UN convenes AI High-level Advisory Body for Global Governance

The United Nations Secretary-General is spearheading a multi-stakeholder High-level Advisory Body on Artificial Intelligence (AI). The initiative aims to harness AI’s potential for humanity while addressing its accompanying risks and uncertainties as AI technologies proliferate internationally. The comprehensive approach seeks to foster a globally inclusive ethos by analyzing and advancing recommendations for AI’s international governance.

The Advisory Body is poised to comprise up to 38 experts from a diverse spectrum of relevant disciplines globally. The experts will hail from government, private sector, and civil society, each bringing to the table varied perspectives on AI governance. This assemblage is expected to engage extensively with both existing and emerging initiatives alongside international organizations. By doing so, it aims to bridge varying perspectives across different stakeholder groups and networks, ensuring a well-rounded discourse on the governance of AI.

The UN is rallying support for the Advisory Body’s operations and its Secretariat, nested within the Office of the Secretary-General’s Envoy on Technology (OSET). Contributors supporting this endeavor will bolster stakeholder cooperation on governing AI amidst the backdrop of emerging technical breakthroughs, thereby aiding in better-governed AI on a global scale.

The leadership of this high-level body includes Co-Chairs Carme Artigas, Secretary of State for Digitalisation and Artificial Intelligence of Spain, and James Manyika, Senior Vice President of Google-Alphabet, President for Research, Technology, and Society. The members’ list is a blend of eminent personalities from various countries and sectors, each bringing a rich reservoir of knowledge and experience to the table.

Among the noteworthy members are Omar Sultan Al Olama, Minister of State for Artificial Intelligence of the United Arab Emirates; Anna Abramova, Director of the Moscow State Institute of International Relations (MGIMO)-University AI Centre; and Mira Murati, Chief Technology Officer of OpenAI. Their collective expertise spans across AI governance, digital policy, and technological advancements, making the Advisory Body a potent force in driving international AI governance.

This move by the UN signifies a robust step towards fostering interdisciplinary expertise to align international AI governance with human rights and Sustainable Development Goals. The multistakeholder, networked approach of the Advisory Body is designed to offer a gamut of perspectives and options on how AI can be governed for the common good. It also underscores the importance of a globally inclusive strategy to navigate the complexities of AI governance amidst a rapidly evolving technological landscape.

In conclusion, the UN’s initiative to convene a High-level Advisory Body on AI illustrates a proactive stance towards forging a coherent global framework for AI governance. By harnessing a diverse array of global expertise and fostering wide engagement, this endeavor aims to position AI as a force for good, aligned with human rights and sustainable development objectives.

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Human Rights Advocates Urge U.S. Lawmakers to Concern Crypto, Saving Crumbling Currencies

A group of human rights advocates from across the globe have written a letter to U.S. lawmakers, urging them to be concerned about the role of importance of cryptocurrencies against unstable economies whose local currencies are collapsing.

The letter reads:

“We are 21 human rights advocates from 20 countries across the globe who have dedicated ourselves to the struggle for freedom and democracy. In this struggle, we have relied on Bitcoin and dollar instruments known as stablecoins, as have tens of millions of others living under authoritarian regimes or unstable economies.”

As a counter to technologists’ claim that crypto is unproven and risky, experts had sent a letter to the U.S. Congress last week, reflecting their sceptism towards cryptocurrencies as they deemed them too dangerous. Nevertheless, human rights advocates are up in arms against this declaration because they believe digital assets have been life-changing.

One of the supporters, Lyudmyla Kozlovska, pointed out:

“For me, Bitcoin is not just technology. It has literally saved the lives of my friends and many Ukrainians. Without it, we would not have been able to raise money so quickly to pay for protective equipment for soldiers in the early days of the Russian invasion.” 

Therefore, the advocates asked the U.S. lawmakers to use an empathetic and open-minded approach when tackling the matter because cryptocurrencies were proving to be game-changers for people facing economic hardship and political repression.  

The letter added:

“Bitcoin provides financial inclusion and empowerment because it is open and permissionless. Anyone on earth can use it. Bitcoin and stablecoins offer ungated access to the global economy for people in countries like Nigeria, Turkey, or Argentina, where local currencies are collapsing, broken, or cut off from the outside world.”

In Argentina, citizens sought shelter in crypto to tame runaway prices as local inflation surged by more than 50%, Blockchain.News reported. 

A similar picture was painted in Nigeria because 35% of Nigerians had entered the crypto market in six months based on factors like high inflation rates, according to a study by crypto exchange KuCoin. 

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UNICEF to Commemorate its 75th Anniversary of Changing Children’s Lives by Selling 1,000 NFTs

To celebrate efforts of saving children’s lives and defending their rights for seventy-five years, the United Nations Children’s Fund (UNICEF) intends to sell 1,000 data-driven non-fungible tokens (NFTs).

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The NFT collection dubbed Patchwork Kingdoms includes artwork representing a subset of more than 280,000 schools across twenty-one nations. 

Part of the NFTs will be digitally watermarked to celebrate the agency’s 75th-anniversary, scheduled on December 11. The rest will be tied to events in early 2022. 

UNICEF’s executive director, Henrietta Fore, welcomed this move and stated:

“For 75 years, UNICEF has been a driving force for change in children’s lives. And as we look back at our history, we must also look forward and seize every opportunity to take innovative actions to secure the future for our children.”

Reaching out to more children for a better world, UNICEF decided to use NFTs as part of its toolbox to support its global efforts and bridge the digital divide, according to Fore.

Proceeds from the NFT auction will be channelled towards promising initiatives like Giga, an ITU and UNICEF program intended to connect every school worldwide to the internet using cutting-edge technologies like blockchain, machine learning, and low-earth orbit satellites. 

Fore acknowledged:

“There are more than 1.3 billion children disconnected in an increasingly connected world. We cannot allow these children to grow up on an information island, cut off from the wealth of information and opportunities available online, and with fewer resources to learn and grow.” 

The United Nations has been at the forefront of NFT adoption in realising distinctive objectives. For instance, through its UN-Habitat program, it is taking advantage of NFTs to create awareness about the global climate crisis using an initiative called DigitalArt4 Climate. 

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The Village And The Strongman: The Unlikely Story Of Bitcoin And El Salvador

I. As Fast As Lightning

I was standing in a small coffee shop just off of an unpaved street, in a Central American village with no traffic lights, an hour’s drive west on curvy jungle roads from the nearest major city.

I had walked there from my hotel, passing a half dozen restaurants with sheet metal and tarp roofs, trekking carefully down a steep and muddy ravine that locals use as a path to get from the main road to the beach. It was hot and humid in El Zonte, and the nearby ocean was rough and tinted brown from the sediment rushing into the sea from the summer rains.

There was no supermarket in town, and most of the residents I passed on the street had no bank accounts. Despite the lack of infrastructure and it being low season, the town was buzzing with activity. There was an excitement and feeling of hope and opportunity that had not been felt before. Something special was happening.

The coffee shop’s barista, Karla, had just finished making a perfect cappuccino, and was preparing my bill on a tablet on the counter in front of me. She spun it around in my direction, and presented a digital QR code. I took out my iPhone, opened my Bitcoin wallet, scanned the pixelated image, and pressed send. Less than two seconds later, Karla’s tablet flashed green. The transaction was settled.

I had paid for my coffee instantly, without using the banking system. I bought the drink, in effect, with digital cash.

Just as if I had paid with a $5 bill, Karla did not learn anything about me in the transaction. There were no third parties to vacuum up my identity, no social engineering programs learning about my preferences, no ability for corporations or governments to know my last purchase or predict my next one. In fact, better than a $5 bill, we did not have to deal with change.

I did not need to tell any bank or any financial company about my trip to El Salvador. I was not worried about my credit card not working. In El Zonte, one can glimpse the potential of a peer-to-peer global financial system. I was impressed by how many merchants accept bitcoin, how easy it was to pay, and how familiar most people were with the technology.

I wanted to tip Karla, so she took out her personal phone and flashed a QR from her own Bitcoin wallet. I scanned it and sent her $10 worth of BTC, which traveled instantly to her wallet over the appropriately-named Lightning Network. I told her that if she saved these 25,000 satoshis for 10 years, she could probably buy a car with them in 2031.

Karla had only been using Bitcoin for a few months, but seemed to understand that I was not joking. Like most Salvadorans — even the ones already in the Bitcoin economy — she’s still not sure about the new currency, and is still taking her salary in dollars. But she told me that she was saving her tips in bitcoin, and that all things considered, it was “worth the risk.”

Five days after my chat with Karla, a new national law came into effect in El Salvador, making Bitcoin legal tender alongside the U.S. dollar. First announced on June 5, 2021 by President Nayib Bukele, the move stunned the world and made headlines across the biggest media outlets.

Many Bitcoin enthusiasts had predicted that one day, governments would start adopting Bitcoin. But most thought the state would convert fiat to BTC to hold as a store-of-value reserve asset on a central bank balance sheet. Virtually no one foresaw that the first government to officially adopt Bitcoin would use it as a payments network as a medium of exchange.

With bitcoin now legal tender, Salvadorans do not have to pay capital gains taxes if their BTC rises in value against the dollar, and they can use it to settle debts with the banking system. If the government rollout proceeds as promised, they will soon be able to use Satoshi Nakamoto’s invention to buy goods or services anywhere in the country.

However, on the morning of the law’s implementation on September 7, skepticism filled the air. Would the state-run “Chivo” app work? Would Lightning be a part of the system? No one knew, as the administration, led by the young populist Bukele, had kept citizens in the dark about the rollout’s details.

Just a few days before the law came into effect, I was one of many who doubted it would go smoothly. I certainly did not think that Chivo wallet functionality — which was kept a mystery to even project insiders until the last second — would integrate Lightning. So, on the morning of launch day, I was shocked to receive a message from a Salvadoran friend, telling me that they had somehow pulled it off.

He gave me his Lightning address and I sent him $5 of BTC. The funds settled from California to El Salvador instantly, with fees so small that my wallet said they were $0.00. Moments later, my friend used the Chivo wallet to send the $5 back to me, again, with virtually no fees.

Compare this to the typical experience of a Salvadoran trying to receive a remittance from the U.S. through Western Union, where one might have to get on a bus, spend an hour waiting in line, go through an intensive KYC process, only to receive $92 out of a $100 payment due to extortionate fees.

The humanitarian implications that Lightning apps could have for Salvadorans are massive. The nation’s GDP is 23% dependent on remittances, and the population is more than 2.5 times as reliant on these flows as is the rest of Central America. The funds mainly originate in the U.S. where more than two million Salvadorans live and regularly send money back to their families.

Later that morning, Bitcoin Magazine journalist Aaron van Wirdum walked into a McDonald’s in San Salvador expecting that it would not be ready to take bitcoin. To his enormous surprise, when he asked to pay in bitcoin the cashier presented him with a QR code that directed him to a webpage with a Lightning invoice. He paid it instantly, and went to enjoy his desayuno típico, astonished. The magic internet money that van Wirdum had written about for close to a decade was now usable as an easy and fast means of payment not just at McDonald’s, but at Starbucks, Pizza Hut and Wendy’s.

Van Wirdum conducted another demo a few days later, going to a Chivo cashpoint to try and withdraw $20. When the QR code popped up on the ATM screen, he took a photo of it and sent it to a friend abroad who then paid the invoice with their Bitcoin wallet, thousands of miles away. Without any fuss, the machine spit out a crisp $20. The only ID check van Wirdum encountered during the transaction was a simple text verification, which he passed with a phone number whose SIM card he had bought with cash from a merchant in El Salvador. This possibility would have blown the mind of any mid-1990s cypherpunk.

Launch day was a mixed bag. The government had to take Chivo offline early in the morning to iron out last-minute issues, and it was only released onto app stores gradually throughout the day. Some users reported problems with signing up and analysts spotted a variety of design issues. Concerns over bugs, surveillance and rug pulls abounded.

Bitcoin itself crashed 17% intraday against the dollar, leading Bukele to joke that he was “buying the dip” as he announced that the state had bought 550 bitcoin with public funds. The amount, roughly $21 million at time of purchase, was possibly done with respect to Bitcoin’s “21 million” monetary policy. The global media largely mocked the purchase, along with the rest of the rollout, which was derided everywhere from WIRED to The Wall Street Journal.

But at the end of the day,the Chivo app worked. Some of the more glaring bugs were fixed, even with a sense of humor. And debate over the logistics of the rollout obscured the bigger picture: a government had officially begun connecting its population to an open monetary network, a remarkable event in geopolitical history. Just as England once pioneered central banking and government money as notes, here was El Salvador, marking the start of perhaps a new era with a decentralized digital currency as legal tender. Bukele could have pursued a central bank digital currency, or a partnership with China, but instead chose free and open-source monetary software.

Two of the most most visible outcomes of the Bitcoin law’s implementation are the state-run Chivo app — which any Salvadoran can download, then use their national ID number to claim $30 of bitcoin gifted by the government — and the Chivo ATMs, which will apparently number close to 200, dotting El Salvador and locations inside the U.S. with physical places for citizens to convert Chivo balances to U.S. dollars, for free.

Bitcoin supporters and critics alike were surprised when the Bukele administration revealed that the rollout would begin just three months after it first announced the law. Politically, Bukele’s New Ideas party has a supermajority in parliament, and was able to pass the law quickly despite protests from the opposition. But technologically, no country had ever done this before.

Details have surfaced that in July and August, a collection of companies ranging from Athena to OpenNode to BitGo to IBEX Mercado helped the Bukele administration create, market and activate the Chivo wallets, Chivo cash points and merchant relationships across the country. The government claims to have allocated approximately $223 million to finance the Bitcoin rollout, all taken from funds loaned by the Central American Development Bank.

Over the last three months, the Bukele administration has operated in an opaque manner. Until the last second, no one knew which companies were hired to build the apps, ATMs and backend. No one knows what the government is going to do with the bitcoin it bought. No one knows exactly how the $150 million trust — established to provide liquidity for citizens who wish to trade their bitcoin for dollars — is going to work. Instead of sharing these details in a traditional manner, Bukele leaks them live, on occasion, through his Twitter account, personifying digital populism.

At the same time that the Bitcoin bill came into effect, Bukele’s government also announced that it would be purging more than 100 judges. The Supreme Court (which Bukele had stacked with his own supporters earlier this year) also ruled that he would be able to run for another presidential term in 2024, violating the constitution. The Human Rights Foundation, where I am employed, has been one of many international organizations to strongly criticize Bukele’s anti-democratic actions.

The contradiction is striking. On the one hand, there is a government rolling out a new currency to its people that cannot be debased, censored or remotely confiscated. On the other hand, the same government is following the blueprint Hugo Chávez used in the 2000s in Venezuela to consolidate power, only much faster.

The situation is filled with contradictions. A grassroots, peaceful, village-based movement started in El Zonte inspired a national, forced, top-down law. A money beyond government control was pushed by a government that wants to control more and more of Salvadoran society. A populist leader forced into law a bill that would not have stood a chance in a country like the U.S., where the financial system exerts such a high degree of control over elected politicians. These paradoxes make quick analysis difficult. It is not a black and white picture.

In 10 years, will the world look back at the Bitcoin law as a failed experiment, or as a visionary decision? Only time will tell. Meanwhile, debates over Bitcoin adoption will rage on between promoters and naysayers.

Zooming out, it seems borderline impossible that El Salvador of all places would be the first country to roll out a next-generation financial technology like Bitcoin. But in history books, the claim will not be held by Japan, the U.S., Germany, or even Brazil. Instead, students decades from now might read about El Salvador, or, as the country’s name reads when translated from Spanish, “The Savior.”

II. An Unlikely Place For A Financial Revolution

Sandwiched between Guatemala and Honduras, El Salvador — the smallest and most densely populated country in Central America, with an average GDP per capita of around $3,500 — is a most unlikely ground zero for a financial revolution.

And yet, baristas, pupusa sellers and surf instructors in the village of El Zonte are more familiar with the concept and use of Bitcoin than most titans on Wall Street and in Silicon Valley, and have a far deeper understanding of what it is than most central bankers or Fortune 500 CEOs.

How a country where the average monthly income is less than $300 ended up beating all of the world’s industrial powers in being first to adopt the Lightning Network as a national payments system seems the stuff of a Hollywood film. But, as they say, the truth is stranger than fiction.

Historically, El Salvador has suffered a fate similar to many Global South nations, where despite rich agricultural resources, the country must import food. Large-scale commercial operations have dominated El Salvador over the past century, harnessing the best agrarian pockets for export to global consumers, at the expense of locals. The fight over land ownership culminated in 1932 with La Matanza, the country’s most deadly massacre, where the army killed more than 30,000 peasants.

