
Speaker 1: they can you know, burn a d MS. Fine. We've
Speaker 1: demonstrated that bitcoin could do a lot of good things.
Speaker 1: So the opposition parties have sort of found in this
Speaker 1: bitcoin issue sort of a rallying call um, if you will,
Speaker 1: sort of an issue that they can sort of push
Speaker 1: against blu Kelly with because they know that the population
Speaker 1: isn't really on board with using bitcoin, at least on
Speaker 1: a large I mean, there are a few people here
Speaker 1: and there that you can find that that do enjoy it,
Speaker 1: but but you know, between sixty and seventy percent of
Speaker 1: the population, according to the polls that we've seen, don't
Speaker 1: like the idea of using bitcoin is legal tender. So
Speaker 1: it is something that the opposition has sort of grabbed
Speaker 1: on too and and are sort of using it to
Speaker 1: push back against his government with. So he's got seventies
Speaker 1: eight percent approval ratings except for the overwhelming majority of
Speaker 1: people who are like, please no Bitcoin go away. How
Speaker 1: much of this is affected by the fact that al
Speaker 1: Salvador is betting on bitcoin is currently losing the country money.
Speaker 1: I think that's a big part of it. I mean,
Speaker 1: the problem was so in September last year, bitcoin was
Speaker 1: nearer record high. It was between fifty and sixty thousand
Speaker 1: dollars a coin, and I think it hit uh Rich
Speaker 1: reached the sixty nine thousand dollars per coin at one point,
Speaker 1: so and it's basically come down ever since then. So,
Speaker 1: you know, they kind of adopted bitcoin is legal tender
Speaker 1: almost at its peak high, and a lot of people
Speaker 1: that downloaded the wallet and started using it have seen
Speaker 1: their money deteriorated, seen a lot losses pile up, and
Speaker 1: just there have been reports coming out of Al Salvador
Speaker 1: where businesses that used to advertise that they accept bitcoin
Speaker 1: with like little signs in their windows and stuff are
Speaker 1: actually taking those signs down. I mean, it wasn't widespreads
Speaker 1: I don't think it's having a really broad impact in
Speaker 1: the economy. El Salvador's plans for a billion dollar bitcoin
Speaker 1: bond sent the nation's dollar denominated debt to an all
Speaker 1: time low. Investor is worried that President Nayam Bokele is
Speaker 1: moved to sell sovereign bitcoin bonds closes the door and
Speaker 1: a deal with the i m F. The fund is
Speaker 1: repeatedly criticized because it's policies, including the adoption of bitcoin
Speaker 1: as legal tender. The other way this is affecting folks,
Speaker 1: is you know, El Salvador is not super popular with
Speaker 1: the I m F at the moment, I think that's
Speaker 1: safe to say, because they were trying to propose this
Speaker 1: bitcoin backed bond, which would be one of the first,
Speaker 1: you know, sovereign or state related bonds ever issued that
Speaker 1: had bitcoin backing on it. That bond has still not
Speaker 1: been issued. They've blown past the deadlines that they said
Speaker 1: they were gonna they do this by You've also reported
Speaker 1: in the meantime that they may be struggling to make
Speaker 1: their coupon payments on their other debt that's not backed
Speaker 1: by bitcoin. So it does seem like this grand experiment
Speaker 1: has been perhaps more challenging than they were expecting. Right,
Speaker 1: They have gotten a lot of blowback from the multi ladders,
Speaker 1: especially the IMF. I mean, last year they were negotiating
Speaker 1: an IMF program and when they adopted bitcoin, that really
Speaker 1: angered the I m F, and the I m F
Speaker 1: has urged them to drop bitcoin is legal tender um
Speaker 1: and so that they haven't gotten the I m F
Speaker 1: program that they announced a year ago that they were
Speaker 1: pursuing um. You know, that was a one point three
Speaker 1: billion dollar program. Some of the other multilateral lenders have
Speaker 1: been hesitant to lend to them because of this. So
Speaker 1: there has been a lot of pushback that sort of
Speaker 1: has prevented them from getting access. The perception among investors
Speaker 1: is that El Salvador is an extremely risky country to
Speaker 1: be investing in right now, and there are a lot
Speaker 1: of questions as to whether or not they're willing to pay.
Speaker 1: So the risk perception of government bonds is incredibly high
Speaker 1: right now, and as a result, the government has has
Speaker 1: really lost access to international debt markets which could help
Speaker 1: finance government operations. Thank you so much, Mike. We'll be
Speaker 1: right back. We're also going to talk about bitcoin beach.
