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El Salvador's crypto experiment ends in failure
- TechDebtDevin 2y agoArchive anyone?
- hsuduebc2 2y agohttps://archive.is/BNzS2 https://archive.is/BNzS2
- hsuduebc2 2y agohttps://archive.is/BNzS2 https://archive.is/BNzS2
- hsuduebc2 2y ago[flagged]
- dang 2y agoRecent and related: El Salvador abandons Bitcoin as legal tender - https://news.ycombinator.com/item?id=42925210 https://news.ycombinator.com/item?id=42925210 - Feb 2025 (858 comments)
- alephnerd 2y agoAnd we in the US about to embark on a similar crypto adventure with the EO for the Strategic Bitcoin Reserve [0]. This is what happens when top leadership at A16Z like Marc Andressen [1], Ben Horowitz [1], Scott Kupor [2] (first VC at A16Z and now head of OPM - the agency that gives DOGE it's teeth), and Brian Quintenz [3] (head of policy (ie. Lobbying) at A16Z as Head of the CFTC) become major backers of the current administration. A16Z has been lobbying for deregulating the Crypto industry and defanging the CFPB for half a decade now [4][5] as they have $4.5B dedicated in crypto investments alone [6], which were largely underwater [7] People keep talking about the Dark Enlightenment Tech Bro schpeil, and while significant, is basically a bunch of blowhards. The primary reasons you saw significant VC support for the Trump administration are 1. the proposed tax on unrealized capital gains tax for those with a net worth above $100M (heavily hits VCs like A16Z, Founders Fund, and YC) 2. the SPAC crackdown (shut down a major venue to unlock capital from zombie investments) 3. Crypto deregulation (as explained above) [0] - https://www.reuters.com/technology/trump-signs-order-establish-strategic-bitcoin-reserve-white-house-crypto-czar-2025-03-07/ https://www.reuters.com/technology/trump-signs-order-establi... [1] - https://techcrunch.com/2024/07/16/andreessen-horowitz-co-founders-explain-why-theyre-supporting-trump/ https://techcrunch.com/2024/07/16/andreessen-horowitz-co-fou... [2] - https://www.whitehouse.gov/presidential-actions/2025/01/sub-cabinet-appointments/ https://www.whitehouse.gov/presidential-actions/2025/01/sub-... [3] - https://www.reuters.com/world/us/trump-plans-pick-brian-quintenz-lead-cftc-bloomberg-news-reports-2025-02-12/ https://www.reuters.com/world/us/trump-plans-pick-brian-quin... [4] - https://www.nytimes.com/2021/10/29/us/politics/andreessen-horowitz-lobbying-cryptocurrency.html https://www.nytimes.com/2021/10/29/us/politics/andreessen-ho... [5] - https://www.forbes.com/sites/davidjeans/2022/10/17/andreessen-horowitz-crypto-lobbying-washington/ https://www.forbes.com/sites/davidjeans/2022/10/17/andreesse... [6] - https://www.axios.com/2022/05/25/andreessen-horowitz-raises-45-billion-for-record-breaking-crypto-fund https://www.axios.com/2022/05/25/andreessen-horowitz-raises-... [7] - https://www.wsj.com/articles/andreessen-horowitz-went-all-in-on-crypto-at-the-worst-possible-time-11666769270 https://www.wsj.com/articles/andreessen-horowitz-went-all-in...
- chgs 2y agoThat’s just grift to transfer wealth from the taxpayer to the Don’s favoured henchmen.
- alephnerd 2y agoOther way around. Trump had no shot until the proposed tax changes in early 2023 and competition with Sequoia lead much of A16Z's leadership (and other VCs) to invest in Trump's campaign. Before that, A16Z, other VCs, and tech leadership tended to donate equally to both parties. As I've mentioned multiple times before, Dem leadership screwed the pooch by alienating tech leadership who coalesced around Obama while overinvesting in failed outreach to legacy unions like the UAW and ILU. Musk has always been an unsavory character, but he only really flipped to Trump after the Biden admin alienated him to try and get UAW support [0] - and now the UAW who Biden and the Dems tried to poach are now fully behind Trump and the GOP [1] [0] - https://www.wsj.com/politics/elections/how-elon-musk-broke-with-biden-and-the-democrats-4960b7d8 https://www.wsj.com/politics/elections/how-elon-musk-broke-w... [1] - https://www.axios.com/2025/03/04/uaw-trump-tariffs-united-auto-workers https://www.axios.com/2025/03/04/uaw-trump-tariffs-united-au...
