What are the US tax implications of Bitcoin being an official foreign currency?
This is also my question. This blurs all sorts of lines.
El Salvador adopts Bitcoin as official currency, first country to do so
131–140 of 394 posts
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#132Earlier quoted context omitted.
Actually, they are not even using lighning wallets. They are using a centralized payment processor that has personal accounts for users, like any other payment app. This centralized processor happens to use lightning wallets in its backend, but there is no 1:1 mapping of payment_account:lightning_wallet. And since Lightning itself doesn't interact with the blockchain except when you open/close payment channels, there…
You have the first part right, but to insinuate that lightning is not using the bitcoin blockchain is entirely wrong. In the case of lightning, the bitcoin blockchain is only used in a dispute over funds. This is how you properly scale a decentralized blockchain.
So the way to scale the blockchain is to avoid putting transactions on it. If I promise you that if you give me your burger you'll have 5SAT from me, and later you ask for my water and offer to reduce my debt to 4SAT in exchange, did we use the bitcoin blockchain in our transaction?
With ligthning, you're not using the bitcoin network to process transactions. If we opened a lightning channel for our 2 personal bitcoin wallets, and I paid you 1000SAT over the channel, and then someone checked my bitcoin wallet, they would see that I still have all those SATs (of course, I can't double spend them).
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#133Down 1.6 million the first day. Good luck 400 coins BTC-USD Bitcoin USD 47,256.78 -4,285.39 -8.31%
In Jan 2020, the USD monetary base (= the other legal tender in El Salvador) was 15.3 trillions, in Jan 2021 it was 19.
That's a drop of 24% in purchasing power.
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#134Monetary Policy. Can someone explain how a country plans to implement a monetary policy (e.g. inject new currency during a recession to fund expansion) when they don’t control their national currency (Bitcoin).
> inject new currency during a recession to fund expansion
that's a relatively new concept that hasn't exactly worked out so well for anyone that's ever done it
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#135Earlier quoted context omitted.
I’d be skeptical about using a government wallet as well, though it could potentially make initial disbursements easier.
This probably eliminates this whole "bitcoin is privacy and independence from government" thing but I think for majority of bitcoin buyers it was not more than just a nice talking point anyway.
The best argument for Bitcoin is that it’s not created out of thin air and then lent to people with interest, IMO.
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#136Down 1.6 million the first day. Good luck 400 coins BTC-USD Bitcoin USD 47,256.78 -4,285.39 -8.31%
back to 47519 now but yes there's a >50% chance there'll be more downward pressure tomorrow
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#137Earlier quoted context omitted.
Indeed, but it’s still a natural experiment to observe.
On a very poor population where even a 1% swing in valuation can make a huge difference in someone’s life. There’s also no recourse for fraud here — the industry has all kinds of scrupulous players and isn’t as locked down as traditional banking. To me, it seems like El Salvador should have created a MoneyGram competitor and left it at that. They could remove/reduce commission without all the rest of the risks.
To your point, they could've partnered with TransferWise/Wise.com or OFX to build a white label app that allowed for frictionless remittance and fiat management for their citizens and "wallet management" (ie deposit accounts), and your usual fintech wallet accounts. This would be no different than the UK's Faster Payment's service being a managed service by Vocalink [1]. Some have proposed the US Fed issuing FedAccounts, deposit accounts held at the Fed with no fees, to sidestep inequity and predatory behavior from commercial banks. This would be very similar, except the El Salvador government outsourcing these functions (as they rely primarily on the US dollar as their currency) and the cross border exchange. Onboard citizens using their DUI (Documento Único de Identidad) or Passport number, voilà, they're banked and can store or transfer monetary value. Subsidize physical hardware for those who can't afford a smart phone.
Does El Salvador need a blockchain or crypto? No, of course not. They need inexpensive facilitation of domestic financial services and cross border remittance to reduce currency import drag.
Instead, inept politicians (for various reasons out of scope for this thread) are going to cause a lot of suffering, but it will be helpful to have a case study to point to in order to demonstrate the nation state policy failure. This is worse than being reliant on another country's monetary policy and central bank. You're tying your economy to a speculative asset with few governance mechanisms. C'est la vie.
[1] https://www.vocalink.com/payment-processing/real-time-paymen...
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#138Earlier quoted context omitted.
> Bitcoin could be used by the whole world with mining only happening on a laptop. That would not change anything for Bitcoin users. No, that is completely inaccurate. First of all, with current parameters that would mean that you need a good few hundred years to process a few seconds of world-wide transactions. And if the parameters were adjusted such that it would be that easy to mine blocks, bitcoin would become v…
> No, that is completely inaccurate. > First of all, with current parameters that would mean that you need a good few hundred years to process a few seconds of world-wide transactions. If you settle everything onchain, maybe (I haven't done the math on this, so I honestly don't know), but storing every transaction for a cup of coffee in a datastore that persists across tens of thousands of computers for the rest of t…
But the total amount of data stored in the Lightning network is even more absurd. Not only do we store "A has paid B 1 SAT" for all time, we actually store "A is paying C 1SAT for B; C is paying D 1SAT for B; E is paying F 1SAT for B; F is paying B 1SAT".
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#139Best part is the President trolling the IMF on Twitter: https://twitter.com/nayibbukele/status/1435263064933285898
Yea, best to troll on Twitter than fix your country that has the literal highest homicide rate in the world. Murder good for Bitcoin?
A middle finger to the IMF sharks is a good start to fix a country.
Re: El Salvador adopts Bitcoin as official currency, first country to do so
#140yep, That's why protests are taking place in El Salvador. We have also uncovered some security holes. https://twitter.com/Rchr2M/status/1435236141112905732 https://twitter.com/david_a_garcia/status/143525911196544614... Protests: https://twitter.com/OscarMachon/status/1435272669189087236
>We have also uncovered some security holes.
What security holes? The first tweet seems to be some sort of some sort of app saying it's a virus, and the second seems to say that it collects IMEI information. Neither constitute good evidence of "security holes".