Most of the country’s land consolidation historically revolved around coffee, which was known as el grano de oro, or the grain of gold. By the 1920s, the crop constituted 90% of the country’s exports. By the late 1970s, coffee accounted for half of El Salvador’s GDP, making the country the world’s third-largest producer. Ten percent of the country’s territory is still covered in coffee plantations. The phrase “Banana Republic” is a cruel one, but in some ways accurately describes the fate of many Salvadorans, as they have often fallen subservient to the interests of multinational corporations and foreign powers.

In 1979, a brutal civil war broke out, rising up from the decades-old conflict over land and external control, pitting a right-wing regime against leftist guerillas. Salvadorans were victims of a Cold War proxy conflict between the U.S. and USSR. The U.S. backed the Salvadoran regime with weapons and cash to fight off revolutionaries who vowed to claim back land from alien corporations.

The official American narrative was that these guerillas were part of a communist plot backed by the USSR, Cuba and East Germany. And for many years, the Soviets had indeed supported the radical left-wing FLMN with arms and training. At the end of the Carter Administration, the U.S. responded by backing the “largest counterinsurgency campaign since the Vietnam War.”

The Salvadoran regime was sensationally brutal, but gained constant support from the U.S. in its war against Marxist terror. In 1980, Archbishop Oscar Arnulfo Romero, who had used his platform to criticize the junta — calling for them to “stop the repression” — was assassinated while giving a private mass. The shooter was Roberto D’Aubuisson (also known as “Blowtorch Bob” after one of his favorite methods of torture), who had graduated from the School of Americas, an infamous military training center at Fort Benning, Georgia. After the murder, national violence metastasized.

The U.S. ended up giving $5 billion to the Salvadoran regime during the 1980s to keep communism at bay. The flow of funds was frozen briefly in 1980 by an outgoing Jimmy Carter, after regime forces raped and murdered three American nuns and a U.S. missionary, but were activated again shortly before Ronald Reagan took office. When the decision to renew support was publicly questioned, Reagan’s policy advisor Jeanne Kirkpatrick defended the move, saying that the nuns “were not just nuns… [they] were also political activists.”

In the early 1980s, more U.S. aid dollars and military support flowed to El Salvador than to any other country, save Israel or Egypt. The U.S. embassy staff in San Salvador was the size of its staff in New Delhi, despite serving a country that was 200 times smaller. El Salvador was, in Washington’s eyes, a critical line of defense against Soviet influence.

The 12-year civil war destroyed the country’s infrastructure, setting manufacturing, commerce, agricultural production, and living standards back decades. By 1998, for example, the purchasing power of urban Salvadorans was only one third of what it was in 1980. For a war that was in part a conflict over wealth and land distribution, the tragedy was that inequality and real wages were worse off after the war than before.

More than 1 million people were displaced and more than 75,000 were killed, often in barbaric fashion as a warning to the rest of the population. According to a U.N. truth commission, some 85% of victims were murdered by U.S.-backed paramilitaries and death squads.

Historians are still digging up the remains of those killed by U.S.-backed forces in the early 1980s, including at the site of one horrific incident in El Mozote. In this mountainous area of small villages in December 1981, more than 900 people were massacred by the Atlacatl Battalion, a special armed unit that had been trained on American soil. Two hundred and forty eight of the dead were children less than six years old. It is considered the largest massacre in modern Latin American history, and a “central parable” of the Cold War.

First-hand accounts from El Mozote are painful to read. The unspeakable cruelty of the rampaging soldiers is vividly captured in a New York Times report, written by a journalist who visited the area a few weeks after the atrocity. And yet, a few months later, Reagan certified to the U.S. Congress that “although serious problems remain, we conclude that the Government of El Salvador is making a concerted and significant effort to comply with internationally recognized human rights.”

Defenders of U.S. involvement during El Salvador’s civil war justify the bloodshed by saying that if Americans had not intervened, the country would have fallen the way of communist Cuba. But 75,000 lives and 15 years of lost economic activity is a heavy price to pay. Over the past 25 years, El Salvador has been healing and recovering, but remains without strong rule of law and is still marked by an extraordinary amount of violence.

More than 500,000 Salvadorans fled during the 1980s, establishing a strong flow of migrants to the U.S. But after the civil war ended in 1992, President Clinton allowed special rules for Salvadoran migrants to expire. Tens of thousands were sent back home empty handed. Many of these young men formed and joined gangs, for example, MS-13, which was founded in Los Angeles and only pushed to El Salvador by Clinton’s decision.

Between 2000 and 2017, approximately 2.5 million people were murdered in Latin America, Central America, and the Caribbean, compared to 900,000 killed in wars in Syria, Iraq, and Afghanistan over that same time. El Salvador lies at the center of this violence, mostly as a result of gang warfare. In 2015, it was considered the most dangerous country in the world not at war.

According to a 2015 report, “fear permeated daily life, particularly in poor communities where the gangs stake out most of their territories. Residents who cross the invisible line between them — usually an innocuous-looking bridge, road or park — risk beatings or even death. Taxi drivers dread wrong turns that can lead to robbery or kidnap. Shopping trips, lovers’ trysts and football matches are all circumscribed by safety concerns. Even staying at home is no guarantee of safety…

“Shopkeepers, hairdressers and restaurant owners are frequently assailed by extortionists, who typically threaten arson attacks or to cut off the ears or fingers of spouses or children. Parents watch with rising alarm as their sons and daughters approach pubescence — and the inevitable pressures that follow to join the local gang. There is often no one to turn to for support: teachers are intimidated by students and police are afraid to enter many communities.”

Regardless of one’s views on Bitcoin, it is stunning that a place that was spoken about like a war zone not so long ago is now being discussed worldwide as a pioneer of a new financial technology.

III. The Trauma Of Dollarization

A national economic struggle has accompanied El Salvador’s post-war violence. Today, coffee, cattle, lumber, and fishing make up a commodity export base that cannot meet the needs of the growing population. The country has seen progress since the end of the war, but has been unable to settle its external debt, and remains reliant on foreign aid, borrowing, and remittances. Economic growth has also been set back by catastrophic natural disasters, with destruction from Hurricane Mitch in 1998 causing $400 million in damage and a 7.6 magnitude earthquake in 2001 causing $2.8 billion in damage.

As the Salvadoran saying goes, “our greatest export is our people.” Research points to remittances as one of the major reasons for El Salvador’s decline in poverty over the past 25 years. The flows — making up roughly a quarter of GDP — are vital, but all of that time and effort expended by Salvadorans in Los Angeles, Washington or New York goes towards building things and providing services to Americans, not Salvadorans at home.

In 2001, the Salvadoran government implemented the U.S. dollar as legal tender, in a move that quickly replaced the traditional colón as the national currency. President Francisco Flores announced the transition in November 2000, and implementation occurred on January 1, 2001, just 39 days later. The country was 98% dollarized in only 18 months. The sudden shift gave no space for public discussion, and raised suspicion that the move was made to benefit elites, and not the majority of the population.

Unlike in Ecuador, which was dealing with severe inflation, dollarization in El Salvador was not brought in to fix an emergency. Inflation was 4.3% in the year 2000. Rather, dollarization was a macroeconomic prescription. Advocates said it would help preserve the purchasing power of workers and protect them from government monetary abuse. It was billed as something that would make commerce easier, prevent debt monetization, attract foreign investment, and lower interest rates. Banks especially could benefit, as lower interest rates meant they could borrow more cheaply from abroad and lend out inside the country for profit.

However, according to Silvia Borzutsky, a professor of political science at Carnegie Mellon University who studied El Salvador’s dollarization, the policy “had extremely negative effects on the lowest-income groups without doing much to help the overall economy.”

A 2002 survey conducted by the Instituto Universitario de Opinion Publica showed that only 2% of Salvadorans considered dollarization an achievement, while 62.2% thought it had been damaging to the nation. Another 2002 survey by the University of Central America found that 61% of Salvadoran respondents said that dollarization had a “negative effect on their personal economic situation.” According to a University of Central America paper, “the most benefited sector from the dollarization process has been the financial system, which no longer faces the risk that its payments will be increased from possible devaluation decided by the political circle.”

At the time of dollarization, 21% of El Salvador’s population could not read, and an even larger percentage had trouble pricing things in the dollar economy, where everything was divided by the 8.75 colón-to-dollar exchange rate. According to a contemporary study, “businesses were not permitted to increase prices in dollars over what they cost in colónes. Thus, in the formal market, prices are rounded up to the next cent, and inflation from rounding up is minimal. In the informal market, where the poor operate, the situation is entirely different… there is almost no regulation, so vendors have often set prices in dollars much higher than what they were charging in colónes. One participant observed, ‘some people take advantage of the change, and for what used to be seven colónes they now charge a dollar.’ From seven colónes to a dollar is 25 percent inflation.”

Even more loss of purchasing power came as a result of the difference in spending habits among poorer classes, who buy things several times per day as opposed to once a week or month like the middle or upper classes do, resulting in a more constant exposure to rising prices. The major stated benefit of dollarization — lower interest rates — even escaped lower-income populations, as the poor do not typically get loans from banks, but rather from the extortionate informal sector. According to data from 2002, 70% of the credit in El Salvador was lent at the time by four banks, with loans to 400 clients constituting 60% of the total borrowing.

Other frustration from dollarization came from a feeling that the policy was pulled over the population quickly and without consultation, and that the native currency was replaced by an imperial one, from a foreign power that had helped a brutal regime destroy the country during the civil war.

Negative attitudes about dollarization persisted for many years. In a 2007 Los Angeles Times report, a potato seller named Janette was interviewed, saying that she used to sell 100 pounds every day, but now was “lucky to move that much in a week.” She was quoted as saying “life is harder now. The dollar is a curse.”

In the mid-2000s, average Salvadoran wages rose just 4%, while food and drink prices rose 14%. Farmers and agricultural vendors faced the struggle of not just higher commodity prices, but less demand for their products. Another character in the Los Angeles Times story is a chicken farmer who was forced to cull her flock and abandon her business as a result of dollarization, resulting in an outcome where she could no longer even afford to eat chicken herself.

In a fate shared by other countries that use a more powerful economy’s currency — like, for example, the CFA countries of West and Central Africa — dollarization meant that the Salvadoran government could not tweak the currency to keep goods and services competitive, and that wages remained expensive compared to those of other countries. Five years after dollarization, El Salvador’s imports had grown “nearly three times faster than exports,” which were harmed by the rise of China, which devalued its currency to stay competitive.

Even today, 20 years later when the macro effects of dollarization seem to have been positive on El Salvador as a whole, there are negative trends that do not show up in the official data. For example, when the U.S. government monetizes debt in order to pacify financial crises and artificially boost the value of American stocks and real estate, U.S. citizens are provided stimulus checks, and U.S. corporations receive bailouts. But these lifelines are not extended to the average Salvadoran, who feels the cost of rising prices, without the benefits.

Dollarization is a painful memory for many Salvadorans, and the idea of a new top-down currency change is scary. This summer’s sudden announcement and implementation of the Bitcoin law brings back old fears.

Usually, when a government changes the currency, it is not good for the people.

Will this time be different?

IV. The Village

One could say that the unlikely story of Bitcoin adoption in El Salvador all started about 15 years ago, before anyone had ever heard of Satoshi Nakamoto, when Jorge Valenzuela and Ramon “Chimbera” Martinez got lucky.

Growing up in El Zonte, a seaside village of no more than 3,000 people, they told me that there were precious few opportunities for young men like them to do something different. Their families had for generations lived in the area, taking care of property for wealthy landowners from the capital, or fishing off the coast.

“My father is a fisherman, Jorge’s father is a fisherman,” Martinez told me. “We live in a natural paradise, with warm weather, good food … and friendly people, but our families never had real economic opportunities.”

Their lives might have continued along that path, had it not been for a social worker, who came to El Zonte and planted a seed of inspiration in them, taught them about hope, and tried to set them on a new path. “We grew a dream to change our reality,” Martinez said.

The social worker’s investment paid off. Valenzuela and Martinez found careers in building restaurants, managing properties, and teaching people how to surf. Bit by bit, they helped build El Zonte into what it is today.

“We learned that to change our community, we had to change other people first,” Martinez said. “If you just change on your own, it’s not enough.”

But the road was tough. Martinez said that while he and Valanzuela had benefited from mentorship, most people around them did not.

“We lost friends, we lost family, we started to see kids that didn’t dream anymore,” said Martinez. The economic depression and gang violence was bad, but that was not the main problem. It was the missed opportunities that really hit hardest.

In 2006, Martinez and Valenzuela, along with their friend Hirvin Palma, created a program that they call a “point of light in the darkness,” which aimed at creating families for kids without them.

“A lot of kids don’t have a father,” Martinez said. “So we created a social fabric to tackle that, to create change through children.”

They would mentor kids who lost their way and give them a new support network. Over the years, some of the hundreds of students they have worked with have made it to university, instead of into gangs. They called the program Fill Up The Tank Of Love.

“We all have a tank,” Martinez said, “but it needs to be full.”

The problem was, Martinez and Valenzuela’s programs started to lose steam a few years ago, as cash flows began to dry up. One day, Martinez said, an American came to them with an idea.

After the civil war, surfers and backpackers started to come to the area around El Zonte. One of those tourists was a Californian named Mike Peterson.

“When we first met Mike,” Martinez said, “he was one of the few that actually started spending time with us locals, who started to believe in this community.”

Around 2013, the three started working together in earnest, providing scholarships, mentorships and jobs for youth in the area.

In 2019, an anonymous donor came to Peterson and promised a large gift to the community, under the condition that it would be sent in bitcoin and was spent in El Zonte in a circular fashion.

“We didn’t know anything about Bitcoin,” Martinez said, “but we are dreamers, and we believed in Mike.”

The first vendor to accept bitcoin was Valenzuela’s mother, who goes by Mama Rosa. In 2019, she started selling pupusas for bitcoin to kids who had earned satoshis through Martinez and Valenzuela’s programs for doing community work.

One evening, I walked down the street in El Zonte with a group of friends to Mama Rosa’s pupuseria. It is a modest road-side operation, a few feet away from the local highway, but serves as a popular gathering point for locals and is a place with special history in the El Zonte story.

We ordered a variety of pupusas, and paid in bitcoin. At the end of our meal, I sat down with Mama Rosa and asked her: What was it like when her son said she should start taking payments in a magic internet money? Did she think he was crazy?

She laughed. “I didn’t think he was crazy, but I was hesitant about the currency,” she told me.

The last time the government made a big currency change, she had suffered. When I brought up dollarization, Mama Rosa grimaced, as if in physical pain.

“We didn’t want the dollar, we wanted to keep the colón,” she said. After the transition began, she encountered significant price inflation. “It was very difficult,” she said.

So, at first, with this in mind, she was not sure about Valenzuela’s plan. But she believed in him, and started accepting the new currency, and more notably, started saving some of it on her phone wallet.

Today, she keeps all of her earnings in bitcoin. She knows it is volatile, but has accepted that feature. She proudly pointed behind her to an impressive truck that was sitting next to the restaurant, and told me that she was able to buy it recently as the result of the growth of her bitcoin savings. When I asked her if she was surprised at the rise of bitcoin’s value, she laughed.

“Of course I’m surprised,” she said. “I’m making bank!”

She told me that she is incredibly proud of her son, not only because he made smart and wise decisions, but because he is improving the lives of so many people.

I asked her what advice she would give her fellow countrymen and women who are afraid of the Bitcoin law.

“There is a lot of mistrust of anything new,” she said. “On top of that, scammers have been here calling people, trying to defraud them out of their bitcoin by asking them to send it to them for a good or service and then disappearing. To get the full benefits, we need education and knowledge.”

“But in the end,” she said, “there’s nothing to fear. It’s just another currency.”

V. Bitcoin Beach

Valenzuela told me that the initial idea behind Bitcoin Beach had little to do with remittances. The goal was to create a circular economy. A key part of the effort was the construction of Hope House, a modern multi-story building in El Zonte where education around Bitcoin could happen.

But a big challenge remained. Merchants said: “If I can’t touch it, I won’t use it.”

So, at first, Bitcoin Beach leadership gave paper claims to students and others who were part of the program. If bitcoin dipped, Hope House would make them whole. At first, the students all wanted to trade their claims for dollars. But eventually, they started keeping more and more of their claims, and eventually learned how to be their own bank and hold actual bitcoin in their own wallets.

Valenzuela told me that when they finally convinced the first small merchants in town to accept bitcoin, it was the first time most of them transacted digitally, and the first time they started to think seriously about savings.

“Remember,” Valenzuela said, “people here don’t have bank accounts.”

“In our communities we have no financial literacy courses, and no one provides advice to the youth,” Valenzuela said. “But Bitcoin is a great teacher.”

Families started saving up for assets for the first time in their lives.

“People here don’t have access to stocks or real estate,” said Valenzuela.

Bitcoin helped bring inclusion to the financial system. Valenzuela said that you could feel the community starting to save for the future, and that it was a big psychological shift.

Bitcoin Beach educated a group of community leaders to help people navigate the waters of how to use the new currency. Valenzuela called them a “tribe for financial inclusion.” Thanks to them, he said, “the outcome is that kids are not as interested in going to the dark side. They are more interested in the future.”