Speaker 1: So you know, I'm really struggling and I have been
Speaker 1: struggling with this. El Salvado started for a while in
Speaker 1: that the Macroe canomic fundamentals don't seem great, the crypto
Speaker 1: fundamentals don't seem great. Boo. Kelly's popularity quite good, not
Speaker 1: so great when you introduce crypto into the equation. But
Speaker 1: he's plowing ahead with multiple different initiatives and does seem
Speaker 1: really personally committed to having El Salvador and bitcoin always
Speaker 1: be associated in a sentence, Can you say a little
Speaker 1: bit more about what this supposed bitcoin beaches. Bitcoin beach
Speaker 1: is sort of the pilot project where this all started.
Speaker 1: It was kind of a private initiative. It was a
Speaker 1: private donor that donated some money to this small little
Speaker 1: beach town in El Salvador called El Sante. It's a
Speaker 1: really tiny town. It's popular with surfers because they have
Speaker 1: some pretty big waves there. Um, but you know, it's
Speaker 1: a small town with really small businesses, a couple of
Speaker 1: small hotels. And they started this pilot projects around eighteen
Speaker 1: where they sort of launched their own bitcoin wallets and
Speaker 1: tried to sort of incorporate bitcoin into the local economy.
Speaker 1: And that's kind of where it's kind of where it
Speaker 1: all started. You know. You go there and um, you
Speaker 1: know the little you know convenience stores will accept bitcoin
Speaker 1: in exchange for you know, a can of pringles and
Speaker 1: and things like that, where you can pay for a
Speaker 1: surf lesson in bitcoin, um, you know, one of the
Speaker 1: local surf instructors. So Bitcoin Beach is kind of where
Speaker 1: it all started, and and Boo Kelly kind of wanted
Speaker 1: to take it national nationwide from there. It's just a
Speaker 1: sleepy little town where this this experiment began and it
Speaker 1: sort of served as a as a pilot project for
Speaker 1: what Boo Kelly is doing now, but you are our investor.
Speaker 1: There's all over the world when you post something on
Speaker 1: your Instagram account or in your Twitter, your phrasebook, everybody
Speaker 1: that follows you, everybody and that admires you, everybody that
Speaker 1: wants a bill like you. We'll be We'll be seeing
Speaker 1: our country. I will be seeing our waves and our beaches,
Speaker 1: and we're seeing all other things we have to offer.
Speaker 1: In a sense, would you say the pilot project has
Speaker 1: been more successful perhaps than the more widespread it option,
Speaker 1: because it does sound like if I can pay my
Speaker 1: serf lessons in bitcoin, but if I go into the
Speaker 1: capital and nobody will take my crypto, I might just
Speaker 1: hang out in the on the beach all the time.
Speaker 1: I mean me personally, and I don't know what other
Speaker 1: people might do. Yeah, in a way it has been
Speaker 1: I guess also because Bitcoin Beaches is touristy and it's
Speaker 1: really popular with tourists um and there's this sort of
Speaker 1: whole whole marketing campaign that goes along with it, so
Speaker 1: there is kind of a draw for people who are
Speaker 1: really into crypto and bitcoin to show up there. So
Speaker 1: on a small scale and a very tiny town like that,
Speaker 1: it's popular with foreign tourists that may be more adept
Speaker 1: at spending bitcoin it. It seems to work a little
Speaker 1: bit better. But when you expand it to a national
Speaker 1: scale and take it to places like Saint Salvator, which
Speaker 1: is a really large city with lots of different types
Speaker 1: of businesses, it doesn't really seem to work well. But
Speaker 1: Bitcoin Beach a lot of the businesses will take it there.
Speaker 1: You can buype pooses, which are these little um you know,
Speaker 1: filled the cheese in in bitcoin at Bitcoin Beach, so
Speaker 1: you know, some of the small vendors there seem a
Speaker 1: little bit more comfortable with it, and some of the
Speaker 1: foreign tourists that come seemed to be a little bit
Speaker 1: more comfortable with with spending it as well. So it
Speaker 1: does seem to work a little bit better on a
Speaker 1: on a much smaller micro scale, in in a place
Speaker 1: like Bitcoin Beach. And there are a few different examples
Speaker 1: around the world of these you know, little crypto on clips,
Speaker 1: like folks may have heard of zoog in Switzerland, that's
Speaker 1: definitely one of them. There are absolutely pockets of San
Speaker 1: Francisco and Silicon Valley where you know, you can get
Speaker 1: bitcoin or or other kinds of crypto accepted for things.
Speaker 1: But El Salvador was supposedly the national model for how
Speaker 1: accepting a token like this at scale would work. And
Speaker 1: you know, from everything that you've been reporting and others
Speaker 1: have been reporting, it does seem that that calculus may
Speaker 1: have been more challenging than they were expecting. But there
Speaker 1: are other folks who are like, yeah, but give it time, right,
Speaker 1: which which is always the conversation. It's always been less
Speaker 1: than a year. Markets have been historically pretty pretty volatile.
