This analysis of the Bitcoin Law will not age well. In a recent episode of CNBC’s “Beyond The Valley” podcast, they tried to cover the risks inherent in El Salvador’s decision to make Bitcoin legal tender and failed miserably. This is a technology-focused specialized podcast. Could they be this clueless? Or did they have an agenda and tried to muddy the waters with the worst information possible?
Before we get into it, what is this podcast exactly about? According to their website:
“Beyond the Valley” tells the stories of how technology is shaping the world – no matter where they happen on the globe. Increasingly, some of the biggest technological developments and trends are finding their start outside the traditional tech power centers.
In the episode titled “El Salvador made bitcoin a legal currency. Now it gets interesting,” host Arjun Kharpal interviews Rachel Ziemba from the Center For A New American Security. We’re sure both of them are good at what they do. However, neither of them did their homework about Bitcoin, nor about the Bitcoin Law.
What Was “Beyond The Valley’s” Take On The Bitcoin Law?
The whole report is extremely surface-level. That’s ok, their target audience doesn’t have to be experts or even Bitcoin users. However, both Kharpal and Ziemba focused on finding problems with the application of the Bitcoin Law. They didn’t do a very good job. Sometimes, when they asked the most basic questions, they laughed between their teeth as if they were poking holes in what’s a very thought-out project. They were not poking holes.
At first, Kharpal seemed to approach the subject honestly. He called the application of the Bitcoin Law “Our first real-world example” of what a society under Bitcoin could be. He mentioned that 70% of El Salvador’s population doesn’t have access to traditional financial services and 25% of their GDP comes from remittances, which Bitcoin could make faster and cheaper. After the introduction, they didn’t mention any of those points anymore.
Then, he went directly into the Bitcoin Law ‘s Article 7, and the fact that “Every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.” He asked, “What if they don’t want to? that’s just one of the many questions here on top of the fact that we know Bitcoin is extremely volatile.” Well, President Bukele already answered the first question.
Without Article 7, the pharmacy could refuse because it’s a private agent. And that, “Would be a discrimination against the 70% of the people that you want to benefit.” They don’t have another method of payment. They have to be able to go to buy medicine or food, “and have them receive their sats.”
Yeah, But, What About Bitcoin’s Volatility?
One of the podcast’s leitmotifs is the asset’s volatility. Of course, as usual with mainstream media, they try to frame it as if Bitcoin’s price always goes down and seldom mention that it can, and usually does, go up. They try to make it look like they’re looking for the common citizen’s interests, but not even once they mention the inflation inherent in the Fiat’s system. The hidden tax that eats our hard-earned money’s purchasing power.
The guest, Rachel Ziemba, poses a question:
“There are plenty of other transactions globally that might be conducted in Bitcoin, sort of rents that are taken, sort of purchases that are made, but often they’re quickly converted into a Fiat currency. And I think there’s a real question mark about how’s that going to work in El Salvador. And who’s going to bear that cost of that volatility? And the risk is that the average citizens are the ones that are going to pay for that, as well as the private sector entities that are going to be struggling to think about how are they hedging these risks.”
President Bukele also answered that one:
A notable characteristic of the law is that ”you can actually opt-out. You have to accept the sats, but you don’t have to receive them. You can actually receive US Dollars. So, how can you complain? I mean, you’re receiving what you ask for.” El Salvador will have a trust fund dedicated to these currency exchanges. They’ll buy the Bitcoin from those who choose to receive Dollars, and they’ll protect their earnings from possible volatility in Bitcoin’s price. If the vendor does a transaction for $5, that’s exactly what he or she’s going to get.
Shouldn’t these experts know about the President’s take on the situation?
Answering “Beyond The Valley’s” Questions About The Bitcoin Law
Let’s kill these questions with rapid-fire answers. The host asks:
If you’re talking about any kind of debt or anything like that, what price is it going to be determined in? Is it going to be in Bitcoin? In USD? Is it going to be from the point at which you got the debt or when the debt is due?
The prices will be in Dollars. They have two official currencies. The Bitcoin Law exists because El Salvador already has a real-life use case for these kinds of operations in Bitcoin Beach.
Is El Salvador’s digital infrastructure ready?
They’re plugging in to Bitcoin, an open network that’s always evolving and providing solutions. Again, they already have a pilot program running in Bitcoin Beach.
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The host talks about the need for education, and that’s fair. It’s also addressed in the Bitcoin Law itself, which is only 4 pages long. He should’ve read it. Kharpal also talks about a “digital divide,” as if the people with lower income don’t own cellular phones and can’t operate them. There are cases, of course, but they can learn. Ziemba asks:
What if cell service or WiFi service goes down?
They’ll have to wait, don’t they? Or pay in cash, they have two legal currencies. She talks about the risk of “People losing access to their accounts.” That’s a real risk they’re going to have to learn how to live with. Losing your cash or getting robbed is also a risk.
In the end, they start talking about CBDCs and the show loses its allure. In the whole episode, they don’t mention the Lightning Network once. Nor the Bitcoin Beach project.