This is why they named Bitcoin Beach’s flagship new building — nicely built and well-equipped by any standard — Hope House. Martinez said it is part of a dream about a future where people would have the freedom to choose their destiny.

Thanks to the new paradigm, Martinez said, people worldwide are now talking about El Salvador in a different way. It is not just about gangs and money laundering. People are talking about a rhetoric and narrative that is optimistic.

“People talk about the food, the pupusas, the surfing, the weather, the investment options — it’s becoming a land of opportunity,” Martinez said.

“When we first brought an ATM machine in,” Martinez said, “People laughed. They aren’t laughing now.”

“We’re finally first in something besides murder rate. All of this innovation happened not in Europe or the United States or even Silicon Valley,” Martinez said, “but right here in El Zonte. Other towns and cities are now calling us, asking us for our secret. There is no secret. Only hard work and community building.”

Today, Bitcoin Beach is sharing its philosophy with other communities in the region, one by one. Valenzuela and Martinez go to new towns every week, and help people set up wallets, and give them a bit of bitcoin. If the government did this, they said, people would be skeptical. But because they are villagers like them, they are open.

“It’s beautiful that the entire country can now have access to the financial system. This is what we hoped for 15 years ago,” Martinez said, with a big smile. “The beginning of the dream has been achieved. Our hometown is not a scary spot on a map anymore, but an exciting place to go. So now we are celebrating.”

“But the Bitcoin law is just the beginning. It’s not going to make our work any easier,” Martinez said. “It took us two and a half years to build a community around this idea with just 3,000 people. A country of six million? That will take time.”

VI. The Gift

When I sat down with Peterson on his porch at his home in El Zonte, he told me that he originally came to El Salvador in 2004. Things seemed like they were on the upswing. It had been a decade since the civil war, and people were hopeful.

His family bought a home in the small surf town, and started spending several months a year there, volunteering and helping with community efforts connected to church groups that were running orphanages, helping with ex-gang member rehabilitation, and working with victims of sex trafficking.

But the Great Financial Crisis, spawned by Wall Street, hit El Zonte and El Salvador hard. The gangs were already a problem, he said, but got much worse in 2008 and 2009. The violence crescendoed in 2016.

Today, a skate park sits across the street from Peterson’s house, right on the beach. But a few years ago, a small home was located on the property.

On the night that Donald Trump was elected U.S. president in the 2016 election, Peterson was watching the results come in at home. He heard a series of bangs, and went outside to look. He could not see anything, so went back inside. But in the morning when he went out on the street, he saw the police pulling a body out of the house across the way.

His neighbor was murdered with 40 bullets, just a stone’s throw from where I was sitting, interviewing Peterson five years later. That was the third person murdered in three weeks on Peterson’s block in El Zonte, he said. People during that time did not go out at night, he said. Some even fled the country, going to Nicaragua or Guatemala. Local business owners were paying protection money to gangs.

“If you didn’t pay,” he said, “they would kill you.”

Peterson said this was a cycle that impacted the lower classes the most: The impoverished feel like the wealthy are keeping them down, so they respond with violence, but in the end mostly the lower class gets hurt, as only the wealthy can afford to hire private security.

In the middle of all this, Peterson was in his third year of working with Valenzuela and Martinez on community projects in El Zonte. He said there were 10 to 15 leaders active in the community, pushing everything forward, but called Valenzuela the “quarterback of the operation.” They kept their heads down and kept working throughout 2017 and 2018. Thankfully, national and local crime dropped steeply during that time. But they still faced funding issues.

In the spring of 2019, one of Peterson’s friends asked if he wanted a connection to a donor who was interested in Bitcoin philanthropy. He said sure, he’d be happy to talk. He had been a fan of Bitcoin, but had never thought of implementing it into his work until that point.

The donor was anonymous, so Peterson met with his liaisons. The requirement was that a gift could be made toward community work in El Zonte, but it would be made in bitcoin, and Bitcoin needed to be baked into the local programs. The donor did not want the bitcoin to be sold into dollars, they wanted it to circulate, to become part of the local philosophy and not just a “hoop to jump through.”

Peterson was open to the idea because the local banking system was extortionate, bureaucratic, and broken. It was “so hard” to get money in from the U.S., with hour-long bus rides, long waits, high fees and inexplicable delays a common occurrence.

In his own personal experience, about 10 years ago, Peterson tried to buy a car, but had trouble getting the money out from his American account through an ATM to make the purchase. The wire took weeks, and by the time he finally got the cash, the car owner had sold it to someone else. He noted that when foreigners try to buy property and develop the area, there’s a one to two week lag time between sending and clearing, where both parties are taking risk, and deals often fall through.

But these are just minor inconveniences compared to the high fees that the impoverished deal with.

“They always pay the highest price,” said Peterson.

So, Peterson came up with a pitch for the donor, including hand-drawn diagrams of how bitcoin would circulate in town, and a three-year plan for adoption. By the end of the summer, the gift was approved, and Bitcoin Beach started running official programs to pay individuals in bitcoin for cleaning up the community, doing road repair and starting construction projects.

Peterson also made contact with the Chicago-based company Athena, which helped sneak a Bitcoin ATM into town. This, Peterson said, made a big psychological difference, as residents appreciated how they could easily cash out bitcoin into dollars on demand. By the fall, Peterson said middle class people from the capital were driving down to El Zonte on the weekends to buy bitcoin at the ATM. Momentum was starting to build.

In November 2019, Peterson traveled to a Bitcoin conference in Uruguay, where he met the British podcaster Peter McCormack. He told McCormack that he should visit El Zonte. Peterson was shocked when McCormack said “that sounds great, I’ll come this week.”

After his visit, McCormack recorded an interview with Peterson, which made the rounds on his popular show “What Bitcoin Did.” This ended up being important, Peterson said, as it was how many people in the Bitcoin community first heard about El Zonte.

In July 2020 an article in Forbes came out, profiling Bitcoin Beach. It was, according to Peterson, the “first time El Salvador had ever been featured in a positive light” in a world-class financial magazine.

Between the Forbes article and McCormack’s podcast, future key contributors to El Zonte including Galoy founder Nicolas Burtey, Strike founder Jack Mallers and Square product lead Miles Suter, would find out about the community, inspiring future visits in the fall and following spring.

As a result of the pandemic, tourism ground to a halt in El Zonte in 2020. Most hotels closed. Bitcoin Beach responded with a UBI-type program, where $40 worth of bitcoin was distributed on regular occasions to families in need. If one of these payments had been saved until now, it would be worth $400.

By the end of 2020, Peterson, Valenzuela and Martinez thought that not just El Zonte but the whole country could potentially grow to have bitcoin as a currency. But they never envisioned the kind of aggressive rollout that would come the following year.

In early 2021, Peterson said that he drove to the capital with Suter, Martinez and Valenzuela for a meeting with the minister of tourism. They spoke for two hours about the idea of El Salvador adopting a Bitcoin strategy. Peterson said that they pitched it as a cheap and easy idea to help change the national narrative from gangs to opportunity. They argued it was like a “life hack” for international recognition. Peterson said that she seemed to get it, but only a little bit.

By May, though, Peterson could feel that something was happening. Instead of making overtures to the government, officials were coming down to El Zonte, and looking at the operations of Hope House closely. In April and May, the vice minister of education and the minister of tourism visited personally.

Peterson said that the transition “hasn’t been all roses” since the Bitcoin law announcement in June. Salvadorans are suspicious of a scheme from a central government with a long history of corruption.

When it comes to the strong national opposition to the Bitcoin law, Peterson said that in general, people do not understand Bitcoin and feel in the dark, unconsulted and believe the new program will be used to steal from the public — a fair concern given that the last three Salvadoran presidents all looted the country.

Peterson said that people are also skeptical of the story of El Zonte. It is rare — or even unheard of — for anonymous people to make big gifts in El Salvador, so there is a lot of suspicion around the founding gift made to Bitcoin Beach. Peterson’s response is that “if someone had wanted to create a scheme, would they have started it with two Salvadorans who didn’t go to high school and a computer illiterate foreigner in a small village? No, you’d start in the capital.”

Despite broad national skepticism, Peterson sees Bitcoin adoption going well over the next few years.

“It’s typical for a technology to ‘leapfrog’ in the developing world and be embraced faster: skipping over landlines straight to cell phones, for example,” he said. “Especially because Bitcoin doesn’t require a lot of capital investment or need a huge new infrastructure beyond the ATMs. Everything is software; the leapfrog can happen because people already have phones.”

Peterson thinks that long term, the Bitcoin law will have four big impacts:

First, by creating a culture of savings. Today, he said, if you drive around San Salvador there’s a ton of fast food restaurants and the price of those meals does not compare favorably with daily wages. Many people, he said, spend their remittance on fast food and, in general, the money is not put to productive use because there is no hope for tomorrow. Bitcoin allows them to break this cycle.

Second, by providing business opportunities. He said that between hotel development, tech sector back office support for payments, and consulting for other countries and businesses around the world that want to add Bitcoin payments, the job creation could be significant.

Third, the efficiencies that will be gained as a result of saving fees and time on remittances are massive. It is hard for Americans to understand, Peterson said, but people spend hours of their week dealing with remittances, wait in huge lines and pay high fees.

Fourth, the sense of pride that you see in people knowing that they are leading the way instead of following from behind. The difference, he said, between subsisting in poverty and breaking out. In a country with such a tragic history and cycles of violence, going from a dark spot on the map to an exciting destination is priceless.

So, what’s next for Bitcoin Beach?

“We’ve had to wrestle through this,” Peterson said. “Do we focus on El Zonte, or do we go national?”

He said that they ultimately decided to return to their roots and work on promoting Bitcoin as a tool for the local youth. Others can handle the national work.

“Our goal is for young people to be successful and build a better future, not to do Bitcoin adoption,” Peterson said. “But we believe the latter will bring more benefits.”

Peterson said that communities like Bitcoin Beach are replicable, but only if the objective is deeper than just promotion of the technology. The mission has to be to improve a community.

If bitcoin had crashed last year, he said, they would still be doing what they are doing with dollars. But he said that Bitcoin had all kinds of benefits he did not predict: helping people with financial literacy, thinking about the future and delaying gratification.

“Bitcoiners have hope,” Peterson said. “And that feeling is spreading here. We think the future will be better than today.”

VII. The Strongman

A political chameleon and opportunist, 40-year-old Bukele has evolved in his career from a member of the leftist FMLN to creating his own party, New Ideas, which is broadly characterized as right-wing. His approval rating rests around 90%, making him the most popular politician in the hemisphere and possibly in the world.

Bukele’s popularity comes in large part from a perception that he has helped clean up crime and build new infrastructure to make the country more safe and attractive. El Salvador’s murder rate had already dropped from more than 100 homicides per 100,000 people in 2015 to around 40 by the time he came into office — declining into the 20s during his administration — but he gets a lot of credit for the overall shift. Independent newspapers like El Faro allege that Bukele has reduced violence by making deals with big gangs, but few would complain about the decline.

The big problem is that Bukele has abused his popularity to dismantle democratic institutions. The world saw a glimpse of this behavior in early 2020, when Bukele pushed a spending bill through the National Assembly by encircling the building with snipers and bringing armed troops into the chamber. In February of this year, his party won a legislative supermajority, and in the past few months, he has commandeered the judiciary. Five Supreme Court judges were sacked in May and replaced with his supporters. At the same time, Bukele fired the attorney general, who was investigating corruption in his government. Sparking concerns about transparency, he also told the National Assembly to keep pandemic-related government expenditures secret.

On August 31, the legislature passed a bill that purges all judges with more than 30 years of service or over the age of 60 — amounting to about a third of the body — and allows Bukele to replace them. Some of these judges were investigating war crimes committed in the 1980s by the government against civilians, including the atrocities at El Mozote. If the cases are closed, it is possible that no one will be held accountable for what happened there. Also in August, Bukele officials pushed forward a proposal to rework the constitution that, among other changes, removes a clause that forbids one-party rule.

On September 3, the Supreme Court, now sympathetic to Bukele, ruled that presidents could run for a second-consecutive turn, paving the way for him to run for re-election in 2024. The decision clearly goes against the constitution.

The U.S. ambassador to El Salvador recently compared Bukele to Hugo Chávez. But as Human Rights Watch has pointed out, it took Chávez five years to get control over Venezuela’s Supreme Court, seven years to conduct a mass judicial purge, and 10 years to bypass electoral limits. It took Bukele just two years to do the same.

It is likely no coincidence that the Bitcoin implementation took place at the same time as the Supreme Court ruling. Bukele has a world-class Twitter game, and has been using it masterfully lately — even poking fun at the International Monetary Fund (IMF), and telling the U.S. to mind its own business — but has not said anything about the Supreme Court. Similarly, the day before Bukele announced his plan in June to make bitcoin legal tender in El Salvador in a video at the Bitcoin 2021 conference in Miami, his government broke an anti-cooperation agreement with the Organization of American States.

In the blueprint for dictators — used by Putin, Erdogan, Chávez, and so many others worldwide — once a leader consolidates political control, he typically goes after the media, and then any powerful business people who might get in their way. This summer, Salvadoran officials made a move in this direction by expelling the El Faro journalist Daniel Lizárraga.

As El Faro wrote, “In previous administrations, journalistic investigations revealed the improper use of public funds and systemic corruption. Among other outcomes, these investigations led to the prosecution of corruption cases at the highest levels of government, as well as the discrediting of the two main political parties covering up those acts. Those investigations paved the way for Bukele and his party.”

The newspaper argues that he is trying to disable the very institutions that made it possible for him to get where he is today.

When I spoke to El Faro editor Carlos Dada by phone, he told me that a country like Switzerland or Germany should have experimented with Bitcoin, “not El Salvador, where the people have no way of seeing what the government is doing, and where no one knows what Bitcoin is. With dollarization, at least we knew what the dollar was.”

He later summed up his position on social media: “Bitcoin has been imposed on an impoverished population by an opaque, authoritarian and corrupt government.”

Dada has received death threats for his work. He told The New Yorker that he was looking up from his desk one day earlier this year and saw a drone floating outside the window. He gave it “the opportunity to biometrically examine my middle finger.”

Privacy advocates like Matt Odell have voiced concerns that the Chivo app could grow to replace cash transactions, which have, by default, excellent privacy. Moving these payments into a digital system where the government has full knowledge over all aspects of transactions could push the country in the direction of a surveillance state.

In the end, why did Bukele push the bill? Was it to distract the world from his brazen consolidation of power? To — as his critics most often allege — launder money through a network that’s harder to monitor than the banking system? Or to try and get citizens into his Chivo system, where he can better surveil and control them? Was it to make a back-up plan, in case international lenders cut him off? Perhaps — as his supporters say — to strike first in a digital arms race, modernize the country, and attract investment and talent? Or was it simply to put El Salvador, and his own persona, on the international map?

Any mix of these reasons is possible, but one thing is for sure: Bukele is a lot more internationally famous today than he was six months ago, and is now the most recognizable leader in Central America.

Geopolitically, there is a $1 billion IMF loan to El Salvador pending, and the U.S. and other international entities may try to pressure Bukele to make concessions before the money gets cleared. They prefer he stays on the Washington consensus, and not start a Nakamoto consensus trend. Whether these concessions would be targeted with regard to his erosion of democracy, or his promotion of Bitcoin, is not yet clear. Shortly after the Bitcoin Law was passed, the Biden Administration sanctioned 11 Salvadorans close to Bukele for corruption. And on September 5, the U.S. State Department published a press release accusing Bukele of undermining democracy.

Critics say that Bukele will use Bitcoin as a tool to fight back against U.S. sanctions. But as The Economist pointed out, it is unlikely that the U.S. will pressure Bukele too strongly: Biden is facing an immigration crisis, and instability in El Salvador could increase the flows of migrants into the U.S., causing political problems for the White House. On August 27, the U.S. government made a military gift to the Salvadoran army, including eight helicopters.

On June 8, as the Bitcoin law was being passed by the Salvadoran legislature, Bukele joined a Twitter Spaces organized by the investor and entrepreneur Nic Carter and answered questions from an audience that numbered more than 20,000. I had the opportunity to ask him two questions: One, would Salvadorans be able to use any wallet they want, or would they be forced to use the Chivo wallet (he said the choice would be theirs). And also, I asked if the state had planned to do any Bitcoin mining with its natural resources. On the latter, he initially said no, but then quickly began describing the idea of using volcanoes to mine Bitcoin with El Salvador’s stranded geothermal energy.

The next day, Bukele posted a video taken at a geothermal site, saying the state was preparing to mine Bitcoin using 95 megawatts (MW) of 100% clean energy. He later posted sketches of a futuristic Bitcoin mining facility. If his administration is able to effectively set up these operations, it could provide a non-IMF revenue stream and a way to finance development that other emerging market countries could emulate.

