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El Salvador to adopt Bitcoin as legal tender

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Re: El Salvador to adopt Bitcoin as legal tender

#31

Post by rawtxapp »

ineedasername wrote: post #30

I'm sure the people of El Salvador won't mind having 20% of their wealth wiped out every time Elon Musk tweets something that changes his mind in some way. Certainly if I was selling something I'd denominate it in something relative stable and then change Bitcoin asking price to match the exchange rate to that stable currency. Since the currency there is the USD... Yeah, I'd still be pricing my goods and services in…

Historically, Bitcoin appreciated 300% YoY whereas the dollar is in a constantly depreciating cycle, I know which one I'd prefer.

Re: El Salvador to adopt Bitcoin as legal tender

#32

Post by jerf »

squiggleblaz wrote: post #25
jerf wrote: post #19

Earlier quoted context omitted.

Accepting it as legal tender doesn't mean it is what the loans are denominated in. Nobody sane would denominate loans in BitCoin. (There are loans denominated in BitCoin. The obvious syllogism applies.)

But if I have a loan for a value that corresponds to about 1 bitcoin and $53, then doesn't legal tender mean I have to accept 1 bitcoin and $53 in exchange for it? The fact that tomorrow the value will be 1 bitcoin and $196 seems irrelevant. And this is significant: debtors could repay their debts when bitcoins look like they will decrease in value with respect to the currency of denomination with an intent to harm t…

A loan can be denominated in a currency other than what you directly pay for it with. That just means somebody is automatically converting it for you. Financially, it's exactly the same as using your Visa to buy something in a foreign currency; you're paying in Euros for a loan denominated in dollars, and you'll pay it off in dollars.

The loan can't be denominated in multiple currencies at once, as you seem to be thinking of, because that would make the loan amount undefined unless the two currencies were directly pegged to each other.

You can have a loan of 100 dollars. Or you can have a loan of .01 BitCoin. You can pay either off in dollars or BitCoin. How much a given pile of currency will pay off depends on exchange rates. But that doesn't affect the loan itself.

I somewhat sarcastically said nobody would denominate a loan in BitCoin, but not sarcastically at all, nobody would ever denominate a loan in "either this much of one currency or this much of another" because that is seriously a no-win situation for the entity loaning money. Obviously the loanee would pay it off in whatever is cheaper.

Re: El Salvador to adopt Bitcoin as legal tender

#33

Post by TimJRobinson »

kragen wrote: post #27
cperciva wrote: post #16

Earlier quoted context omitted.

Nothing to do with retaliation. They just want to protect their assets from being seized by the US government.

Hmm, are you suggesting that the US could overthrow their government, either by invasion as in Panama or by funding a terrorist campaign as in Nicaragua, and that Bitcoin would be more secure than suitcases of dollar bills against such actions? Surely not that the US would dramatically devalue its own currency in order to drain El Salvador's reserves? Or are you thinking that dollar-denominated reserves held in overs…

It's Sanctions. The USA can put sanctions on anyone as they've done with Russia, Iran, Venezuela. All banks that trade with the USA must comply, and those people/places are locked out of the global financial system.

There's no effort of an invasion or coup involved. It's easy for the USA to do this to pressure people they don't like and that's why so many of these countries are moving away from USD.

Re: El Salvador to adopt Bitcoin as legal tender

#34

Post by bubersson »

bratao wrote: post #15

What would happen to the markets if Satoshi appeared and starts trading his 1 Mi in BTC?

That would really depend on what Satoshi would do exactly with his/hers holding. It would probably cause volatility, but imo not larger volatility compared to what we are already used to.

Re: El Salvador to adopt Bitcoin as legal tender

#35

Post by temp10298385 »

Beached wrote: post #24
temp10298385 wrote: post #17

As someone who readily admits to not fully knowing what legal tender entails, I have a question for the optimists: As I understand it, legal tender status forces creditors to accept bitcoin as debt repayment. Given the volatility of bitcoin, wouldn't this impact risk assessment of loans? Being obligated to accept a high volatility asset as a repayment sounds like a nightmare for creditors. Wouldn't interest rates ris…

they would be forced to accept it, however they would likely instantly convert it to a more stable currency at the time of payment through some processor. there will likely be a small fee to them for the conversion of Bitcoin to say, USD, but I imagine it would be similar to accepting credit cards for payment? and so it would be worked into the prices.

Yes, I'd assume that creditors preferring USD would convert but that seems like a non trivial overhead for many creditors. The time between receiving payment and actually converting BTC to USD will surely result in a non-negligible balance difference?

Re: El Salvador to adopt Bitcoin as legal tender

#37

Post by temp10298385 »

jerf wrote: post #19
temp10298385 wrote: post #17

As someone who readily admits to not fully knowing what legal tender entails, I have a question for the optimists: As I understand it, legal tender status forces creditors to accept bitcoin as debt repayment. Given the volatility of bitcoin, wouldn't this impact risk assessment of loans? Being obligated to accept a high volatility asset as a repayment sounds like a nightmare for creditors. Wouldn't interest rates ris…

Accepting it as legal tender doesn't mean it is what the loans are denominated in. Nobody sane would denominate loans in BitCoin. (There are loans denominated in BitCoin. The obvious syllogism applies.)

Yes of course, I'm still assuming USD denominated loans. However repayments may be done in BTC still, unless I'm misunderstanding what legal tender actually is. Even if I, as a creditor, convert my payments from BTC to USD as soon as I can there will be a volatility, right? I wouldn't dare to predict the impact scale but certainly enough to warrant consideration?

Re: El Salvador to adopt Bitcoin as legal tender

#38

Post by kragen »

TimJRobinson wrote: post #33
kragen wrote: post #27

Earlier quoted context omitted.

Hmm, are you suggesting that the US could overthrow their government, either by invasion as in Panama or by funding a terrorist campaign as in Nicaragua, and that Bitcoin would be more secure than suitcases of dollar bills against such actions? Surely not that the US would dramatically devalue its own currency in order to drain El Salvador's reserves? Or are you thinking that dollar-denominated reserves held in overs…

It's Sanctions. The USA can put sanctions on anyone as they've done with Russia, Iran, Venezuela. All banks that trade with the USA must comply, and those people/places are locked out of the global financial system. There's no effort of an invasion or coup involved. It's easy for the USA to do this to pressure people they don't like and that's why so many of these countries are moving away from USD.

Oh, I see. So reserves held in overseas banks might suddenly become inaccessible, even if not actually seized, and Bitcoin (unlike, say, the euro or yen) offers a way to reduce this risk?

Re: El Salvador to adopt Bitcoin as legal tender

#40

Post by eloff »

My prediction. This won't be used hardly at all. Why use bitcoin when the USD is also legal tender and superior as a currency in nearly every way?

About the only thing you can do more easily with bitcoin is buy other cryptos and send it across borders - sometimes.

I would also predict that the failure here would finally get people to stop thinking it's a currency. But I doubt it.

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