- mastazi 2y agoWorth noting that adopting a currency as legal tender and keeping reserves of that currency are two different things. El Salvador has abandoned the former, your government wants to do the latter.
- alephnerd 2y agoIt's de facto the former as Crypto-first payments are increasingly accepted in the US AND the admin is considering giving crypto tax-free status exempt from capital gains.
- jfengel 2y agoIt's hard not to see the "crypto reserve" as a step towards "you can pay your taxes in crypto". Which isn't quite the same as legal tender but it's infinitesimally close.
- dexter0 2y agoKey points: > Despite these profits, crypto has brought El Salvador more costs than benefits. The free publicity has been welcome, yet crypto-investment and crypto-tourism have been small beer. Gains in financial inclusion and from more efficient payments are meagre at best: the currency never really caught on. In 2022, when the hype was at its peak, a survey by CID-Gallup found that only a fifth of firms accepted bitcoin and just 5% of tax payments were in crypto. > Moreover, the policy cost $375m in all—from the Chivo rollout, subsidised transaction fees, bitcoin ATMs and more—according to Moody’s, a rating agency. That far exceeds the profits on bitcoin holdings, which could still evaporate. By delaying an IMF deal, the crypto experiment kept El Salvador’s risk premium high.
- Loughla 2y agoSo this was just a way to shift more public dollars into private hands?
- horrible-hilde 2y agoyes
- deleted 2y ago[deleted]
- dgfitz 2y agoThe bulk of BTC is owned by like 50 people. It’s such a fucking joke.
- blitzar 2y agoand 20 of them lost the keys to those BTC 10 years ago
- ty6853 2y ago375 minus like 287 in unrealized gains. My next question is are they still behind once you consider the market value of the ATM and other investments. I doubt it's a total write off.
- greyface- 2y agoWhether or not it's classified as legal tender going forward, Bukele has indicated that he intends to continue amassing Bitcoin as a reserve asset: https://twitter.com/nayibbukele/status/1897019629702410551 https://twitter.com/nayibbukele/status/1897019629702410551
- dsr_ 2y agoHigh volatility is the thing that should be most avoided as a reserve.
- ursuscamp 2y agoThat really depends in your time horizon
- kinakomochidayo 2y agoWhich is ironic, considering how Bitcoin security budget will very likely decrease as time goes on with Bitcoin halvenings and low transaction fees going to miners
- toomim 2y agoIt's already about 1000000x higher than it needs to be. Keep in mind that all it does is prevent double-spends. There are other ways to avoid double-spends, too, like taking the party to court. Mining does not need to be incentivizes nearly as much as it is right now for bitcoin to still function as p2p cash.
- toomim 2y agoNot if the "volatility" is in the upward direction.
- roenxi 2y agoI'm pretty open to the idea that their crypto experiment ended in failure because bitcoin must be a truly terrible reserve asset, but being assassinated by the IMF isn't really evidence of that. El Salvador doesn't seem to have independently changed their minds about the merits of their policy. I might draw a very vague parallel with a gentleman who can't repay a mortgage and through various machinations the bank forces him to sell his beanie baby collection. The beanie baby collection might have been a success or a failure for him personally. Probably was a failure. But that isn't really what we're learning in this story. And pointing out that they lose money on the bitcoin reserve is a bit of a non-sequiter. They all do that. Gold has storage costs, the USD inflates like crazy and sometimes the US sanctions you. The analysis has to be a bit deeper than just noting that money was lost, it is a tricky question of relative options.
- tptacek 2y agoThe article makes a case on the merits for the failure of the project, in terms of its uptake, the direct value generated, and the costs of its rollout.
- roenxi 2y agoThose arguments could be levelled against any currency. Typically uptake is only 100% because the government has a "thou shalt accept this" policy. If it was practically voluntary then a bunch of businesses would operate on a barter system or private scrip. Even with the insistence of the tax office it takes regular crackdowns to stop alternatives springing up. And it is even easy to argue that normal currency is value destructive, all the flows of money into crypto are implicit "I'd rather be burning energy than using USD" announcements.