Despite its upside for empowering individuals, improving remittances, and putting El Salvador on the map, the Bitcoin law is perhaps the most unpopular action Bukele has taken since becoming president. According to a recent poll administered by the Universidad Centroamericana José Simeón Cañas, around 95% of Salvadorans do not think adoption should be mandatory, and a majority do not think the government should use public funds on bitcoin, with seven out of 10 saying the law should be overturned. The survey also revealed how little Salvadorans know about Bitcoin, with 43% saying that they thought it was a physical currency, and 20% saying that 1 BTC was worth a dollar or less.

When I attended an anti-Bitcoin law protest on September 1 in downtown San Salvador, I encountered this lack of knowledge first hand, and also was reminded of Bukele’s authoritarian behavior. That morning, police arrested Mario Gomez, a computer scientist who has been very critical of the Bitcoin law on social media. He was later released, but the action was a clear move of intimidation.

At the protest, I met the leader of the Salvadoran union for judicial employees. She told me that people were afraid of losing their freedom, and are still scarred by dollarization. She said lots of families still cannot connect to the internet, and that — despite the iPhone in her shirt pocket — even some people in the capital have trouble getting online.

Out in the rural areas, she said, there are even fewer connections. The opposition keeps repeating this talking point, though it is worth mentioning that El Salvador as a whole has around one and a half cell phones per person, that virtually everyone in El Zonte had a phone, and that two thirds of the country uses social media. Regardless, she said, “the law will favor the 1%.”

The protestors claimed they were against the law, not the technology, and admitted or revealed through their statements that they knew very little about Bitcoin. If one does not understand the empowering potential of Bitcoin, then of course, one would think that the $200 million spent on the project is a waste of money that should be going elsewhere to help the people.

The protestors’ qualms about Bukele’s lack of transparency and lack of consultation with the people around the Bitcoin rollout are legitimate and important. The fact is, very few Salvadorans had heard of Bitcoin until recently, and most do not know the first thing about it. So people are afraid and think it’s a tool for money laundering.

“The law opens the door for more evil people to benefit,” the union leader told me.

I asked her if she would like to learn more about Bitcoin.

“I’m not interested,” she said

VIII. Being Your Own Bank

Enzo Rubio is a Salvadoran entrepreneur, the founder of Point Break Café where Karla works, and the owner of a larger location in the nearby town of El Tunco. He told me that he grew up in San Salvador, and moved down to the El Zonte area in 2016, mainly to surf.

Loving the area, Rubio opened his coffee shop in El Tunco in 2017.

“I love coffee, and there was no good coffee around,” he said.

He said it went well, feeding off a new wave of tourists coming as the violence started to decline. El Tunco is much larger than El Zonte, with many more shops, restaurants, hotels and foot traffic in general.

One of his most loyal customers was the owner of the Garten Hotel in El Zonte. In 2018, he convinced Rubio to establish a second location there, which finally opened in November 2020 after several years of construction.

Rubio immediately noticed how tight the community was in El Zonte. He also knew that there was something going on there with Bitcoin.

“I didn’t know what,” he told me, “but I had heard the buzz.”

One of his first customers was Burtey, the developer of the popular Bitcoin Beach wallet, who was visiting El Zonte with his wife and kids. They came in during one of the first days the cafe was open, and asked for a couple of cappuccinos. When it came time to pay, Burtey asked: “Do you accept bitcoin?”

Rubio said no, but he would like to.

“In less than two minutes, Nicolas had set me up with a wallet, and had paid me $8.50 worth of BTC. It was my first transaction,” Rubio said. “Now it’s worth around $25.”

Burtey’s family helped Rubio put up a sign indicating that he accepted bitcoin. In the first few months, Rubio said, it actually accounted for 10% to 15% of his sales. He told me that he was fortunate that business at both locations was doing well, so he did not need to sell the bitcoin. He watched it grow in dollar terms over time.

Maybe, in a different year, the price would have gone the other direction, and he would have been panicking.

“Right place, right time,” Rubio said.

By the start of 2021, Rubio had saved more than $500 in bitcoin, both from tourists but also from locals who earned satoshis doing community work through Hope House.

He had some early concerns about liquidity, but once he realized Hope House would cash BTC out for dollars for him anytime, he stopped worrying. The fact that it was liquid made all the difference, as did the Lightning Network. Waiting 10 or 20 minutes for a transaction to settle is impractical. But Lightning is a game changer.

Rubio recalled when Mallers visited.

“One day my friend called me, and he was very excited,” he said. “He said, Jack Mallers is here! He told me to go look for the guy in the hoody.”

Mallers, Rubio said, would come to the cafe three or four times a day, paying in bitcoin, and it helped him and his staff become comfortable with frequent orders. It was “good exercise,” said Rubio. When I visited Point Break Café a few weeks ago, the process was smooth, as if Karla had used Bitcoin her whole life.

In the beginning, Rubio said, Karla needed to call him whenever someone wanted to pay in bitcoin, and he would send her a QR code. But now, with the Strike account on a tablet, things are easy.

Rubio calls Karla’s story a “clear case of financial inclusion.”

I posted a video of me buying coffee from Karla using Lightning on Twitter, and it went viral, attracting more than 650,000 views. I included Karla’s Strike and Bitcoin Beach tip pages, and she was inundated with tips of all sizes from dozens of countries around the world.

“It was amazing to watch,” Rubio said, telling me that at one point tips were coming in in a steady stream for hours. “When something goes viral, when you see millions of people watching your TikTok video, that’s great, but this was way better, because it wasn’t likes, it was satoshis.”

“Now, like so many others around here, she’s creating a savings strategy,” he said. “It’s the same for me. I’ve had several other businesses, but never set aside money for emergencies. Bitcoin gives you a bigger motivation to save instead of spend. We know that dollar inflation is maybe 3% to 4% per year officially, but down here things get more expensive, even by the week. I know that the more I wait to spend the BTC, the more my purchasing power will be.”

The whole region is really picking up economically, Rubio said. El Tunco does three times the business that his location in El Zonte does, but the latter now does the volume that the former used to do.

“Point Break Café is now the place to go,” Rubio told me. He said he’s been interviewed by Bloomberg and The Wall Street Journal.

Indeed, I visited El Zonte during a typically dead time in low season, when the humidity and heat peaks, and when it rains almost every day. And yet, even mid-week, the hotels were packed. There was a hum of energy every night.

When I asked Rubio about Bukele, though, his tone changed. Rubio finds it contradictory that Bukele is forcing Bitcoin on the population.

“Bitcoin is so anti-government,” he said. “So it’s surprising that any government wants to bring Bitcoin to the people.”

Earlier this year, Rubio thought a legal tender law would be impossible. He had seen Bukele tweet about Bitcoin a few times in 2017, so knew that it was in his mind for a long time. But why would the government give the people the ability to transact outside the banking system?

“There are so many AML laws,” he said. “Opening the economy up to Bitcoin is the other way around.”

Two months before it announced the Bitcoin law, Rubio said, there were rumors even that the government would switch the country back to colónes. His mother was warning him, saying they need to take their money out of the banks, worried about a haircut in the event of a currency conversion.

The law stunned Rubio.

“There is one discussion about Bitcoin,” Rubio said, “and another discussion about how the government is implementing its adoption.”

“Bitcoin is about challenging the government,” he said. “It’s about taking away the power of the government to fiddle with our economy and our money and savings, not about government intervention.”

He called the act of making it compulsory to receive bitcoin “a big mistake.”

He is also critical of the Chivo wallet, which he says is “not even a government wallet, it’s a private company that was created in just a few short weeks just for this purpose.”

Rubio is worried that it is a scheme to spend the taxpayers’ money to build something, but where the private company gets the rewards.

“It’s not regulated by any public agency,” he said.

Rubio tries to do his part to boycott the government wallet. He has not downloaded it yet, and he does what he can to help people use other wallets.

“The revolution is about being your own bank,” he said. “You can’t do that if you’re using Bukele’s wallet.”

IX. Si No Tienes Las Llaves, No Es Tu Dinero

Was it good when King John signed the Magna Carta? When the Chinese Communist Party permitted private enterprise? When the Cuban dictatorship introduced the internet?

In all cases, yes. These political shifts helped improve lives for billions of people. But the authoritarian rulers who made these sweeping changes do not necessarily deserve praise. If Bitcoin is successful, it will continue to co-opt many leaders. But Bitcoin exists to separate money from state, and even as we liberate the former, we should remain cautious of the latter.

Today, Bukele is moving fast. In the span of writing this article, in just the past few weeks, the topic of his running for another term went from speculation, to maybe something he would do next year, to something that his new Supreme Court made an actual ruling on, paving the way for his re-election. He seems aware of the international criticism, just yesterday tweeting “¿Y la dictadura?” to his 2.9 million followers.

His supporters, of course, say he needs more time to clean house, end corruption and implement his reforms. But anyone who has studied populism and dictatorship will know that that is what the fans of strongmen always say. I visited El Zonte with citizens from neighboring countries like Nicaragua and Venezuela. They had seen this movie before, and were alarmed at the political red flags popping up in El Salvador.

A Bukele dictatorship is not inevitable, but it looks more likely every day, unless the president changes his behavior. In the meantime, the peaceful protest and empowerment tool of Bitcoin has been associated with Bukele and his regime in many people’s minds. That association will be difficult, if not impossible in some cases, to break.

What can human rights activists do? Beyond traditional tactics of supporting the independent media and keeping a spotlight on government behavior, a worthy effort would be to encourage Salvadorans to use non-custodial Bitcoin wallets, and to avoid the government wallet. After all, any funds in Chivo are not real bitcoin, just confiscatable promises to pay.

“Si no tienes las llaves, no es tu dinero” — not your keys, not your coins — could become a rallying cry.

If Bitcoin is going to make a positive long-term impact on El Salvador, then education seems like one of the most important things to focus on right now. Just as Karla and Mama Rosa said, onboarding was hard at first. People are hesitant about Bitcoin and only see its value later, over time. Today, there are more than six million Salvadorans in this skeptical mindset, virtually all of whom have not used Bitcoin and do not know what it is.

Without a sustained and localized effort to spread knowledge about how to use Bitcoin in a non-custodial way, where it can check the power of the government and protect individual freedom, the people may not benefit.

What is clear from visiting El Zonte and talking to the community leaders is that Bitcoin is not something you can sprinkle on a town and make it come to life. Alone, it is not a sufficient tool to empower a population.

Yes, it is true that Bitcoin helped a small village change the world. But without Valenzuela, without Martinez, without Peterson, without Mama Rosa, and without entrepreneurs willing to take risks like Rubio and Karla, no change would have happened.

It would be wise to remember that a village started El Salvador’s Bitcoin movement, not a strongman.

This is a guest post by Alex Gladstein. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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Finding Financial Freedom In Afghanistan

Roya Mahboob — the first female Afghan tech CEO, one of TIME’s most influential people in the world and one of the first entrepreneurs to introduce Bitcoin to Afghanistan — was seven years old when the Taliban first took over her country and invaded her hometown in 1996.

One day she was playing with her bicycle in her front yard, wearing her favorite red scarf, when a bunch of armed men showed up in a jeep, screaming at her father in a language she did not understand. After that, she was not allowed to go outside and play anymore.

“My family took my scarf away, and forced me to wear a black dress,” she said, “just like all the other girls.”

A few days later, the Taliban returned. Its members rolled down her street, armed to the teeth, and went home by home, going into each house by force, looking for any signs of books or television sets.

“If they found any books, they would take them out to the front yard and set them on fire,” Mahboob said. “If they found any VHS tapes, they would set those on fire too.”

She said the most jarring part was that she could no longer go to school. Instead, she was forced to go to the mosque, and study the Quran, and sit through lectures from a mullah who could not even read. For her, all paths to knowledge had been closed, and all bridges to the outside world had been burned down.

Shortly after the Taliban conquered Afghanistan, Mahboob’s family fled into Iran. She told me that her father was a secular leader, and that it had become too dangerous for him to raise a family in a new land of religious fundamentalism. She grew up a stranger in a strange land and as a second-class citizen. But over time she got used to Iran, and when her father decided to move the family back to Afghanistan in 2003, she was terrified.

When she finally arrived back in the city of Herat one night, however, she remembers things were surprisingly calm. Iranian state TV had portrayed Afghanistan as a place of death and destruction, but Roya found her home region stabilized. Now a teenager, she was still forced to wear a hijab, but she found the restrictions much looser than under the Taliban. Yes, there were foreign troops everywhere, but compared to today, she said, there were many new economic opportunities and the security situation was much safer: “There was a sense of hope in the air.”

I. Discovering The Internet

One of the things that intrigued Mahboob most about her new life in Herat was the internet cafe. Living in Iran, she had never been allowed to go to a library or bookstore. Her schooling was limited and based mainly on Islam. Getting other kinds of information was a struggle. Upon arriving in Herat, she heard about a shop that had small boxes that could communicate with each other. If one typed into them, she heard, they would provide lots of information. One could even talk to other people through electronic messages. But, she said, women were not allowed in this kind of shop.

“One day,” she said, “I forced one of my male cousins to take me inside.” The cafe owner would not let them in, but she was persistent, and one early morning he relented. She fell in love with the computer immediately. She learned that the United Nations had started a local computer course for women, and the teacher told Mahboob that if she could get 15 girls to enroll, they could start a class. She rallied her cousins and friends to make it happen. After a six-month course, she was hooked on the web.

The next year, in 2004, Mahboob entered Herat University and took up computer science. Over the next four years, she learned how to code, and her desire to change the world through technology grew.

Unknowingly, Mahboob had tapped into the philosophy of a group of coders who were thousands of miles away: the cypherpunks. They believe that the best way to change society is through technology, not through government. Their philosophy is to innovate without permission. In this sense, Mahboob was one of them.

She continued her studies, eventually working her way up to coordinator of the university’s IT department, where she helped build the campus network architecture. She learned English, mainly to communicate with the teachers, and started working on the Silk Road project, a NATO initiative that helped all the key universities in Afghanistan get linked up with fiber optics.

In 2009, Mahboob met with Paul Brinkley, the U.S. deputy undersecretary for defense. The Americans wanted to build a tech incubator in Herat. By that time, Mahboob had helped create an association of young girls interested in technology and software. According to Mahboob, Brinkley asked her, “Why not start a company? We can hire you.”

II. Mahboob’s Citadel

With contracts from the U.S. government and multilateral organizations, Mahboob built Citadel Software.

Why the name?

“In Herat,” Mahboob said, “there is a beautiful citadel that looms over the rest of the city. It is impressive, even breathtaking.” Mahboob said that her company wanted to be a castle of software programming and a place where women could safely pursue their careers.

Little did she know, she was already on the same page as many Bitcoin users, who often talk of the idea of a citadel where they can retreat into a space of freedom without external control. “I’ll see you in the citadels,” says the popular Bitcoin podcaster Stephan Livera at the end of every one of his 350-plus episodes.

Mahboob founded her own “citadel” and became the first female tech CEO in Afghanistan. To launch, she used some of the money she had saved while working at the university and for the Afghan Ministry of Education. Of course, she had less access to commercial finance than men, but the meeting with Brinkley was her breakthrough. The U.S. government would pay Citadel to consult on the strengths, weaknesses and different approaches to building technology systems in Afghanistan.

After a few months, Citadel also started to win contracts from the Afghan government. At the end of 2011, an Italian businessman saw a documentary about Citadel. He was so moved that he reached out and eventually financed the company, giving Mahboob private investment by the end of 2012.

“Citadel was 85% female,” Mahboob said. “For every woman at Citadel, this was her first job.”

Because it was a mostly female environment, conservative families were more comfortable with allowing their daughters to work there as opposed to at male-dominated organizations.

At the same time, Mahboob started a platform called WomanNX, which helped Afghan women in high school and college work from home, getting paid based on their contributions. Work ranged from uploading short videos to writing articles or translating documents.

At first, Roya paid her employees and the WomanNX contributors in cash. The problem was that the women wanted to send the money to family and pay vendors in different parts of the country. They used the hawala system, an 8th-century money transfer process that relied on brokers and a web of trusted intermediaries.

This ancient platform seemed dated and slow to Mahboob and the women, many of whom already had Nokia cellphones and had started to create and use their own Facebook accounts. Even worse, sometimes the money did not make it through the hawala system, and it was hard to verify that the whole amount reached the recipient.

So, Mahboob researched the idea of mobile money. As it turned out, cellphone-based payment systems like M-PESA, which worked so well in Kenya, never took off in Afghanistan. PayPal was still not available because of U.S. sanctions. And the women did not have bank accounts, so she could not wire them the money. The women had to have their father’s or husband’s permission to open an account, and this was often not granted.

Mahboob’s employees wanted digital control over their time and earnings.

“If I gave them cash,” she said, “their fathers or husbands or brothers might find out and take it away.”

