Home Global Blockchain El Salvador Runs a Bitcoin Scam: WSJ

El Salvador Runs a Bitcoin Scam: WSJ

El Salvador Runs a Bitcoin Scam: WSJ
El Salvador

Ever since Iran was denied access in 2012 to the Society for Worldwide Interbank Financial Telecommunication, a Brussels-based global banking network known as Swift, the axis of evil and its allies have intensified their search for a way to move illicit money electronically, outside the legal banking system.

Getting kicked off Swift is “like getting knocked back into the financial Stone Age,” says Joseph Humire, executive director for the Center for a Secure Free Society. “Without it, governments are reduced to physically moving around pallets of cash.”

Salvadoran President Nayib Bukele doesn’t have to worry about that possibility anymore because on Sept. 7 El Salvador made bitcoin obligatory legal tender. By adopting a nonbanking currency that will coexist with the U.S. dollar but trade outside the internationally protected banking system, Mr. Bukele ensures that he will be able to move money electronically, even if his government should face sanctions.

The bitcoin law also gives Mr. Bukele a path to end dollarization and return to a government fiat currency that can be printed as politicians desire. This has alarmed advocates of stable money because, by dollarizing in 2001, El Salvador ended the specter of hyperinflation and devaluation.

It may be that Mr. Bukele believes that bitcoin will behave better than the dollar as a medium of exchange and a store of value. But if so, he got an education on the day of the launch. The website of the e-wallet Chivo, which the government is using to circulate bitcoin, crashed. Meanwhile the dollar value of the cryptocurrency traded down as much as 17%.

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