- tptacek 2y ago"Nobody used it and the costs didn't justify the usage" is a complaint you can level at any currency?
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- TechDebtDevin 2y ago1.4bn seems cheap, and its a loan that presumably will be guaranteed. So for 1.4bn dollars the IMF gets to call the shots for an entire country's economy. Im surprised we dont see more private indvs playing the role of WB.
- NicoJuicy 2y agoYeah, Greece didn't survive IMF. Oh wait... (Nobody remembers the long term success stories, just the short period pain)
- TechDebtDevin 2y agoIm not even arguing against this type of lending, although it does seem predatory to a degree. Im surprised at how much leverage can be bought for 1.4bn $$, this is pocket change for most large banks/countries, im surprised the IMF doesn't have more competitors, especially if natural resources are on the table, and they always are.
- dzonga 2y agoyeah as an economy - you don't want to ever receive IMF money. Lots of African and Caribbean countries will attest to that. IMF money is like having the mafia control your money - the structural adjustments will kill the natural course of your economy and never recover. That's why Chinese loans have been welcome for a lot of countries. they don't come with a lot of stipulations, such as removing subsidies for your farmers.
- biophysboy 2y agoHave any crypto experiments ended in success?
- henrikschroder 2y agoWell, tons of scammers have made tons of money, so technically, yes? For the average person not so much.
- PartiallyTyped 2y agoIncluding current POTUS and their family :)
- claudiug 2y agofor the one that make money, yes :)
- goldforever 2y ago[dead]
- blindriver 2y agoI worked at a crypto company and left after I realized that 99% of crypto are scams. Either people get rugpulled or they get their wallets emptied by scammers, and I don't think Apple would have survived if the iPhone was a hotbed of scams. There's a tiny sliver of activity which isn't purely scams, like BTC or ETH but even then there's almost no real use case except the Greater Fool Theory, and I just don't think that's sustainable. I think at some point the entire industry is going to get rugpulled because there's still no inherent demand except selling it to someone else for more money.
- brianwawok 2y agoYup. A lot of people got rich, but I can’t see it lasting much longer
- daveguy 2y agoLike I told my family recently: I think people are going to start realizing that there's a lot more invested in crypto than it's worth. Trump putting the federal government behind a crypto reserve didn't intice new investors/investment. Not sure where the bottom is, but we might find out sooner than later. The people who want crypto have it. The people who recognize it's not worth the lack of fraud regulation/protection and instability aren't going to suddenly start buying.
- blindriver 2y ago> but I can’t see it lasting much longer I said this back in 2012, and I've been waiting ever since... That's why I decided to join the crypto company but left after seeing it from the inside of the actual space.
- werdnapk 2y agoDoesn't take working at a crypto company to realize 99% of crypto is a scam. Meme coins, ICOs and NFTs were the icing on the cake for me though.
- chiefalchemist 2y agoBTC aside, the rest are scams. As for BTC I went to this presentation at Princeton University in late 2024. BTC isn’t perfect but often enough it’s better than centralized alternatives. https://www.princeton.edu/events/2024/book-talk-resistance-money-philosophical-case-bitcoin https://www.princeton.edu/events/2024/book-talk-resistance-m...
- merek 2y agoFor an excellent analysis of Bukele and life on the ground in El Salvador, I highly recommend Matt Lakeman's notes: https://mattlakeman.org/2024/03/30/notes-on-el-salvador/ https://mattlakeman.org/2024/03/30/notes-on-el-salvador/ Specifically on Bitcoin: > This guide also told me that he immediately spent his $30 Bitcoin gift from the government on beer and hasn’t possessed a single Satoshi since. > I saw maybe four or five Bitcoin ATMs in El Salvador, including two Athena Bitcoin machines. I didn’t see anyone using them. > The guide, who I consider an articulate and strong supporter of Bukele, seemed to consider the president’s Bitcoin ambitions to be a weird, misguided, but ultimately trivial effort.