III. Enter Bitcoin

In early 2013, Mahboob’s Italian business partner told her about bitcoin. He said it was a new kind of money that could be sent from phone to phone without a bank account. Unlike the local afghani currency, which was steered by the government, bitcoin floated on the open market. When Mahboob first learned about bitcoin, it was trading at around $13. By the early summer of 2013, it broke $70.

“At first, I did not think the girls would trust Bitcoin,” Mahboob said. “It was too hard to understand.”

But her business partner encouraged her and said: “Let’s try it — what do we have to lose?”

And so Mahboob taught her employees and contractors how to install Bitcoin wallets on their phones, how to receive funds and how to back up their savings. If the girls ever wanted to spend the bitcoin, Mahboob or her sister Elaha would buy it back from them with cash.

“I began to understand Bitcoin as a digital upgrade of the hawala system,” Mahboob said. She and the women liked to get paid in bitcoin because they could keep it on their phone, and no one needed to know how much money they had.

“The girls were happy to finally have a money that the men in their lives could not take from them,” Mahboob said. “It gave them security, privacy and peace of mind.”

Elaha started a business that bought bitcoin from the girls for cash when they needed to purchase things. Some shops in Herat even started accepting bitcoin as a means of payment for clothing.

During the late summer and fall of 2013, bitcoin’s price skyrocketed to more than $1,000. Citadel had put all of its cash assets into bitcoin. Business was booming, and the women could not believe their new wealth and economic freedom.

Mahboob felt invincible.

But in November 2013, bitcoin crashed, losing 60% of its value relative to the U.S. dollar. Citadel’s assets were decimated. Worse yet, its employees’ savings evaporated.

“Our competitors went on the attack,” Mahboob said, “arguing that Citadel was run by frauds who stole money from young girls.”

Mahboob decided to offer to buy back the bitcoin from all of her employees and contractors — more than 150 in all — at pre-crash prices. To salvage what remained of Citadel, Mahboob converted almost all of the company’s bitcoin to U.S. dollars.

2014 and 2015 were hard years for Citadel and Mahboob. She had to lay off a lot of employees, and WomenNX lost popularity. She did not close shop, but she did scale down the business, giving her more time and energy to help young women learn vocational skills through software. In 2014, she launched a non-profit organization called Digital Citizen Fund (DCF) to educate women on how to use computer technology. By 2016, DCF became her primary focus.

“By then,” she said, “many Afghans had lost their trust in Bitcoin. But I could not forget its potential. It stuck in my mind and would not go away.”

Later in 2016 she created a curriculum through Digital Citizen Fund to teach women across many schools how to use Bitcoin, set up a wallet and understand how the network’s “blockchain” ledger system worked. As of August 2021, thousands of women in the Herat area have learned about Bitcoin and attained more financial freedom because of Roya and the DCF.

Roya said the girls liked that they could receive, save and spend Bitcoin without needing a bank account. It only took a few minutes to set up a wallet and write down a seed phrase to back up their savings, in case they lost their phone. They could send the money anywhere in the world in minutes.

“The volatility,” she said, “was the price you had to pay for the rest of these benefits.”

Perhaps most powerfully, Bitcoin could not discriminate by gender. Despite the 2013 crash, the technology was too interesting to ignore.

IV. A Refugee’s Escape

A few of the women did keep their bitcoin from 2013. One of them was Laleh Farzan. Mahboob told me that Farzan worked for her as a network manager, and in her time at Citadel earned 2.5 BTC. At today’s exchange rate, Farzan’s earnings would now be worth more than 100 times the average Afghan annual income.

In 2016, Farzan received threats from the Taliban and other conservatives in Afghanistan because of her work with computers. When they attacked her house, she decided to escape, leaving with her family and selling their home and assets to pay brokers to take them on the treacherous road to Europe.

Like thousands of other Afghan refugees, Farzan and her family traveled by foot, car and train thousands of miles through Iran and Turkey, finally making it to Germany in 2017. Along the way, dishonest middlemen and common thieves stole everything they brought with them, including their jewelry and cash. At one point, their boat crashed, and more belongings sank to the bottom of the Mediterranean. It’s a tragic story familiar to so many refugees. But in this case, something was different. Through it all, Farzan was able to keep her bitcoin, because she hid the seed to her Bitcoin wallet on a piece of tiny, innocuous-looking paper. Thieves could not take what they could not find.

Once Farzan got to Germany, she sold some of the bitcoin for $2,500, making ten-times her initial earnings in dollar terms. Bitcoin helped her start a new life. Reflecting on the countless refugees in recent history, and thinking about how most of them could only bring the clothes on their back with them as they fled, Mahboob thinks Bitcoin could be a difference-maker for so many.

As another example, Elaha saved some of the bitcoin she made back in 2013 and held onto it until 2017, eventually spending it on her college tuition when she was admitted to Cornell University. For the girls who were patient, bitcoin became an enormous treasure.

Today, Roya Mahboob says she uses bitcoin as a savings account and as an investment for the future. The bitcoin she obtained in 2013 for around $100 has increased in value by 500 times. She often uses it to send money from New York, where she spends a lot of time, to friends and family and vendors in Afghanistan.

In the past two years, she said, many hawala system brokers have started to learn about Bitcoin. She explained to me that in Herat there are more and more people willing to buy bitcoin in exchange for cash, and that in Kabul it is even more prevalent. The data supports Mahboob’s observations: when adjusted for purchasing power and internet penetration, the firm Chainanalysis reports that Afghanistan has the seventh-highest peer-to-peer exchange trade volume in the world.

Mahboob said that as Bitcoin becomes easier to use, it will get more adoption. Since 2013, she said, wallets have improved in a staggering way with regard to usability and design. The Digital Citizen Fund plans to continue offering classes to Afghan women and girls today on how to use Bitcoin.

“Thousands of graduates,” Mahboob said, “have built the knowledge for economic sovereignty that they would not otherwise have.”

Mahboob does not see Bitcoin as a Western innovation or a Silicon Valley creation, but rather as a global tool of financial freedom that can empower women. So many girls and women in Afghanistan do not have an ID or a bank account, she said.

“Bitcoin gives them power. They can learn how to mine it, code it or trade it,” she said. “When they earn money, they can convert that into radical self-reliance and power that they can use to escape the traditional role of Afghan women in the home.”

Mahboob does not know if Bitcoin’s mysterious inventor, Satoshi Nakamoto, realized how powerful it would become. To her, it is the most world-changing invention since the internet.

“It is more than just an investment,” she said. “It is a revolution.”

V. Economic Collapse

Today, Mahboob said, Bitcoin is more important than ever for Afghanistan.

In the wake of the fall of Kabul to the Taliban, Afghans are in dire economic straits. Already before the transition, as many as 14 million Afghans did not have enough food to eat. 2.5 million people had already fled the country. Now, bank accounts have been frozen, economic activity has slowed, and remittances have been halted. ATMs are empty — after withdrawals spiked from hundreds per day to thousands per day — and financial exchanges are shuttered.

The afghani has fallen to a record low, falling 5% in a single day last week to reach as much as 100 per dollar. A month ago, the rate was 78 per dollar, and 10 years ago, 58 per dollar. Normally propped up by a flow of dollars, those shipments sustaining the afghani have stopped arriving.

Further exacerbating the situation, the U.S. government has pressured the International Monetary Fund (IMF) to stop the release to Afghanistan of $460 million of special drawing rights, a kind of credit that can be exchanged for hard currency, and has confiscated more than 99% of the country’s foreign reserves, which sit in New York. The German government has suspended $300 million in aid. The World Bank announced that it is freezing its aid mechanism, which has committed more than $18 billion to Afghanistan. Development assistance — which reached $4.2 billion in 2019 — could trickle to zero. Instead of being supported with aid, the Afghan economy could be strangled by sanctions.

Western Union and MoneyGram — two of the world’s biggest money transmitters — have cut off services, and websites like GoFundMe have been blocked from fundraising efforts for “compliance” reasons. Remittances are a key lifeline for the country, making up nearly 4% of the economy or around $800 million annually. But now Afghans are in the cold, greeted by these kind of statements when they try to receive money from abroad:

“Western Union understands the urgent need people have to receive funds, and we are committed to resuming operations for our customers in Afghanistan as conditions permit. We will continue to monitor the situation closely and we will keep all appropriate stakeholders apprised of further developments.”

WasalPay is a service that Afghans use to top up their phones, but the company’s CEO is inundated with requests, and has run out of cash. He does not know how long he can stay in business. Asef Khademi, who was working on a World Bank project to digitize payments in Afghanistan, says all progress has stopped since the Taliban took over.

“They might just destroy it,” he told MIT TechnologyReview. “They might just burn all of these technologies. Who knows?”

Mahboob pointed out that while the Taliban could crush local businesses or shut down financial modernization plans, they cannot stop Bitcoin.

Afghanistan’s former central bank head Ajmal Ahmady — who fled during the fall — has predicted capital controls, currency devaluation, price inflation, and tough times for the poor. He said the Taliban have access to just .1% to .2% of the country’s savings. This, combined with the slowed remittance and aid flows, will crash the currency and cause prices to rise. Ahmady said that there are already reports of wheat prices doubling in Kabul.

There could even be a demonetization event if the Taliban finds the existing currency, installed by the American-backed government in 2002, as not Islamic enough. After all, when the Taliban came to power in 1996, its economic chief declared the legacy currency “worthless” and halted production of new notes.

In this dire climate, experts are predicting hyperinflation and an economy that could contract as much as 20%. People holding afghanis are trying to exchange them for dollars or goods, driving prices up more and more. In a country where only 10% to 15% of the population has a bank account, a quick erosion of the afghani’s purchasing power would be devastating. Some say that opium production or intervention from Russia or China could prevent economic collapse, but Ahmady called that an “over-optimistic scenario.”

“This is always how it is,” Mahboob says. “The poor suffer, no matter what the elites do.”

VI. Bitcoin Fixes This

Mahboob said that in the chaos of this month’s transition, her parents fled Afghanistan, but were not able to bring their money with them. Earlier this year, she flew to Kabul to see them. She tried telling her mother to start converting some of her afghanis into bitcoin. But her mother is traditional, the process seemed unnecessary and she procrastinated.

Mahboob wishes she had been more persuasive. Had her parents put at least some of their money into bitcoin, they could have taken their savings with them when they fled.

“Bitcoin fixes this,” Mahboob said.

She thinks Bitcoin could have helped many other Afghans over the past few weeks — whether they fled and needed to take their savings with them, or stayed and needed an alternative to the afghani — and remains committed to teaching as many people as possible about it in the coming years.

She told me that she is negotiating with the Taliban to try and keep her educational programs going.

“Giving up,” she said, “is not an option.”

Mahboob has already spoken to Taliban spokesperson Timothy Weeks about keeping technology and finance classes for girls going in the Herat area. Weeks is a former professor from Australia who was kidnapped while teaching in Afghanistan, and beaten and jailed for three and half years in a small cell. In 2019, he and an American prisoner were freed in exchange for three Taliban commanders. Upon his release, he seemed to have developed Stockholm Syndrome and has sided with his former captors, now going by the name Jibra’il and running point for the Taliban on digital issues. He is savvy enough to use apps like Signal. Mahboob said he seems open to her ideas.

One objective would be to try and convince Afghan Islamic scholars that Bitcoin is halal. Mahboob thinks that an approach framing bitcoin like a digital hawala system based in gold — concepts that have been a part of Afghan society for thousands of years — could work.

“Religious scholars currently criticize Bitcoin as gambling,” but, she said, “it depends on how you frame it.”

Mahboob has helped many young women — including some of the stars of Afghanistan’s female youth robotics team, which she founded and mentored to worldwide fame — get out in the past few weeks. Five members just arrived in Mexico. But millions of young women remain in the country, and will need ways to connect with the outside world.

Moving forward, Mahboob does not want to retreat to a passive state of simply condemning the Taliban from abroad. She experienced its rule and knows how brutal it is for women’s rights, but said, “we have to work on the ground and push for action, not just write articles criticizing the new government.”

In negotiations so far, Taliban leaders have told her team that in Herat, women will be able to continue to go to school once female-specific buildings are established.

Data is hard to trust in Afghanistan, but estimates say that out of a country of nearly 40 million, there are around nine million internet users, with close to a quarter of the population online, and 90% living on less than $2 per day. Mahboob said that these numbers seem low, and said that a much higher percentage of people, at least young people, have internet on their phones, and that a much higher percentage make more than a few dollars per day, especially through side jobs.

Most of the young generation, she said, have cellphones with internet access. And the Taliban is allowing people to remain online, at least for now. Mahboob’s goal is to convince the Taliban to allow women to participate in the digital economy.

Bitcoin, she said, is a big part of this plan.

VII. A Legacy of Corruption

Mahboob said that over the past 20 years, Afghanistan has seen many achievements, especially with regard to women’s rights, elections and education. The number of Afghan girls attending first grade rose from zero in 2001 under the Taliban to more than 60% in the past decade. But the government’s fatal sin, she said, was corruption.

She blames the collapse on the “selfish behavior” of men like former president Ashraf Ghani and his predecessors.

“The elites only thought about their own interests,” Mahboob said.

Ghani taught at top American universities, worked at the World Bank, gave a TED Talk, wrote a book on fixing failed societies and started an NGO called the “Institute for State Effectiveness,” but then lost Kabul to the Taliban and fled the city, allegedly stealing $170 million in cash along the way.

Afghanistan hosted the longest war in American history, leaving more than 240,000 people dead, but the operation has faced very little scrutiny. U.S. lawmakers never actually voted to declare war in Afghanistan, and the $2.2 trillion cost of the war was only questioned once in 20 years by members of the U.S. Senate Finance Committee.

The U.S. faces an astonishing $10 trillion in debt from 20 years of forever wars in Afghanistan and Iraq: $2 trillion in debt-financing to pay for the wars, $6.5 trillion to be paid on interest by 2050 and $2 trillion for expected expenses related to benefits for four million war veterans. Much of the war money was wasted, as hundreds of millions of dollars of equipment has been destroyed or is now under Taliban control.

Mahboob is critical of the way the West “supported” Afghanistan. Tens of billions of dollars was invested in her country, but little was actually given to Afghans, with most given to American NGOs and companies to do implementation, bringing that money back to the U.S. instead of having it soak into the local society. Out of the $144 billion that was invested in Afghanistan since 2002, an astonishing 80% to 90% ended up back in the U.S. economy, siphoned through “a complex ecosystem of defense contractors, Washington banditry, and aid contractors,” according to Foreign Policy.

Who benefited most from the war? Undeniably, the lives of Mahboob and millions of other Afghan women improved. But the country’s elites, like Ghani, and the military-industrial complex, led by companies paid billions by the U.S. government such as Fluor and Amentum, profited most handsomely. A cynical interpretation would be that the war operation was only sustained for so long to keep funds going to certain companies and interest groups — and not to build serious lasting infrastructure — explaining why the government in Kabul fell so quickly.

One former U.S. soldier said that “the Afghan army wasn’t real. The Afghan Civil Authority was never real. They never collected taxes. There were no courts outside of police robbing people. None of it ever existed … it was just a big jobs program funded by American money, and the moment it looked like the money would go away, everyone went home.”

Mahboob thinks there could be a different kind of future, where Afghanistan is actually independent, and not just something so dependent that it collapses without foreign support.

VIII. A New Chapter

Mahboob said that before the fall of Kabul, she was thinking about reducing her time with her non-profit activities and going back to working entirely on the business side. But now, she realizes that education is more important than ever.

“With everything that has happened in the last few weeks, I can see that our fight has just begun,” she said. “We need to hold the Taliban accountable.”

Even with all that she has accomplished, Mahboob said that she regrets not doing more Bitcoin education.

“If we had done more,” she said, “so many more could have benefited.”

She vowed to double down in this area, telling me that in Digital Citizen Fund programs moving forward, financial literacy and “being your own bank” will be key components, and Bitcoin will be a core part of the curriculum.

“Democracy is over,” Mahboob said. “That chapter has closed and a new chapter has started. We are upset, yes, but we will not give up. I’m going to keep fighting.”

“The women are going to make it,” she promised.

This is a guest post by Alex Gladstein. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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Inside Cuba’s Bitcoin Revolution

Lucia is a 30-year-old medical worker and Bitcoin user living in Matanzas, a city of about 150,000 people sitting about 50 miles east of Havana on Cuba’s northern coast. Named after an aboriginal rebellion against Spanish colonizers, the word “matanzas” literally translates to “slaughter.” The settlement later turned into a 19th-century epicenter of slavery and sugar plantations. Today, like all Cuban cities, it is ground zero for a financial and human crisis.

The Cuban people are suffering their worst economic struggle since the early 1990s, when the Soviet Union collapsed and the regime lost its main lifeline. At the time, longtime dictator Fidel Castro told citizens they needed to unite together to get through a “Special Period.” The era was marked by food shortages, blackouts, thousands fleeing to Florida on risky rafts and a spectacular devaluation of the Soviet ruble-pegged peso. Between 1991 and 1994 the Cuban economy contracted by 35% and quality of life deteriorated dramatically.

