<\/p>\n
<\/p>\n The Ley de Emisi\u00f3n de Activos Digitales (Digital Assets Issuance Law) passed the Legislative Assembly of El Salvador on 11 January 2023 by 62 to 16. Bitcoin Volcano Bonds<\/a> are one step closer! [Twitter<\/i><\/a>; <\/i>WSJ<\/i><\/a>, paywalled<\/i>]<\/p>\n The law made it through committee on 14 November 2022, but was only put up to a vote this month. Here\u2019s the official draft as submitted by the Comision de Economia \u2014 it\u2019s a PDF of a scan, sorry. [Bitcoin Magazine<\/i><\/a>; <\/i>Asamblea Legislativa<\/i><\/a>, PDF, in Spanish<\/i>]<\/p>\n The Digital Assets Issuance Law was written by the guys at iFinex<\/a> \u2014 the owners of the Bitfinex crypto exchange and the Tether stablecoin.<\/p>\n The law is long, rambling and ill-organised \u2014 the species of law which is completely half-assed, but they half-assed it in great detail over many months. It does things like define what a URL<\/a> is, and translates terms from English where there\u2019s already a jargon word in Spanish.<\/p>\n In the Diario Oficial (Official Gazette) of 17 November 2022, an executive decree created the Oficina Nacional del Bitcoin (National Bitcoin Office). [elsalvador.com<\/i><\/a>, in Spanish<\/i>]<\/p>\n There will be a Comisi\u00f3n Nacional de Activos Digitales (National Digital Assets Commission), to write regulations, enable or suspend crypto offerings and regulate digital asset service providers. This is in effect no earlier than 90 days after the law passing, so 11 April.<\/p>\n The point of the new law seems to be the Agencia Administradora de Fondos Bitcoin (AAB) (Bitcoin Fund Administrator Agency), part of the Ministry of the Economy \u2014 which can authorise the Banco Central de Reserva to issue dollar stablecoins backed by bitcoins.<\/p>\n The state will be able to borrow money by issuing bonds backed by digital assets \u2014 such as the Bitcoin Volcano Bonds. The money will be managed by the AAB, whose administrator is appointed by the President for five years.<\/p>\n The really fun bit is that the AAB can issue new government debt all by itself, without the approval of the Assembly \u2014 as long as it\u2019s in Ponzi coins and not dollars. This is against the Constitution, but Nayib Bukele is in power.<\/p>\n Here\u2019s a more detailed local analysis from Domingo Flores. [Patreon<\/i><\/a>]<\/p>\n <\/p>\n <\/p>\n The Volcano Bonds were all set to be issued in February 2022. The Finance Minister, Alejandro Zelaya, assured Salvadorans that they had a billion dollars of buyers lined up. In fact, they had a billion and a half dollars<\/a> lined up!<\/p>\n I know of no smoking-gun evidence of a connection \u2014 but Russia invaded Ukraine on 24 February, a pile of Russian billionaires were sanctioned, and coincidentally <\/i>the prospective buyers of Volcano Bonds vanished. Zelaya even said straight up<\/a> that the invasion of Ukraine was the main reason for the delay.<\/p>\n Mind you, Salvadoran bitcoin experts Mario G\u00f3mez<\/a> and \u00d3scar Salguero think the Volcano Bonds were just undersubscribed, and never had buyers \u2014 particularly given the bonds were a provably worse deal than just buying bitcoins and some of El Salvador\u2019s existing distressed sovereign debt separately. [Bennett Tomlin<\/i><\/a>]<\/p>\n Paolo Ardoino of iFinex expects the Volcano Bonds to be issued \u201cthis year.\u201d He\u2019s now calling them Volcano Tokens. [Bloomberg<\/i><\/a>]<\/p>\n Just which non-sanctioned entities are going to buy Volcano Bonds or Tokens? \u201cThere is a ton of wealth that is outside the banking system and wants to remain outside it,\u201d said \u201cone industry executive who has experience of working with Bitfinex\u201d to the Financial Times in March 2022. I can\u2019t see any translation for that first sentence other than \u201ccrooks.\u201d [FT<\/i><\/a>, 2022, paywalled<\/i>]<\/p>\n There\u2019s also the small problem of the price of bitcoin going down the toilet in the middle of the year, and the influx of actual dollars into crypto drying up.<\/p>\n El Salvador could certainly do with a billion actual US dollars. But bitcoins are legal tender in El Salvador, so you could just dump your slightly-grubby bitcoins in.