Speaker 1: There are other considerations at play, and some of those
Speaker 1: considerations that folks will mention is, you know, particularly in
Speaker 1: many lots time economies, as things like inflation, it's worries
Speaker 1: about the the independence of the central bank, which is
Speaker 1: certainly an issue in El Salvador. Are you seeing other countries,
Speaker 1: even if they're a little bit worried about what El
Speaker 1: Salvadore is going through, thinking about ways in which crypto
Speaker 1: might make sense for them. Yeah, we are in different ways.
Speaker 1: I mean, it's not always that countries are considering doing
Speaker 1: exactly what El Salvadore is what did, which is adopting
Speaker 1: bitcoin is legal tender. But there are you know, El
Speaker 1: Salvador is in kind of a unique position, and that
Speaker 1: it's a dollarized economy, so it doesn't really print its
Speaker 1: own money, and so a lot of the inflation is
Speaker 1: imported from abroad from the US because they can't really
Speaker 1: control their own money. So line, but you know, there
Speaker 1: are different countries. We've seen some countries in the Caribbean
Speaker 1: start to experiment with not necessarily bitcoin and decentralized finance,
Speaker 1: but sort of actually centralized crypto central bank digital currencies,
Speaker 1: stable coins and things like that. There was there's really
Speaker 1: there was recently a bill passed in in Panama, which
Speaker 1: is also a dollarized economy, to sort of make Panama
Speaker 1: a more crypto friendly environment and allow exchanges to come
Speaker 1: in and get licenses easily to operate their countries. In Africa,
Speaker 1: we've seen move to adopt cryptocurrencies as legal tender. So
Speaker 1: it is something that's spreading, maybe not to the extreme
Speaker 1: that El salvad Or is where you actually declare one
Speaker 1: cryptocurrency actual legal tender, but I think it is you know,
Speaker 1: sort of the fundamentals of cryptocurrency and and sort of
Speaker 1: using different sort of blockchain technology in national economies. I
Speaker 1: think I think there there are technocrats that are looking
Speaker 1: at it and discussing it and trying to figure out
Speaker 1: what are the best ways and what are the best
Speaker 1: elements of this that we can implement in our countries.
Speaker 1: So it is sort of an ongoing conversation, especially among
Speaker 1: emerging market economies, um, you know, especially like all Salvador
Speaker 1: and Panama and and and countries that you know don't
Speaker 1: really control their own money supply dollarized economies and and
Speaker 1: other and other places like that, or places to where
Speaker 1: inflation is extremely high. You know, we've seen case in Argentina,
Speaker 1: for example, where there's really no central government push for cryptocurrency,
Speaker 1: but there's you know, individuals have sort of taken in
Speaker 1: upon themselves to get into cryptocurrency just because inflation rate
Speaker 1: is so high and there are extreme capital controls. In
Speaker 1: in Argentina, you can only withdraw two hundred dollars a
Speaker 1: month in U S dollars from a bank. Venezuela is
Speaker 1: another example of that. So there are countries in Latin
Speaker 1: America where inflation is such a problem and currency depreciation
Speaker 1: is such a problem that individuals are just getting into
Speaker 1: crypto on their own because they figure, well, I can
Speaker 1: lose on the national currency or you know, lose or
Speaker 1: gain ten percent and in cryptocurrency, so so you are
Speaker 1: starting to see that sort of on on people's personal level.
Speaker 1: Pick up, well, thank you that was such an interesting
Speaker 1: and helpful tour of the reality of what it means
Speaker 1: to accept legal tender in a country like alsabad or
Speaker 1: Thank you so much for joining us. Thank you stay.
Speaker 1: You can find more of Mike's reporting on the Bloomberg
Speaker 1: Terminal on Bloomberg dot com or follow him on Twitter.
Speaker 1: He's at m d McDonald. If you've been watching sports lately,
Speaker 1: and I know many of you have, you may have
Speaker 1: noticed something different with your favorite sports teams. From the
Speaker 1: Miami Heat to the Philadelphia seventy six is America's favorite
Speaker 1: sports teams are now receiving sponsorships from major cryptocurrency companies.
Speaker 1: In tomorrow's episode, we'll take a look at these sponsorships
Speaker 1: and what may happen if your favorite team makes a
Speaker 1: risky deal with a volatile token. I'm Stacy Marie Ishmael,
Speaker 1: and this is Bloomberg Crypto, a daily podcast from Bloomberg
Speaker 1: and I Heart Radio. For more shows from I Heart Radio,
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Speaker 1: the show to Crypto at Bloomberg dot net. You'll find
Speaker 1: us on Twitter at Crypto. The supervising producer of this
Speaker 1: episode is Vicky very Galina. Our producer is Mohammed Farouk.
Speaker 1: Associate producer is Zan Absidiki Desto wonder At is our engineer.
Speaker 1: Original music by Leo Sidron. Bloomberg's Head of podcast is
Speaker 1: Francesca Levi