Tensions peaked in the summer of 1994, when an anti-government protest known as the Maleconazo uprising broke out in Havana. Without its Soviet subsidy, the state ration system was failing to support the population, and important goods were all of a sudden only available for purchase with dollars, which were increasingly expensive for Cubans to obtain with their peso wages and pensions. In a desperate move, the regime violated its founding collectivist philosophy and imposed a series of unprecedented taxes on the population. In response, tens of thousands of protestors gathered at the Malecon waterfront, calling for an end to the government.

The internet did not exist, so the regime was able to quell the movement through police brutality while ensuring that most Cubans barely knew anything had happened. State television and radio made a brief mention of a small gathering of delinquents and troublemakers. But in reality, the Maleconazo was a staggering display of dissent, the biggest on the island since the revolution.

When the money system breaks, it can threaten a regime’s survival.

I. Monetary Purification

Today, Lucia and other Cubans talk of a new Special Period. As a result of currency reform and social frustration from decades of repression and bureaucracy, there are again shortages, blackouts, extreme inflation and protests.

The big difference is that today, with widespread mobile phones and internet access, everyone knows what’s going on. Last month, on July 11, the biggest anti-government protest since the 1959 revolution broke out, not just in Havana but in cities all across Cuba.

With a firsthand view into the medical system, Lucia told me that the human support network in Cuba is collapsing. The pandemic has overwhelmed hospitals in Matanzas, she said, and dead bodies pile up on the streets. It is incredibly hot and Cubans go many hours a day without electricity. Food — especially beef, fish, chicken and eggs — is scarce or even impossible to find. New American regulations, passed by President Trump right before he left office, have cut Cubans off financially from their families in the U.S.

“It’s hard to get food, it’s hard to get medicine, it’s hard to get bathroom supplies, the power grid is broken, the pandemic is peaking, tons of elderly people are passing away, the healthcare system is collapsing, we have no oxygen or fans,” Lucia said. “This was too much. This is what put people out on the streets.”

Lucia told me that at the very root of the state’s failures and the unprecedented citizen uprising is a crisis of money.

In January the Communist Party of Cuba conducted what it described as a “monetary purification.” Since 1994, the government issued two kinds of currencies: the CUP, or Cuban peso — pegged to the dollar at 24:1 — and the CUC, or Cuban convertible peso — pegged to the dollar at 1:1.

Public sector salaries and pensions were always paid out in pesos, but for years, citizens needed to obtain CUCs to buy key items like medicine, any food beyond the basics, clothing, cleaning supplies and electronics. The regime designed the system to suck value out of the population, selling CUCs for 25 pesos at state-run money exchanges called cadecas while only buying them back for 24 pesos. The regime knew it would have to keep printing and inflating pesos for the staffing of its centrally-planned economy, even as its agricultural and industrial sectors collapsed. The dual-currency system gave it life support, propping up purchasing power for the elite and well-connected.

Lucia described the system’s output as creating a reality where she could buy a cup of coffee, a bus ride or even a small meal for an incredibly cheap price in pesos, but a pair of shoes or a phone plan, priced in CUC, could cost an entire month’s salary. This put state workers — including teachers, police officers and medical workers like her — at a severe economic disadvantage compared to anyone exposed to the tourist industry, like waiters or taxi drivers.

In tragic irony, unskilled workers were often far better off financially than highly-educated ones, and many of the latter dropped out of their careers to clean tables or pick people up from the airport to get access to the CUC economy. The dual currency system institutionalized inequality, creating clear classes of haves and have nots. For many people like Lucia, this as much as anything else showed that the revolution was a sham.

More than 1.5 million Cubans have fled their home since Fidel Castro and his troops captured Havana in 1959, and many ended up in the United States. In the 1960s, Castro and his cronies triggered the human and capital flight by enforcing a planned, communist economy in Cuba, nationalizing businesses, confiscating land and reducing the role of the private sector practically to zero.

Many Cuban-Americans still have family on the island and find ways to send them dollars. It is estimated that as much as $3 billion is remitted into Cuba each year. To convert dollars to CUC, one had to pay a fee of 10%, at a minimum, to the state. The system was designed to suck in hard foreign currency and provide Cubans with “fake dollars” or even worse, pesos.

Fidel Castro ceded control to his brother Raúl in 2006, and since then, the regime has made a series of half-hearted economic reforms to stay alive. As Anthony DePalma wrote in his modern history book, “The Cubans,” the communist government toyed with capitalism “the way a tiger plays with its prey: tapping it lightly one minute, squeezing the life out of it the next. Socialist officials urged would-be Cuban capitalists to go ahead and open their small businesses, then they erected layers of burdensome regulations to limit profit and handicap success. Their real goal was not to lift millions out of poverty. It was to prevent anyone from making millions.”

Starting in 2011, Raúl spoke openly of the need for monetary unification, but he ruled for another seven years without taking any action. The Cuban economic disaster he presided over can be summed up in one statistic: As of 2015, Cuba’s GDP per capita was roughly the same as it was in 1985, despite having much higher economic potential with 13% more citizens.

In 2018, longtime communist bureaucrat Miguel Díaz-Canel took over the Cuban presidency, ending nearly 60 years of Castro family tyranny. Like Raúl, Díaz-Canel presided over changes to the planned economy — like mass layoffs of state workers and permitting tiny businesses to operate privately — but continued to parrot Fidel’s rallying cry in his speeches: “ﬞ¡Patrio o muerte! ¡Socialismo o muerte! ¡Venceremos!” (“Homeland or death! Socialism or death! We will be victorious!”)

As DePalma wrote, “Fidel and Che are dead. Raúl’s tomb already has his name on it, and the new president is as unrecognizable around the world as the leader of any small country. The mythology of the revolution means very little to Cuban youth, who, with their tattoos, smartphones, and seething nihilism, see the old men of the Sierra as impossibly out of touch with their own reality. The foreign aid Cuba relied on for so long — first from the former Soviet Union, then from Venezuela, and additionally from sympathetic nations around the world — has dried up, and, to quote Margaret Thatcher, Cuba has run out of other people’s money. At the bottom of every prescription it now prints the line: healthcare in Cuba is free, but it costs money.”

Lucia agrees, and said the revolution has run out of steam. Díaz-Canel is no Fidel, and cannot put protests down with personal charisma or a secret police operating in a world with no internet. He was forced to act, and the “monetary purification” is one of those actions.

As of January 1, 2021, the CUC was officially phased out. Cubans were given six months to exchange their CUCs for pesos at the official exchange rate. This constitutes a massive time theft, considering Cubans worked hard for those CUCs, and are now being liquidated out of dollar positions into tiny amounts of rapidly-depreciating currency. Even before January, CUCs were traded at a 15% discount to the dollar.

Over the past eight months, the monetary reform has caused a massive devaluation in the peso. Cubans have lost nearly two-thirds of their purchasing power since the end of 2020, as the price of $1 has gone from the official rate of 24 pesos to costing as much as 70 pesos on the black market.

The official Cuban annual median salary in 2018 was approximately 9,300 pesos, or around $372. Lucia told me that a pound of rice last year cost her 6 or 7 pesos, but today, it runs more than 50 pesos. Two kilos of chicken once cost 60 pesos, but now cost more than 500. Economists often say inflation is not a problem as long as wages rise at the same time, but wages have barely budged, or have even declined in dollar terms.

The government has extended the window for Cubans to redeem CUCs for a few more months, but use has evaporated, as the currency has essentially been replaced by the MLC, which stands for moneda libremente convertible or “freely convertible currency.”

Introduced by the regime in 2019 as the future monetary system of the island, the MLC functions like a reusable gift card. There is a plastic MLC card that one can pick up from a bank, and two different apps that one can download on a mobile phone. There are no MLC banknotes, coins or ways to earn interest. Functionality is pointed at citizens giving their account information to contacts abroad, who send hard currency, which the regime seizes and replaces with MLC credit for Cubans to spend at government-run stores.

In a comically-cruel twist, Cubans — who largely remain paid or pensioned in pesos — cannot buy MLC with pesos. The only way to officially “top up” your MLC account is with foreign hard currency. You must have family or contacts abroad send funds to your account. Initially, this could be done with dollars, but after the Trump administration cracked down on remittances to Cuba in the wake of a scandal in which American diplomats fell ill after apparently being exposed to sonic weapons, that option is gone, so MLC is now mainly generated through pounds, euros and Canadian dollars.

In an evolution of the trend started 25 years ago with better goods only being available in dollar stores, today’s MLC stores are basically the only place to buy good food, medicine, cleaning supplies, appliances and other essentials. The peso stores face constant shortages, and have very few and very low quality goods. Cubans who have family abroad are able to get MLC top ups and buy things to keep their lives going, but Cubans who do not must take their pesos and buy MLC in the black market. As of publication, the real exchange rate is around 65 pesos for one MLC.

Through the MLC system, the Cuban regime is essentially able to print pesos to obtain hard currency. It is a giant rug pull on the Cuban population, and a major reason for today’s historic protests.

Lucia said that the government’s official line is that the MLC system is necessary for the state to attract hard currency so that it can buy things on the international market to keep the system going and feed the people — a stunning admission of the revolution’s failure.

II. Finding Freedom Through Bitcoin

I met Lucia on Telegram, through a mutual friend who runs a Latin America Bitcoin chat group. Eighteen months ago she started buying bitcoin with her state salary. She uses Telegram groups to find people willing to sell her bitcoin in exchange for MLC or pesos. She does transactions in person — at a café, for example — where she sends MLC from her mobile account to the seller’s, or hands over peso banknotes stamped with the faces of revolutionary figures like Che Guevara in exchange for a transfer of bitcoin to the Blockstream Green wallet on her phone.

Since Lucia started “stacking sats” (as bitcoin saving is commonly called), the fruits of her labor have grown significantly and her purchasing power has increased dramatically. Since the spring of 2020, bitcoin has risen from below $5,000 to more than $40,000. If Lucia had kept her savings in pesos, she would have lost almost everything. Bitcoin has changed, and saved, her life.

Lucia told me that she is not a technologically-savvy person. At first, she did not think Bitcoin would be relevant for her (“I don’t like math,” she said) but in early 2020, she started watching RT for a few hours every Tuesday, Thursday and Saturday. Since it is trusted Russian propaganda, the Cuban regime broadcasts RT (formerly “Russia Today”) on state television. One show on RT, however, is called the “Keiser Report” (produced by Max Keiser and Stacy Herbert) and evangelizes Bitcoin use. Likely permitted to air because its tone is very critical of U.S. foreign policy, the show has acted like a Trojan horse of sorts, reaching a large number of Cubans and Venezuelans through state programming and onboarding them into the new Bitcoin economy. Ironically for Lucia, it was socialist state propaganda that showed her how to obtain personal freedom, not the hundreds of millions of dollars that the U.S. has spent on democracy promotion in Cuba since the 1990s.

Captivated by what she heard on “Keiser Report” about a new form of digital money, Lucia started researching Bitcoin. She eventually joined a Telegram group, first in English and then in Spanish, filled with other Latin Americans who follow the show. These communities gave her a full education in how to use Bitcoin.

“They taught me how I could be my own bank,” Lucia said.

Through conversation one day, Lucia discovered that one of her friends was also into Bitcoin, and they started talking about it on a regular basis. Lucia also joined several Cuba-focused Bitcoin groups on Telegram, continuing to expand her knowledge. She bought and then sent $10 of bitcoin to a friend abroad, and the two marveled together at how they did not have to use a bank, provide any identification, or use the official system in any way. Even the currency itself, they realized, was not produced by a state or corporation, but by an online community. They did not even know who created Bitcoin, and it did not seem to matter.

“This is groundbreaking,” she told me. “What papers did I have to fill out? None at all.”

Lucia told me that many people receive Bitcoin from abroad and then convert it to MLC or pesos to buy food or supplies. In her case, she uses it to invest for her future. She calls it her “personal reserve” and best option for saving money.

She said that the U.S. embargo is still very painful for Cubans.

“A lot of people will deny this reality,” she said, “but we can no longer buy MLC in dollars. We do not have access to American financial apps. Our families in the U.S. have a very hard time sending us dollars.”

“Bitcoin,” she said, “helps ease the pain.”

Lucia looks to Bitcoin as an alternative to the dollar system.

“If we are free from the dollar,” she told me, “then we have freedom.”

Several Cubans that I spoke to for this story demonstrated a similar lingering patriotism, despite the betrayal of the revolution.

“The embargo puts our government against a wall,” Lucia said, arguing that Bitcoin can give independence not just for people like her at an individual level, but for the Cuban society as a whole.

She credits curiosity for her new Bitcoin life.

“Curiosity is what moves people. That’s what motivated me to become a medical worker,” she said. “It animates all human beings.”

This curiosity is now driving her to learn about Bitcoin and spread it to others.

“People have so many questions,” she said. “Who makes it? How does it work? Where do you get it? It’s good to take advantage of these teachable moments.”

She told me that she is now personally teaching others in Matanzas and in her wider circles about how to use Bitcoin.

But learning is tough. Because of desperation, she said, a lot of Cubans have fallen into MLMs and pyramid schemes. The state, she said, conflates Bitcoin with the schemes, so people are in general fearful of getting involved. Bitcoin is hard to learn about, she said. It is unlike anything that people have ever seen before. Its abilities are hard to believe. Using it properly takes time and research.

“Adoption is happening,” she said, “but it will take time.”

Lucia concluded our conversation by telling me how important it is for Cuban women to use Bitcoin, saying that it is “vital that women learn to assert their financial freedom.” Even though Cuban society might be relatively advanced in the area of women’s rights, she said, there is still a broader culture of machismo and misogyny. Even in this context, most men do not even understand financial independence, she said, “so imagine how hard it is for women.”

“Bitcoin allows you to control your money, your spending, and by extension, your life. As a woman,” she said, “my future is finally in my own hands.”

III. Cuba’s History Of Economic Misery

By the end of the 1950s, Cuba was one of the richest countries in Latin America. As currency researcher Boaz Sobrado wrote, “Cuba had more in common with U.S. states like Louisiana and Florida than Hispanic countries like Mexico and the Dominican Republic. Cuban income per capita exceeded Mexico’s by 70% and the Dominican Republic’s by 300%. Its income per capita was even greater than that of ex-colonial powers Spain and Portugal.”

Sobrado pointed to the Havana Hilton as a “symbol of Cuba’s mid-century opulence.” It was Latin America’s tallest and largest hotel, boasting 630 guest rooms, 42 suites, a casino, six restaurants and bars, an arcade, an outdoor pool and an expansive underground garage system. At first glance, then, Cuba seemed like an unlikely place for a socialist revolution. But behind the glamor of old Havana was a deeply broken society.

Dictator Fulgencio Batista ruled the island with an iron fist, and with strong support from the U.S. government and private sector. Cuba’s annual income was an impressive $353 per capita in 1958, but most rural workers earned less than $100, and had very few public services and very weak infrastructure. Foreign governments and corporations controlled the economy, owning around 75% of the arable land, 90% of essential services and 40% of the sugar production.

During the 1950s, Fidel Castro led a socialist movement that challenged the Batista regime. By the end of the decade, his guerrilla tactics, directed from mountainous and rural areas, had drained a huge amount of funds and energy from the capital. In 1958, the U.S. government placed an arms embargo on Cuba, as Batista began to lose all foreign support. On January 1, 1959, Castro’s forces captured Havana.

“El Comandante” promised a people’s revolution, but his rule quickly descended into tyranny, complete with concentration camps, thousands of arbitrary executions, secret police, a surveillance state on par with Eastern Germany or North Korea and political prisons. The Cuban gulags were especially cruel. Their horrors, once hidden, were eventually brought to light by testimonies of survivors in books like Armando Valladares’s “Against All Hope.”

As Anthony DePalma wrote, “Cubans who dared to think differently feared more than anything else their ever-present neighborhood CDR (Committee for the Defense of the Revolution). The president of each local CDR was the person to whom neighborhood snitches reported. They kept track of who had not attended a May Day parade, who listened to the baseball game while Fidel was speaking on the radio, who had an illegal satellite dish hidden under a barrel on the roof, and passed along the information to Fidel’s feared Stasi- and KGB-trained Interior Ministry. The CDR president had what some called the power of fusilamiento del dedo, literally, ‘to execute with a finger’ by pointing out and denouncing anyone suspected of counterrevolutionary activities. Simply allowing someone to use your telephone to call a relative in Miami could trigger a denunciation and ruin a life. The surveillance network was so pervasive that Cubans grew fearful of voicing any complaint. Even in their own homes, they refrained from mentioning the name Fidel, in case anyone was listening. Instead, they stroked an imaginary beard when they dared to criticize el comandante.”

Beyond being brutally repressive and invasive, the new government was also completely inexperienced when it came to actually running an economy. They followed the Soviet example of a planned financial system, and quickly became dependent on the USSR as an export market. Economists were replaced by loyalists, regardless of their background or proficiency. It is said that when Castro chose Che Guevara as head of the Cuban central bank, it is because Guevara rose his hand after Castro asked if anyone was an economist, thinking Fidel asked if anyone was a communist.

