The world’s first Bitcoin City is being planned in El Salvador, a Central American country best known for secluded surf spots and MS-13, the most vicious transnational gang in the hemisphere. El Salvador is now on the bleeding edge of crypto adoption, thanks to its 40-year-old president, Nayib Bukele, the World’s Coolest Dictator, according to his onetime Twitter bio. Spearheading the most ambitious national adoption of crypto in the world, Bukele rules the country with an iron fist and uses black-ops spyware on dissidents. On social media, he masterfully impersonates a progressive innovator, and the global news media buys it hook, line, and sinker.
The president has resorted to strongarm tactics, ordering police to occupy the legislature and replacing supreme court judges and the attorney general with loyalists. Since the beginning of his term, 22 El Salvadoran journalists have discovered Pegasus spyware on their phones, yet many crypto reporters shower him with adulation and many news outlets offer uncritical coverage and lazy fluff pieces. But who can blame them when Bukele is just so flashy!
Bukele oversaw the purchase of $71 million of Bitcoin for a sovereign fund, promising to distribute $30 of BTC to each and every El Salvadoran citizen, as well as a “Bitcoin Beach,” where tourists can pay in BTC and crypto investors from countries with bans, can cash out. Economists and crypto experts have pointed out defects of the plan, one being that it would deplete the foreign exchange reservers, not to mention creating a money-laundering haven for organised criminals and corrupt politicians. Perhaps, that is a feature of Bukele’s plan, not a defect.
In July 2021, Moody’s downgraded El Salvador to Caa1, implying a very high credit risk due to the country’s violence and corruption. The downgrade and its circumstances aren’t surprising. The nation has weak institutional integrity and Bukele already busted down the barriers to his power. It’s been well-known for years that MS-13 runs the nations’ prisons and it was recently revealed that Bukele’s top prison official was negotiating with incarcerated MS-13 in an attempt to get them to reduce street killings and throw their weight behind the president. On December 9, 2021, the U.S. Treasury put sanctions on three top officials of Bukele’s government for maintaining an alleged secret pact with MS-13 and the 18th Street gang. Bukele officials supplyied the gangs with funds and allowed its imprisoned leaders to have cellphones and conjugal visits with sex workers.
Cushy detention for elite criminals is fairly routine across various Latin American nations that avoided the fate of failed states (like Angola or Sudan) by becoming narcostates, where state security is often seamlessly melded with “freelance” paramilitary forces maintained by narcos. As such, the U.S. sanctions probably have some unstated purpose or underlying motive that can be traced back to the customary “horse-trading” of U.S. foreign policy.
The stated reason is about anti-corruption and extradition of gang leaders, which the U.S. believes might reduce the number of Salvadoran migrants fleeing their homeland. However, sanctions under the Magnitsky Act take months to process, so it’s likely U.S. diplomats threatened and browbeat Bukele in private, only escalating the pressure when Bukele would not play ball. And hey, what do you know? In November, Bukele sent a clear message of noncompliance by slapping a 40% tax on all overseas financing of civil society organisations, which the U.S. government obstreperously condemned.
Bukele shrugs off criticism on Twitter, but he is facing trouble on multiple fronts. Since the country’s initial purchase of BTC in September 2021, the investment has lost 31% of its value, an ignominious beginning for Bukele’s masterplan. With the IMF breathing down his neck, he’s on edge. Seeing a tweet from @Investiging.com on January 17, 2022, that Moody’s downgraded El Salvador again, Bukele snapped and sent out a tweet to his 3.3 million followers.
DGAF is a popular acronym about not caring, but the tweet was incorrect – Moody’s did not downgrade El Salvador. Bukele is learning the hard way how to HODL during BTC price swings, the nation’s bonds are plunging as investors flee due to Bukele’s unorthodox economic policies. With protesters marching on January 16 under the #El16Marchamos, it may be fair to say Bukele is embattled. Despite all, Moody’s reaffirmed to Bloomberg that El Salvador’s rating remains unchanged.