<\/p>\n As I\u2019ve been saying<\/a> since the Bitcoin Law passed in 2021, I think the whole point of the bitcoin boondoggle was always that El Salvador\u2019s national currency was the US dollar, and it couldn\u2019t print its own dollars \u2014 so Bukele needed somehow to issue unbacked dollars to fund all his great plans.<\/p>\n Bukele created a new form of dollar that’s not actually a dollar, and isn\u2019t verifiably backed by a large pile of dollars. I think this is what the Chivo Wallet was for.<\/p>\n The next hard part is to get Salvadorans to accept that these non-dollars are dollars. So far they don\u2019t trust Chivo, because it\u2019s just never worked very well.<\/a><\/p>\n Bitcoin City, which the Volcano Bonds were supposed to fund, will never be built. But here are some very silly Bitcoin City mockups from May 2022. [elsalvador.com<\/i><\/a>, in Spanish<\/i>]<\/p>\n El Salvador managed to scrape together enough actual dollars to pay its $604 million of sovereign debt that was due on 24 January!<\/p>\n I and many others thought El Salvador would have trouble paying on time. They scraped through by just cutting dead their funding to local municipalities \u2014 the sort of thing that sovereign debt holders expect of a poor country \u2014 by buying back some of the distressed debt themselves<\/a> for cheap, and by dipping into the country\u2019s foreign exchange reserves. [El Mundo<\/i><\/a>, in Spanish; <\/i>elsalvador.com,<\/i><\/a> in Spanish; <\/i>Twitter<\/i><\/a>]<\/p>\n The $800 million Eurobond \u2014 nothing to do with Europe or euros, the \u201ceuro\u201d prefix just means it wasn\u2019t denominated in its country\u2019s home currency \u2014 was cut down to $604.1 million after El Salvador bought out some of the debt.<\/p>\n El Salvador\u2019s next major bond comes due in 2025. The International Monetary Fund is visiting the country from 30 January. [elsalvador.com<\/i><\/a>, in Spanish; <\/i>Reuters<\/i><\/a>; <\/i>Reuters<\/i><\/a>]<\/p>\n Reuters wrote up Bukele\u2019s Troll Center and how it works: they create pro-Bukele sockpuppet accounts and harass anyone they think is opposed to them \u2014 on the government payroll, often working from government buildings. [Reuters<\/i><\/a>]<\/p>\n I had these bozos show up here on this blog, but I feel no obligation to let through more than the odd sample \u2014 though they stopped claiming to be from El Salvador when I called them out on doing so from a US IP address.<\/a><\/p>\n Mario G\u00f3mez spoke to El Diario de Hoy about his own investigations of the Troll Center since 2019. [elsalvador.com<\/i><\/a>, in Spanish<\/i>]<\/p>\n El Faro journalists who were hacked with the Pegasus spyware<\/a> are suing the software\u2019s distributor, NSO Group, in the US. El Faro has just now revealed that the Salvadoran police bought three other spyware programs in 2020. [El Faro<\/i><\/a>, in English; <\/i>New Yorker<\/i><\/a>; <\/i>El Faro<\/i><\/a>, in English<\/i>]<\/p>\n For the tenth month in a row, the Assembly has approved extending the State of Exception to the Constitution, where you can be jailed without a charge or a lawyer, and the police have been arresting poor people to meet a quota. Last week, military units started setting up in middle-class neighbourhoods, not just poor ones \u2014 supposedly to catch gang leaders living there? But really in case of trouble next election. Let none mistake this for a dictatorship, even as Bukele is following the same script as was used in Venezuela and Nicaragua. [elsalvador.com<\/i><\/a>, in Spanish<\/i>]<\/p>\n I didn\u2019t cover this when it came out \u2014 but in February 2022, Athena Bitcoin Global filed an S-1 form with the SEC to become a publicly traded company. Nelson Rauda from El Faro bothered looking it up, and wrote about it in April. [El Faro<\/i><\/a>, in Spanish<\/i>]<\/p>\n The S-1 contained a lot<\/i> of the detail about the Chivo Wallet that should<\/i> already have been available from the Salvadoran government as public knowledge, given they spent hundreds of millions of dollars in public funds \u2014 but which Bukele\u2019s government declared was all confidential or secret.<\/p>\n \u201cChivo is in a position where one would expect a completely transparent public institution, but it has been created as a private company where no one is allowed to look inside in any way,\u201d I\u2019m quoted as saying.