In the early 1960s, in a back and forth series of retaliations, the Eisenhower and Kennedy administrations placed trade restrictions and eventually a total blockade on Cuba, while Castro and his troops nationalized hundreds of millions of dollars in U.S. property and businesses.

The revolution was disastrous for Cubans’ personal savings. As president of the central bank, Guevara switched the peso peg from the dollar to the ruble, devaluing extant pesos by 75%. Then, pre-revolutionary banknotes were demonetized. If the new authorities declined to accept your old money, you lost everything.

Various American plans and attempts to oust Castro failed, and the regime persisted. It became structurally dependent on the Soviets for oil, loans, weapons, technical training and as a market to sell their main export of sugar, which Moscow purchased at a subsidized price above market rates.

Over the next few decades Cuba’s economy grew, in large part due to the relationship with the Soviets. But even during communist Cuba’s most prosperous times, in the late 1970s and early 1980s, making ends meet was still difficult, and thousands tried to leave. In 1980, more than 125,000 Cubans fled to the U.S. on around 1,700 vessels and rafts in an event known as the Mariel boatlift.

When the Soviet Union dissolved in the early 1990s, the Castro regime lost as much as $5 billion in annual subsidies, and Cuba’s sugar exports crashed by 80%. The peso suffered a devaluation from 5 per dollar to 150 per dollar. Castro asked the Cuban people to make a collective sacrifice to get through the Special Period, not unlike the way Kim Jong Il asked the North Korean people to stay strong and committed during the “Arduous March” in the late 1990s when millions perished.

During the Special Period, many Cubans could only afford or find enough food to eat once per day. Their libreta (ration book) promised things like beef and chicken, but these items disappeared. Fidel had promised that everyone would be able to have a glass of milk each day, but even that went missing.

According to DePalma, Cubans “flattened and tenderized grapefruit rinds and fried them as if they were steaks. Banana peels ground up and mixed with spices became another pale substitute for meat.” Each family received around nine eggs per month. The food shortages were accompanied by blackouts “so routine and long lasting that lightless nights became the norm, as Cubans celebrated the brief periods when the lights came back on as fleeting phenomena that they excitedly called alumbrones.”

Industry collapsed. For example, by the end of the ’90s, fishing fleets all but disappeared. Today, Cubans consume just 25% of the seafood that they did in the late 1980s. In a nation where one is never more than 60 miles from the water, Cubans joke about being an “island without fish.” A country that once produced 80% of its food now imported 80% of it. Sobrado wrote that Cuba’s domestic consumption has “never recovered to pre-1990 levels,” a tragic summary of a starving state.

Times were so grim that in 1993, Castro was forced to make the enemy dollar legal tender to attract hard currency. Cubans began to make dollar deposits at banks with remittances from abroad. Thier’s law was in full effect, as good money drove out the bad. Sobrado estimated that as many as half of all day-to-day transactions were done with dollars, a rate similar to present-day Venezuela. To stop this trend and prevent full dollarization, the regime rolled out the CUC, which they said was backed by an equal amount of dollars in the Cuban central bank.

Out of desperation Castro also allowed family restaurants or “paladares” to operate as small private businesses. This was part of a wider opening process that included allowing European companies to operate Cuban hotels, permitting some citizens to run independent farms, and restoring Christmas as a national holiday — a move seen as a quid pro quo for the eventual visit of Pope John Paul II. The combination of small reforms and increased foreign investment led to a relative recovery out of the Special Period.

In the early 2000s, Venezuelan president Hugo Chávez began to support the Cuban state with some of his new oil profits, providing a new lifeline. But while the government was bailed out, times for the average citizen continued to be extremely difficult. Sobrado wrote about a Cuban expression: dice que hay pollo (they say there is chicken), which the crowd in the streets would shout when chicken became available at stores. Libretas, he said, used to have a provision for fish, but that ran out and was substituted with chicken — pollo por pescado — and in the past few years, the chicken ran out, too.

In November 2004, facing another economic collapse, the Cuban government withdrew U.S. dollars from circulation. State-run stores, enterprises and banking moved entirely to the CUC system. Dollars had to be converted into CUC upon arrival in Cuba, allowing the regime to seize the hard currency, tax it and replace it with something they could print unbacked. The big picture effect was that dollars once held by citizens were now held by the communist central bank.

In the CUC era, the dual currencies allowed the government to provide a very basic level of some cheap goods and services, but created a system where one needed CUCs for anything beyond the bottom-rung tier of items. For example, one might be able to purchase a low-quality loaf of bread for 1 peso at a state-run bakery — if there was any left — but for 1 CUC, you could get a much nicer loaf at a fancier store. Tourists in recent decades only used CUCs, and shopped at the fancy stores with the much higher prices, and thus always poured a lot of hard currency into the regime’s coffers.

The dual currencies also allowed for accounting alchemy that benefitted state-run enterprises. For example, as Sobrado noted, a well-connected elite could buy a ticket to fly out of Cuba paying a few hundred pesos, instead of a few hundred CUCs or dollars. This also meant that some state enterprises could buy imports at the “peso” price, while selling at the dollar price. There was a chronic exaggeration of assets and underestimation of liabilities. These financial tricks were done at the expense of the peso and the average worker.

Many Cubans have another gig beyond their state job, which might give them access to CUCs (or today, MLC) and earn them enough to survive. One can often make more than their entire monthly state salary or pension in one day on the black market. Sobrado said that some even have what he calls negative salaries: “People sometimes bribe their boss so that they do not have to show up. This way they can work at their income earning hustle all day.”

Depalma wrote that “almost every Cuban — whether an entrepreneur with a small business or a parent searching for dinner — became a criminal in one way or another. Inventando (the Spanish verb for ‘inventing’) largely replaced the word ‘stealing’ in Cuban vernacular, and the rules of civil society changed so that stealing was condoned, so long as what was being stolen came from the state and not from a neighbor or a friend. In the new Cuba, inventando was a way of leveling the playing field and making up for the miserable dollar-a-day salaries that the state workers received.”

The cumulative decay of Cuba’s economy is hard to imagine, but the fact that the 2018 sugar harvest yielded just one million tons, the same as the harvest in 1894, helps paint the picture. Once the largest sugar exporter on the planet, Cuba has been forced to import from France.

“Historic” reforms of the system announced by Raúl and Diaz-Canel ended up being small tweaks. Entrepreneurship does not grow well in a climate with no wholesale market, with strict limits on the number of employees one can hire, where licenses are expensive, taxes hefty and credit scarce. By 2017, despite many much-hyped reforms, a pair of jeans still cost a month of state income, and rations ran out after only a few days. The vaunted healthcare system allowed a cholera outbreak, and was tilted toward special care for elites. Education remained propaganda. In 2014 and 2015, the Obama administration opened up American restrictions, boosting local enterprise with a wave of new tourists. But Obama also ended the wet-foot, dry-foot immigration policy, and a few years later Trump reversed the opening.

According to DePalma, the small economic reforms that the government offered Cubans over the past 15 years were not “freedom to better themselves, but permission to eke out a level of survival the government could no longer provide. On top of the limitations it slapped onto their entrepreneurial vision and capacity to amass wealth, the government required would-be capitalists to buy their licenses for relatively hefty fees and pay heavy taxes. The goal, as outlined by the government, was to make Cuba a rich country without rich people.”

IV. Cuba’s Human Rights Crisis

As part of my research for this essay, I spoke to a human rights defender with a background in accounting and finance, living in Havana. She did not wish to be named (“I want to keep a low profile,” she said) but spoke openly about a variety of sensitive topics in our video chat. We will call her Verita.

Her concern is understandable. Cuba remains a one-party communist state. Diaz-Canel’s regime continues the climate of fear built by the Castros. Other political parties are illegal, dissent is suppressed and civil liberties are severely restricted. According to the rights watchdog Freedom House, “the regime’s undemocratic character has not changed despite new leadership in 2018 and a process of diplomatic normalization with Washington, which has stalled in recent years.”

Cuba earns just 13 out of a possible 100 points on the Freedom House 2021 democracy report, with only 1 out of 40 points on political rights, and 12 out of 60 on civil liberties. The constitution forbids independent media, and “the country’s independent press operates outside the law, its publications are considered ‘enemy propaganda,’ and its journalists are routinely harassed, detained, interrogated, threatened, defamed in the official press, and prohibited from traveling abroad.”

Cubans are banned from posting content on foreign servers, including social media platforms, and in general cannot share anything “contrary to the social interest, morals, good customs, and integrity of the people.” Private universities and schools have been illegal since the 1960s, and teachers are promoted based on ideological loyalty, not academic performance. Independent labor unions are outlawed, and Cuban workers cannot strike, protest or collectively bargain. A popular revolutionary saying goes, “Dentro de la revolución, todo. Contra la revolución, nada” — “Within the revolution, everything. Against the revolution, nothing.”

Verita is part of Cuba’s community of human rights defenders. Born largely in the 1990s in the wake of the Special Period, they live under constant attack. In 2003, at just around the same time as the regime was forced to modify the currency system to keep society afloat, it launched the “Black Spring” crackdown, rounding up dozens of poets, authors and journalists. To this day, the sisters, wives and daughters of these political prisoners march in Havana every Sunday for their freedom, and are known as the Damas de Blanco — the Ladies in White.

Independent outlets like 14ymedia, founded by blogger and philologist Yoani Sánchez, and Diario de Cuba continue to report, but work remains difficult. One of Cuba’s leading human rights advocates, Oswaldo Payá, died in a car crash in 2013, an incident widely believed to be state murder. Going onto the street and protesting continues to carry huge risk, as hundreds of disappearances and lengthy prison sentences for protestors last month demonstrate.

In 2018, an Afro-Cuban group of academics, artists and journalists known as the San Isidro Movement, formed to protest Decree 349, a communist law requiring artistic activity to be pre-authorized by the government. In November 2020, the group launched a protest in support of one of their members, the rapper Denis Solis, who had been convicted of “contempt for authority.” State police raided the protest, but the regime was forced to promise more rights for artists, and the seeds were sown for last month’s uprising.

Black Cuban communities have been at the center of these protests. It is estimated that up to 90% of White Cuban families have relatives abroad as a remittance stream, but only 30% to 40% of Black Cuban families have the same option. Guillermo “El Coco” Fariñas, a well-known Black dissident, calls the situation a “powder keg about to explode.”

At first, Verita, who is also Afro-Cuban, was extremely formal, literally reading from a speech that she had prepared for the first part of our conversation, where we talked about the economy. She kept repeating the government line that “devaluation does not impact inflation” and that the peso to dollar exchange rate remains 24 to 1. Later in our chat though, she opened up, and told me that in reality, the exchange rate is as much as 70 to 1. It was clear that Big Brother is very much still alive in her mind.

Verita explained that the MLC system was a government strategy to stockpile hard foreign currency and avoid the flight of dollars and euros. It was also, she said, a way for the government to tax the informal sector which had been leaking huge amounts of value out of Cuba.

For example, a few years ago, if you wanted to buy an air conditioner, you would likely hire someone (sometimes known as a “mule”) in a place like Panama, and they would bring it to you and you would pay them in dollars, which would permanently leave the Cuban economy, without the regime getting a chance to take a cut. With the MLC system, the regime stocks stores with appliances like air conditioners, so that it is actually easier for citizens to buy them there as opposed to with a mule. This way, instead of leaking hard currency out, the regime actually accumulates it, as citizens ask family, friends, and colleagues to top up their MLC accounts so they can buy the air conditioner.

As a result, Verita said, the peso is in the process of demonetizing. Out of the three main functions of money, it has essentially lost the functions of store of value and unit of account — which have now leaked to the MLC or dollar — and really only lives on as a medium of exchange for individuals when interacting with the government, or when buying things on the street.

When I asked her if the government had a plan to stop the peso inflation, she gave me a look that I will never forget: She turned her head, smiled slightly and looked at me in disbelief.

“Plan?” she asked. “No. There is no plan.”

In her estimation, the Cuban economy would need to grow 5% per year for the next 12 years to recover from its current trauma. But, she said, it actually contracted by 11% in 2020 and will shrink even more in 2021. It will be, in her words, “a disaster.”

V. The Embargo’s Ongoing Impact

To learn more about the impact of the American embargo on Cubans, I spoke to Ricardo Herrero, a son of Cuban exiles and the executive director of the Cuba Study Group. He explained that today, because of U.S. sanctions, Cubans cannot access a wide range of popular American products like PayPal, Stripe, Cash App, Zelle, Coinbase, GitHub, Adobe, Dropbox, Lyft, Uber or Amazon. He called the embargo “the most rigid and expansive sanctions regime towards any society on the planet.”

Herrero works to help push the U.S. government to relax some of these restrictions. He said his job is difficult, especially because of the Torricelli and Helms-Burton Acts, which were passed in the 1990s, formalizing restrictions on American trade, business and travel to Cuba in order to destabilize the Casto regime at a time of weakness and promote democratic opposition.

Unlike previous Cuba policy between the Kennedy and Clinton years, in the new era since 1996 when Helms Burton was passed, the embargo has been codified into law and cannot be altered by executive order. Centered on American claims of business and property considered stolen by the Castro regime during the revolution, Helms Burton expanded extant restrictions on U.S. companies and tries to prevent any company in the world from doing business in Cuba. It threatens, for example, to prevent a corporation from entering or doing business with the U.S. if it chooses to do business with Cuba.

U.S. Presidents Clinton, Bush and Obama waived part of the act, so some foreign entities have been able to do business with Cuba, with mixed results. As Sobrado dryly noted, the Havana Hilton, which was renamed the Habana Libre during the revolution, was eventually handed over to Spanish hotel chain Meliá Hotels International. As of last year, the famed hotel stood empty.

Last year, President Trump designated Cuba a state sponsor of terrorism and introduced 243 new measures to strengthen the embargo. President Biden has yet to rescind them. Herrero said that Helms Burton is the deterrent that explains why you do not see Starbucks, Xara or McDonalds in Cuba. It is why Cuba does not receive loans from the International Monetary Fund (IMF) or the World Bank. It is why the Juragua Nuclear Power Plant was never finished. During the Obama opening in 2015 and 2016, some American payment companies tried to explore establishing payment services between the U.S. and Cuba, but once Trump won the election, it was clear the opening would be rolled back, and plans were put on hold.

The embargo, Herrero said, gives “political oxygen” to the Cuban government’s revolutionary narrative.

“It’s the big bogeyman,” he said. “Without it, the regime would suffer an ideological collapse.”

The embargo mixed with an inept, repressive government is an especially tragic combination. This was illustrated recently when a diabetic British citizen was unable to find insulin in Havana, due to the medical shortages. His wife tried to ship him some from London, but DHL returned the package, scrawling “US sanctions on Cuba” on the label. He died in a hospital soon after.

“The combination of the American sanctions on Cuba, Cuba’s mismanagement of scarce resources, and the Covid-19 pandemic is a lethal brew,” his wife said.

Herrero still places most of the blame for the suffering of the Cuban people squarely on the regime’s shoulders, and said that they play a duplicitous game. The regime blames the embargo for all or most of the crises in Cuba, but they have “never missed an opportunity to miss an opportunity to lift it.”

It continues to use the embargo as a scapegoat, and as a tool to draw international sympathy for their cause.

“They paint themselves,” Herrero said, “as a David against the imperialist Goliath.”

Under the Obama opening, U.S. companies flew in to strike deals, but the Cubans allowed very few to get signed. Herrero explained that this was partly because of their Soviet mentality: “The bureaucrats were trained to be enemies with the yankees, and to oppose capitalism.”

They were, when presented with the opportunity to connect Cuba with the world, unable to seize it. For the past decade, the Cuban regime has talked about private enterprise and decentralization of the economy, but in reality, it has been all talk, no action.

Anthony DePalma explained that the regime constantly reminds Cubans “of the imperialist peril from the north, yet it also demands that the empire drop its embargo so that Cuba can do more business with America and its allies. The regime has used the perpetual threat of American intervention as a cover for every misstep, failed program, food shortage, or power blackout over the last six decades, but it also depends on the billions of American dollars that exiles send back in remittances to keep Cuba afloat. State-run media presents the United States as a hellhole of drug addiction, mass murder and runaway consumerism, while portraying Cuba as an egalitarian paradise run by a government that can do no wrong. And yet, when Cubans compare their own lives with what they hear from relatives in Miami or with what they see on the internet, they know it isn’t so.”

Nearly everything the regime promotes about its economy is a veil of ideology covering up exploitation. As of 2018, Cuba’s top source of revenue was shockingly not the tourism industry, but rather the export of more than 50,000 healthcare workers each year to more than 60 countries. Cuba’s educational system is designed to produce a surplus of doctors, nurses and technicians — an “army of white coats” — who are sent abroad in a PR scheme. Herrero said the program is a way to “weave the revolution” into a solution, where the government proudly announces that we will send brigades around the world to save the downtrodden, who have been ignored by imperialist powers. In reality, the state confiscates 75% of the salaries of these workers, raking in more than $11 billion per year, making a form of indentured servitude Cuba’s biggest export.