This comes on the heels of Bukele’s announcement of a $1 billion bond issue, so it’s not like the president doesn’t have a lot on the line. In fact, when his plan is criticised by local residents, Bukele very much does GAF. Mario Gomez gained a quick following on Twitter by speaking out against the bitcoin scheme and leaking some slides from the government’s bitcoin wallet, Chivo, on August 31.
The next day, while driving his mom to work, the national police pulled him over and wouldn’t tell him why. Mario immediately started typing out a tweet and sent it to his 8,000 followers before one of the officers snatched his phone out of his hands. Then, they hauled him to a police station in the bed of a police truck. His plea for an attorney was ignored. His followers demanded his release, which happened six hours later.
Despite Bukele’s thin skin and knee-jerk reactions, he enjoys over 80% approval ratings in the polls. He meticulously manages his public persona. After calling himself “The World’s Coolest Dictator” in his Twitter bio, he changed it to “CEO of El Salvador.” His latest business plan for the country involves tapping a dormant volcano for geothermal energy, for which he has earned praise in the press.
This dubious boondoggle is tied into the brilliant branding of his Bitcoin bond-issue, Volcano Bonds. The press just repeats these messages from the El Salvadoran government without any details about how this will be implemented or where the money is going to come from. Bitcoin mining powered by green geothermal energy sounds great, right? Wrong! Mining is part of a wider cluster of industries with intense energy requirements and huge carbon footprints. Moreover, the decision was reportedly made at the top, after which it was made into law, without debate, in mere hours. It’s pure marketing strategy and campaign promises. Remember: If something sounds too good to be true… (say it with me) it probably is.
Bukele plays the press like a fiddle, much like the former president of the United States, meanwhile, he is consolidating power over El Salvador’s government, in a style much like the former dictator of Chile, Augusto Pinochet, but using cutting edge espionage tactics and top of the line surveillance tech. Yet crypto companies have rushed into contracts with Bukele’s government, despite some muted unrest among some crypto-anarchist and digital libertarian HODLers with this formal connection with a state government.
Blockstream, a provider of blockchain technology, and Bitfinex, a Tether-based crypto exchange, plan to issue the bond. Blockstream sees the project as a step toward “hyperbitcoinization,” or the point at which bitcoin becomes the default global value system.
Bitfinex sees in El Salvador a great laboratory for the development of a multinational framework of securities law for Bitcoin bonds. Blockstream and Bitfinex did not respond to a request for comment on the undemocratic governance tactics of their business partner, the CEO of El Salvador, but Blockstream’s CSO Samson Mow told Bitcoin Magazine “Bitcoin is for enemies… everyone can use it, even if they do not see eye to eye.”
As cryptocurrencies crashed in the third week of January, Bukele bought the dip, announcing that he had scored 410 BTC for the low-low price of a cool $15 million, which pushed the total investment up to $88.4 million for 1,801 bitcoin. On New Year’s day, Bukele predicted that bitcoin would reach $100K in 2022, among other ambitious predictions.
The man shows savvy in the cultivation of his image, and it’s easy to buy in with his catchy gimmicks. But make no mistake, behind the scenes, he’s violating civil liberties with Pegasus, the very spyware used to target activists in 50 countries, including a few who were later murdered, such as Washington Post journalist Jamal Khashoggi.
El Salvador is a valuable testing ground for the digital currency, but if El Faro’s findings are true it seems clear the Bukele administration can no longer be considered a trustworthy partner… A leader willing to use black-ops spyware against his own citizens is not an acceptable figurehead for spreading bitcoin adoption.
Reporters, myself included, should think about how they would feel visiting El Salvador in the future if they write about Bukele’s use of Pegasus. Bukele may style himself as a progressive, an innovator, and a Twitter guru, but never ever forget this: when it comes down to it, he’s just another fascist dictator, all too common now in our world. Remember that if his bitcoin bet pays off.
Author: Tim Tolka, writer, journalist, and BI researcher
The Editorial Team at #DisruptionBanking have taken all precautions to ensure that no persons or organisations have been adversely affected or offered any sort of financial advice in this Article. This Article is most definitely not Financial Advice.