<\/p>\n Here’s the Athena Bitcoin Global S-1. “When Salvadorans convert their Bitcoin to dollars, they do not receive dollars in the digital wallet. Instead they become holders of stable-dollar coins, which are only a claim to real dollars.” This seems like a very weird way of describing holding dollars in an account with a liability to the customer. [SEC<\/i><\/a>]<\/p>\n Athena did mention in passing the bit where they lost the Chivo contract \u2014 \u201dThe government of El Salvador discontinued use of the platform on or about December 15, 2021, but has not terminated its contract with the Company while the Company assists the government\u2019s secondary provider.\u201d Okay.<\/p>\n The SEC’s EDGAR filings database contains some wild stuff \u2014 you just have to go looking. That S-1 had been sitting there for two months, but Rauda was the one who went through EDGAR and found it.<\/p>\n Apparently, my piece from April 2022<\/a> mentioning a large theft via Chivo caused problems for Athena. I was writing on rumours from trustworthy sources (e.g.<\/i>, Mario G\u00f3mez), who put the total stolen at several million dollars. The sources were pretty good, but didn\u2019t tell the tale in its full glory.<\/p>\n In November 2022, Factum wrote up precisely what happened in April. This story is amazing and you should read it, even through a translator. And not just because I spoke to them for the piece. [Factum<\/i><\/a>, in Spanish<\/i>]<\/p>\n A bug in Chivo meant users could transfer funds to their bank account without having the dollars in their account on Chivo. The Chivo wallet gave an error \u2014 but it transferred the dollars anyway. The glitch happened on 8 April, and lasted for about 12 hours.<\/p>\n \u201cOn April 8, 2022, at 1:30 a.m., Michelle made a transaction from her Chivo Wallet to her bank account. She moved $100. Four minutes later she transferred $200 to the same account. At the same time the system registered another transfer for $2,000. A minute later she made two more transfers: one for $100 and one for $1,600. Michelle continued to move money for several hours from her Chivo Wallet to two bank accounts in her name. She did this 466 times. Prior to those transactions, she had a balance of $100 in her account, but ended that day with $72,850.\u201d<\/p>\n The original rumour was that millions of dollars had been stolen. The official total was $840,000, but Factum confirmed that over a million dollars was known to have been stolen, dozens of people were involved and dozens of accounts frozen, and that the prosecutor negotiated the quiet return of the money to Chivo SA de CV.<\/p>\n The perpetrators spent the money on things like Twitch streamers, fancy clothes, plane trips and OnlyFans.<\/p>\n Athena had by this time handed Chivo over to AlphaPoint, but felt it had to file with the SEC about the issue: [SEC<\/i><\/a>]<\/p>\n On April 20, 2022, David Gerard, an author of several books and an eponymous website, reported that there was a theft of several million dollars from the Chivo digital wallet on or around April 1, 2022. This event, if true, was after the migration of user data from the Company\u2019s software to the new software provider for the Chivo digital wallet and the Company has no direct knowledge of or responsibility for the alleged events.<\/p><\/blockquote>\n The transactions were all visible in bank records, and the perpetrators were tried in July. Two of the young people who took the money from Chivo returned all the money, pleaded guilty to money laundering, and received minimal sentences.<\/p>\n <\/p>\n <\/p>\n The real power of a payment system is not just what you can do with it directly, but the businesses you can build on it as a platform. So here\u2019s the first Ponzi scheme on Chivo. [Factum<\/i><\/a>, in Spanish<\/i>]<\/p>\n Here\u2019s a photo gallery of the street dog that sleeps in a Chivo kiosk in Francisco Men\u00e9ndez de Izalco Park in Sonsonate<\/a>. Chivo kiosk use case found! [elsalvador.com<\/i><\/a>, in Spanish<\/i>]<\/p>\n <\/p>\n <\/p>\n El Salvador\u2019s contestant in Miss Universe in New Orlean this month, Alejandra Guajardo, presented herself dressed as Mr. Bitcoin<\/a>\u2019s much more beautiful daughter.