- petertodd 2y ago> I saw maybe four or five Bitcoin ATMs in El Salvador, including two Athena Bitcoin machines. I didn’t see anyone using them. I've visited El Salvador quite a few times and traveled a decent % of the country, including non-touristy areas. I've seen plenty of Bitcoin ATMs in El Salvador. In some areas they aren't busy. But in other areas they have consistent line-ups of _locals_ using them. And yes, I said locals, not tourists. I'm not sure why the locals use them so much. But remittances is one possibility. If all Bitcoin managed to do was force the likes of Western Union to keep their fees low via competition, it'd be a success for El Salvador. As of 2023, about 24% of El Salvador's entire GDP is remittances. > The guide, who I consider an articulate and strong supporter of Bukele, seemed to consider the president’s Bitcoin ambitions to be a weird, misguided, but ultimately trivial effort. Of course, let's put all this Bitcoin stuff in perspective: Bukele's legacy will most likely be ending gang violence. I consider the Bitcoin stuff a mild success; ending gang violence has radically transformed the country for the better.
- ionwake 2y agoI dont check the price of BTC anymore to I just check if there is someone posting an article to HN about Salvador from mainstream media.
- Jimmc414 2y agoEl Salvador invested approximately $269.74 million to acquire 5,900 bitcoins ($595 million) and secure $1.4 billion in IMF loans. I hope they can recover from this failure.
- ramchip 2y agoDid you read the article? > Moreover, the policy cost $375m in all—from the Chivo rollout, subsidised transaction fees, bitcoin ATMs and more—according to Moody’s, a rating agency. That far exceeds the profits on bitcoin holdings, which could still evaporate. By delaying an IMF deal, the crypto experiment kept El Salvador's risk premium high.
- toomim 2y agoI don't believe el salvador spent $375m on those things. I could believe that Chivo spent their VC money on that.
- deleted 2y ago[deleted]
- toomim 2y agoEl Salvador makes $330m from a Bitcoin investment and the Financial Times calls it a "failure."
- xiphias2 2y agoThe article doesn't get into the interesting part: Salvadorian government continued accumulating BTC. So far IMF didn't say anything specific, so the June review will be interesting to see if IMF continues with the loan or cancels the next trenches.
- bobbybobbington 2y agoThe infrastructure is not set up yet, but the multi-nationals have good facilities for it. It's just like any currency, up one day, down the next, which is why I say it's long time past we did away with the concept of money. Not only is the concept of money outdated, it's not a natural phenomenon, other wise trees would give receipts. Living a life in a money world is not unlike living in a cloud cuckoo land, it's just as illusory. There's fish in the sea, crops give up seeds from the ground and barnyard animals reproduce, not a penny passed hands. The world has the education, if the Egyptians could turn a desert in to paradise more than 15,000 years ago, why can't we?
- Roslyn211 2y ago[flagged]
- mrlkts 2y agoOh wow, this is the first time I'm seeing a real crypto scam on hackernews.
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- tyreu 2y ago[flagged]
- vrighter 2y agolike pretty much every other state-sanctioned crypto experiment. Or, more subjectively, pretty much any crypto experiment, imo.
- tamlucky35 2y ago[dead]
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- Murphysharon 2y ago[flagged]
- Roslyn211 2y agoI have been through the hands of scammers, While trying to get my 275,000 USD scammed funds back, I fell into another big scam too. I finally got a solution after telling my friend about my situation She introduced me to these company that helped her husband to recover his scammed funds. I contacted them on : recoverydarek@gmail.com and they where able recovered my stolen funds back to me successfully .
- o999 2y agoOne does not need an expert to predict a terrible failure of Bitcoin as a legal tender and for $30-worth of free BTC wallet. But as a minority of reserve asset, Bitcoin might be a good idea, nobody bought bitcoin at any price whatsover and wasn't able to make a profit that beats US T-bonds for 4 consecutive years (please double check on this, it's not a financial advice), let only if they DCA their portfolio. Of course such national reserve cannot make a large % of the total reserve as the risk is also high and wealth of the nation is not meant to be used in risky bets. 4 years is also not a very meaningful window for a 16 years old market.
- haroldshirley55 2y ago[dead]
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- kebbelarielle38 2y ago[flagged]