The Central American country’s decision to buy Bitcoin is looking good, despite almost universal skepticism from The Establishment when it was announced. Some of that skepticism ultimately proved accurate — legal tender status didn’t lead to mass adoption or cheaper remittances. But these motivations might have been red herrings all along.
President Bukele may have just wanted an excuse to acquire bitcoins for the government as part of their reserves. He was a bit overzealous and definitely too early in their purchases, but the decision paid off anyway. Not only has bitcoin appreciated in value, but El Salvador now has a part of its national savings in money that can’t be debased or confiscated.
This kind of diversification — not just of value, but also access — is something that every country wants.
Bitcoin is the first algorithmically minted, apolitical, and censorship-resistance currency in history. Its appeal grows as geopolitical tensions rise and economic crises become more frequent.
I wouldn’t be surprised if other countries are now also acquiring Bitcoin, though perhaps quietly. A smart buyer never tips their hand. The savviest nations might be mining it, and there are interesting rumors about certain Middle Eastern governments. Regardless of how any country acquires it, owning Bitcoin at the national level has proven worthwhile.
Which brings me to North Korea, a pariah nation whose acquisition strategy has relied on hacking and theft. I don’t buy all the exploits that are attributed to them, but the numbers are still substantial, especially for an otherwise poor country. North Korea’s holdings have never been officially acknowledged, but we still need to ask an important question: What happens when a “rogue” nation embraces crypto officially?
I think it’s only a matter of time until some do — at least Bitcoin — and the most likely candidates are sanctioned countries with energy reserves. Mining is the perfect solution for anyone with too much oil and not enough hard currency.
America is not going to like this. Bitcoin can be used as a workaround to dollar sanctions, and America increasingly weaponizes dollar access as a foreign policy tool. So she’ll try to expand those sanctions to crypto but this won’t be easy because Bitcoin is pseudonymous. Washington may then turn inward, pressuring domestic crypto companies to start censoring blacklisted wallets. Like most kinds of financial censorship (AML, KYC, etc) this won’t be very effective, except to make life harder for ordinary Americans using digital assets.