<\/p>\n Her outfit was created by Santa Ana<\/a> designer Francisco Guerrero, and shows some of El Salvador\u2019s currencies, including cocoa beans, the col\u00f3n and bitcoin. [Twitter<\/i><\/a>, video<\/i>]<\/p>\n Miss Guajardo launched an NFT collection on 24 January. There have been no purchases as I write this. [Instagram<\/a>, video in English; elsalvador.com<\/a>, in Spanish; OpenSea<\/a>, archive<\/a><\/em>]<\/p>\n <\/p>\n <\/p>\n Just as bitcoin and Chivo\u2019s reputations with Salvadorans hit rock-bottom … Bukele was planning a new official cryptocurrency!<\/p>\n SCI \u2014 Salvadoran Crypto Initiative, named in English and not Spanish \u2014 was being worked on in June last year with the Astro Babies NFT company.<\/a> This would be a free-floating crypto, not a dollar substitute. That SCI was an official initiative was confirmed by government crypto promoter M\u00f3nica Taher of the Ministry of Trade and Investment. [elsalvador.com<\/i><\/a>, in Spanish<\/i>]<\/p>\n (Taher left her government position in October 2022. She is now Vice President of Marketing at US crypto payments company RocketFuel.)<\/p>\n I think<\/i> El Salvador could just issue this very dumb thing under the new Digital Assets Issuance Law. If not, I\u2019m sure they\u2019d tweak the law so they could.<\/p>\n Astro Babies opened its real-world casino<\/a> in June 2022. There\u2019s even a video. I\u2019m told the casino was put into a mansion that was retrofitted as a casino. You can even see the company\u2019s ridiculous promotional photos for the casino on Google Maps. Bukele\u2019s team rents houses in the same area to run their Troll Centers. [Elsalvador.com<\/i><\/a>, in Spanish; <\/i>Twitter<\/i><\/a>; <\/i>Google Maps<\/i><\/a>]<\/p>\n President Bukele wrote a very silly column for Bitcoin Magazine in September 2022: \u201cStop Drinking the Elite\u2019s Kool-Aid.\u201d [Bitcoin Magazine<\/i><\/a>, <\/i>archive<\/i><\/a>]<\/p>\n Because the most vocal detractors, the ones who are afraid and pressuring us to reverse our decision, are the world\u2019s powerful elites and the people who work for or benefit from them.<\/p><\/blockquote>\n Bukele means Bloomberg, Forbes, Fortune, FT, Deutsche Welle, BBC, Al Jazeera, the Guardian, the New York Times and the Washington Post. He prefers going on Tucker Carlson.<\/a><\/p>\n Zeke Faux and Nelson Rauda wrote in Bloomberg about bitcoin in El Salvador as of November 2022. You won\u2019t see much sign of bitcoin in the country \u2014 but you will find mass arrests and soldiers with machine guns. [Bloomberg<\/i><\/a>]<\/p>\n Brett Heinz, formerly of the Center for Economic and Policy Research, has written a couple of good pieces on bitcoin in El Salvador. [CEP<\/i>R<\/em><\/a>, 2021; <\/em>Medium<\/i><\/a>]<\/p>\n If you want to know what the news from El Salvador means<\/i>, you should continue to read everything by Ricardo Valencia. [El Faro<\/i><\/a>, in English and Spanish<\/i>]<\/p>\n I can\u2019t understand spoken Spanish in the wild at all yet. But I feel like the written stuff\u2019s getting somewhere. I just did a very useful unit on Duolingo: \u201cMy romantic poems are brief but beautiful.\u201d \u201cI will be the most famous writer in the world.\u201d \u201cYour romantic poems are the worst.\u201d \u201cNobody will read your novel.\u201d I\u2019m hoping for a future unit that covers editors.<\/p>\n <\/p>\n![\"\"](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/09\/volcano.jpg\")
<\/a><\/p>\nDigital Assets Issuance Law \u2014 a back door for sovereign debt<\/h3>\n
![\"\"](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/bukele-bitcoin-city-presentacion-fernando-romero-arquitecto-maquetas-aeropuerto.jpg\")
<\/a><\/p>\nDon\u2019t take me down to Bitcoin City<\/h3>\n
El Salvador pays its 2023 sovereign debt bill on time<\/h3>\n
Trolling for no fun and no profit<\/h3>\n
Athena spills the beans on Chivo<\/h3>\n
SEC media stardom<\/h3>\n
![\"\"](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/chivo-dog.jpg\")
<\/a><\/p>\nThe power of Chivo<\/h3>\n
![\"\"](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/miss-elsalvador-nft-2.jpg\")
<\/a><\/p>\nLook ma, I\u2019m a bitcoin<\/h3>\n
![\"\"](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/astro-casino.jpg\")
<\/a><\/p>\nAstro Babies in the wild<\/h3>\n
Guest informants<\/h3>\n
How\u2019s my Spanish going?<\/h3>\n
![\"\"](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/poemas-romanticos.png\")
<\/a><\/p>\n![\"Become](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" "\\"Become")
<\/a>