Meanwhile, Cubans abroad find it hard to simply send money to their families. Herrero said one way was to make a bank wire to someone in Panama who would “duffel bag” cash to Havana. Another way would be to rely on a hawala-type system. One could give $100 to someone in Miami, and they would call their business partner in Havana and have them deliver $100 minus a cut to one’s family. Western Union transactions from the U.S. to Cuba were also an option until last November when the Trump Administration shut them down. The company closed 407 locations across the island, which seems staggering, but Herrero said that most Cubans already found the service too expensive.

As an example, Herrero detailed a Western Union transaction from last year, where someone sent $1,030 to a family member in Cuba. The fee was $77.25, so the total paid by the sender was $1,107.25. The amount that was delivered to the recipient in Cuba was $1,000. The double-digit fee was split up with 2.5% staying in the U.S. as a clearance fee, 4% going to Western Union, 1% going to Fincimex (the now-sanctioned Cuban state payment processor), and 2.5% burned by the “exchange rate” conversation, which the government pockets.

Even if the U.S. opens up Western Union again, recipients would only receive $1,000 at the “official rate” of 24 pesos to $1. So the receiver would get 25,000 pesos, even though the real value of the remittance is 70,000 pesos. The regime would keep the difference.

Americans, Herrero said, could actually top up MLC accounts directly with dollars until last summer. But the Trump administration’s new sanctions closed this channel. Combined with flight closures and reduced tourism, Herrero said this was a “double whammy” that caused a dramatic reduction in dollar flows to Cuba. This, he said, is right when Bitcoin started taking off.

“There is no currency,” he told me, “that would have helped you navigate the oscillations of U.S.-Cuba policy over the last five years better than Bitcoin.”

“It’s hard for anything to grow in Cuba,” he added, “but if you’ve been investing in bitcoin over the past few years, you have been growing.”

VI. Bitcoin As A “Cheat Code” For The Cuban System

Herrero told me about Erich García Cruz, a popular Cuban Bitcoin personality. He called Cruz a “one man CNET,” as he often appears as a guest on state TV, and runs his own popular YouTube channel reviewing different kinds of technology and payment systems. I reached out to Cruz to learn more.

“I’ve lived in Havana since the day I was born,” Cruz told me. He was comfortable using his name for this interview, as he said he is already a “very popular, very known” person.

Cruz said the recent protests have been triggered by a lack of food, a lack of medication, by people suffering from hunger, trying to survive in brutal conditions, during a pandemic, with government bureaucracy, and with high inflation.

“The Cuban people are tired,” he said. “They want a better life.”

“The system isn’t working,” Cruz said, “so people are turning to Bitcoin to escape.”

Cruz’s business, Bitremesas, is a solution to the giant problem that people have when trying to send remittances from the U.S. to Cuba. Again, because of the embargo, U.S. banks cannot wire dollars to Cuban accounts. There is no Transferwise, no PayPal, no Revolut, not even Western Union anymore.

The mule method still works, of wiring money to someone who will physically go into Cuba and give cash to your family, but this is expensive and time consuming. Cruz said one can also make a transfer to a bank in Spain, for example, where then the remittance can be sent directly to someone’s MLC account. But again, expensive and time-consuming.

The better option, Cruz said, is to use Bitcoin.

“It has become a way to connect to the outside world,” he said. “The number of Cubans using Bitcoin is exploding.”

Cruz estimates that at least 300,000 Cubans have used bitcoin or cryptocurrency at least once, and that maybe 100,000 use it on a regular basis. This is 2.5% of the island’s population, precisely in line with global estimates that 200 million of the world’s 7.8 billion people have used Bitcoin.

Cruz said that any Cuban businesses not using Bitcoin today to interact with the international financial system will learn the hard way, and adapt and adopt.

“All externally-facing companies will be forced to use Bitcoin,” he said. “We have a saying in Cuba: You have to get in the bus, because the bus is leaving the town.”

He thinks Bitcoin adoption is already greater per capita in Cuba than in Europe or Canada, but told me that he was not always a Bitcoin believer. In fact, until March 2020, he thought it was a scam. There were always friends and colleagues, he said, trying to introduce him to cryptocurrency, but they were trying to get him to do it so that he could then send the BTC to pyramid schemes like Arbistar or Trust Investing.

“I was very skeptical,” he said.

In March 2020, Cruz made a popular video where he exposed Trust Investing, and showed how it was a pyramid scheme. As part of the reaction to the video, people encouraged him to look at other investing options. One was bitcoin. He pledged to himself to try and become an expert on the topic.

In April and June 2020, he went “down the rabbit hole” and “discovered the holy grail.” Through the lens of Bitcoin, he told me, “you start seeing the actual limitations that Cubans have and the freedom that Bitcoin provides. You see the world from a different perspective.”

“We can’t access the traditional payment solutions. We’re stuck. Well, if that’s the case,” he said, “then I will make my own payment provider using Bitcoin, and we’ll develop a business around this opportunity.”

On September 1, 2020, Cruz launched Bitremesas so that Cuban families can transact easier between the U..S and Cuba. The process is simple: someone in the U.S. sends bitcoin to a wallet managed by Bitremesas (he told me it is a two-of-three multisig, for additional security) — then the company sells the Bbtcoin for MLC or pesos, and delivers it to the recipient.

He describes a “negative bid” system, where his company will advertise a newly-received $100 remittance of bitcoin in a local network: One trader will offer $95, another $94. Bitremesas will sell to the lowest bidder and take the spread as their profit. The trader will deliver the money to the recipient. The big improvement this holds over other ways of sending money to Cuba, he said, is that the receiver gets close to the real exchange rate. Going through the official system, he said, results in being stuck with the 24 peso to $1 rate.

He said the Cuban people are “smart and intelligent” and are storing value in bitcoin because they trust it more than the peso.

“If you can buy satoshis with pesos and can wait three years, you’re growing your purchasing power in a huge way,” he said.

“I don’t like to speak about politics or the government or whether they have the right or wrong policies,” Cruz said. “I’m just trying to teach my fellow Cubans how to live with Bitcoin and cryptocurrency.”

He credits Satoshi Nakamoto for his new life and new business.

Cruz said he has no special political information, but said the government is researching cryptocurrency as part of its current five-year plan, and could eventually adopt a Bitcoin strategy. For example, it could start accepting bitcoin at MLC stores, or allow citizens to use bitcoin to top up MLC accounts, or to sell tourist offerings or even exports for bitcoin.

“This would be a smart move, a good way to accumulate the hardest currency” he said. “But we are talking about the Cuban government, so I don’t know.”

Cruz remains very critical of the U.S. embargo, which prevents him from accessing a variety of services otherwise available to people living just a few hundred miles away in Miami.

“But fighting the embargo,” he said, “is a fight you cannot win.”

“In Cuba, there are two options,” he added. “You can leave Cuba and escape the Matrix, or you can stay and play the game. Bitcoin is a cheat code to play the game. Now, I choose to stay.”

VII. Building A Bitcoin Economy In Havana

Jorge works for a Bitcoin company in Havana. He discovered Bitcoin in March 2018, when he took advantage of Cuba’s expanded internet access to start trading and “stacking sats” online for various tasks. For much of Jorge’s life, however, connecting to the outside world had been close to impossible. The web had been heavily restricted, and information could only get to Cuba in quiet ways.

As an intern at the Human Rights Foundation, I helped participate in a 2007 program where we would send foreign books and films into Cuba’s pre-internet “underground library” system. From an office in New York, I would burn copies of subtitled films like “V For Vendetta” and “Braveheart” onto DVDs, which were disguised as music CDs, and sent to Cuba with Latin American citizens who would head to the island through Mexico. They would drop off the samizdat content — along with medical supplies and other technology — with our contacts, who would run private screenings in their homes on portable DVD players with three or four other people at a time, and host discussion groups afterwards.

For many years, this — along with picking up radio signals from Florida — is how Cubans accessed outside information. A few years later, “paquete” was born: a system where some Cubans would use illegal satellite equipment to download foreign content and upload it to harddrives, which were then disseminated through communities where people would pay per item to transfer what they wanted to their own USB sticks to watch or read at home.

In 2014 and 2015, WiFi started to pop up across Cuba at hotels and public access points. Paquete grew dramatically at this point, with some people getting paid to simply stand around and download content all day. In 2017 and 2018, data was introduced to mobile phones. Internet access has increased dramatically in recent years, but is still censored and slow and surveilled.

“There’s no great firewall,” Jorge said, “but our experience is not as smooth and shiny as the open web.”

When we spoke, he used a VPN.

The power of the internet in Cuba was on full display last month, when a July 10 Facebook post in the small town of San Antonio de los Banos helped ignite national protests the next day.

“Tired of having no electricity?” the post asked. “Fed up of having to listen to the impudence of a government that doesn’t care about you? It’s time to go out and to make demands. Don’t criticize at home: let’s make them listen to us.”

Jorge could not have predicted this summer’s July 11 movement, but either way, he was thrilled to connect to the world online. Bitcoin’s new form of digital money was one of the most interesting things he found on the web, but he did not know how to actually “give use” to the new digital currency beyond saving. That is when he found Bitrefill.

Through this online service, he started to top up his phone using bitcoin. On the platform, Cubans can buy mobile phone vouchers — along with other things like app store and gaming coupons — directly with bitcoin that they earn, buy or receive from abroad via platforms like Bitremesas. In Jorge’s case, he’ll store his bitcoin on the Muun or Blue Wallet apps on his phone. He said these two are his favorite: Both apps are free, open-source, Lightning-enabled and available to Cubans in Spanish language formats directly from the Google Play store. From there, it’s just one step to buying things with Bitrefill.

Through the platform, some Cubans have found arbitrage opportunities in an otherwise extortionate financial system. For example, in order to lure hard currency, state-run telecoms company ETECSA will sometimes provide extra credit if one tops up their mobile phone with euros or pounds. The promotions are so good that some Cubans will pay middlemen to top up their phones from abroad. But a Cuban can sit at home, earn or buy bitcoin and then top up anyone’s phone from the Bitrefill service, making a tidy profit.

Jorge said that today he even taps into an informal market for meal delivery using Bitcoin. He places an order via a peer-to-peer service, and the prepared food shows up at his doorstep. He pays in bitcoin, a cypherpunk Cuban version of Uber Eats. He said that between his business, his meals and other various items, he buys almost everything he needs today with bitcoin. For Jorge, living in a Bitcoin economy is not a future dream, it is the present day.

Using Bitcoin so comprehensively to live is not widespread, Jorge said, and he admits he is one of the very early adopters. But, he said, either way it is very easy for him to exchange bitcoin for MLC or pesos and buy whatever he needs.

When asked if Bitcoin was a fad, or something that he might stop using at some point, he said “I’m not going back. I can’t imagine my life right now without Bitcoin.”

He pointed to friends who are doctors or lawyers, whose savings was getting eaten by inflation before finding Bitcoin, or others who are entrepreneurs and are building their entire lives around Bitcoin right now, just like him.

When I spoke to Sobrado, the currency researcher whose work informed much of this essay, he told me about a business he ran in Cuba before the pandemic. He built a team that would service, for example, taxi drivers and apartment owners, to make it easier for them to accept foreign payments.

Sobrado’s company would allow foreigners to pay for their Havana airport pickup online. Sobrado would receive their euros into a foreign account, and then he would sell those euros for bitcoin, which could be sent to his team in Cuba in minutes, and sold there for CUC or pesos. His team would then drop off the cash with the drivers.

Sobrado provided a similar service with Cubans using booking.com or Airbnb, which have special OFAC permission to operate on the island.

“Let’s say you are a Cuban apartment owner,” he told me. “You get a license to do business, and you rent out your place online and the first guest comes. The way your guest pays AirBnB is through a remittance company called Va Cuba. On the Cuban end, what this means is that some dude shows up on your doorstep and asks around for you and if you happen to be home, he will hand you an envelope of cash. This dude would often be late, he would give the official exchange rate, it was a mess. So instead, what we would do is pay you directly and immediately, at the real price, using Bitcoin as a rail.”

If Bitcoin didn’t exist, Sobrado said these businesses wouldn’t have worked. He would have had to raise prices by at least 5%, and the profit margins would have disappeared. Sobrado said the best months in terms of overall revenue were late 2019 and early 2020. During the pandemic, he said, “the whole thing died,” but it is yet another example of how creative minds are using Bitcoin to improve lives, make things more efficient, and earn money even in a dreary police state.

In writing about Cuba’s internet adoption in 2017, the author Antonio Garcia Martinez said that an important word to know is resolver: “While literally meaning ‘to resolve,’ in practice it’s closer to Silicon Valley’s notion of ‘life hacking,’ but without the humblebraggy lifestyle posturing.”

“Need to navigate the endless hurdles involved in getting a small business license? Resolver,” he wrote. “Cubans are the kings and queens of resolver. It’s the only thing that kept them afloat since the Special Period.”

However, Martinez wrote, “arrayed against the forces of resourceful resolver lies another important word: complicado.”

“Want to talk to the dissident journalists who scoff at Cuban censorship and are routinely harassed and jailed? Es complicado,” he wrote. “Want to get a passport and visa to travel abroad? Es complicado.”

According to Jorge, Bitcoin is the embodiment of resolver. It is a workaround, a way to defeat complicado.

As Martinez wrote, resolver “almost always” beats complicado, “especially when there is real money to be made.”

Even though Martinez made this observation in Cuba’s pre-Bitcoin days, it could not be more true today, when citizens are turning to bitcoin over pesos in search of “real money.”

Jorge told me that Bitcoin is no magic solution to all of Cuba’s problems, and notes that people are facing an incredibly difficult time for a variety of reasons. He looks to El Salvador’s national Bitcoin adoption and said that services used there like Strike (which connect Bitcoin to the local banking system) are not available in Cuba, and likely will not be because of the embargo.

But, Jorge said, people today are learning more about Bitcoin, getting enthusiastic and saving up. After so many years of the government rug pulling citizens with the CUC and MLC systems, today, Bitcoin users are rug pulling the government by exchanging pesos or MLC for bitcoin, a superior form of money that has appreciated dramatically over the last decade. Maybe, Jorge said, the people will finally get the last laugh.

I asked Jorge about the many Western critics of Bitcoin, who say it is just for criminals and that it has no social value. He laughed in disbelief. Many people’s lives “have been improved dramatically” through Bitcoin, he said.

“This technology goes around blockades and government restrictions, it allows you to move value without trusting anyone, it connects you to the world, and it allows you to empower yourself and do things that are otherwise impossible,” he said. “It has created hope for those who want change.”

VIII. A New Cuba Is Coming

Much like other closed regimes like North Korea and the Soviet Union, technology and outside information is having a massive impact on Cuba. There is no way a protest movement like July 11 could have scaled nationwide without people being able to digitally organize and connect with one another.

When I spoke to Antonio García Martinez recently, he told me that “the internet is going to nuke 62 years of Cuban communism.”

On the island, he said, “the internet is a machine for destroying the consensus elites, who depend on a monopoly of information.”

“If the internet stays on,” he said, “the Cuban government will eventually fall.”

But after nearly 20 years of economic reforms, and a half-decade of a connected population, the Cuban communist party still holds onto power. Even the advent of the internet has not been enough to shake its grip. Its stubborn, conservative nature has sadly worked, and kept it alive for many decades. While Bitcoin might be a good way for it to accumulate the hardest currency on earth, the dinosaurs in charge may not think this is a risk worth taking.

On the U.S. side, the Biden administration has ordered a “review” on remittances to Cuba, trying to determine how those in the U.S. can best send money to their family on the island without supporting the regime. The answer, of course, is Bitcoin, but given Treasury Secretary Yellen’s animosity for the new currency, it is unlikely they will be willing to admit this and begin operationalizing it in their foreign policy.

While speaking to Cubans during the tumultuous last few weeks, one thing is clear: a growing number are not going to wait for their government to unroll some new reform, or for the Biden administration to soften its sanctions. They are seizing their own financial destiny through Bitcoin.

More than 100 years ago, the great Cuban poet José Marti wrote that “rights are to be taken, not requested; seized, not begged for.” This could be the motto of Cuba’s new Bitcoin movement.

Perhaps the current political protests will be enough to show the world that Cubans are tired of living under dictatorship, but not enough to end the regime. Over the decades, many predicted the fall of the Castro tyranny, only to be proven wrong.

In the meantime, Cubans will continue to peacefully protest by opting out of the exploitative peso and MLC system, and into Bitcoin. After six decades of economic misery, there is finally a way out.

Whether it is through individuals like Lucia in Matanzas, stacking sats quietly every day, or Erich or Jorge in Havana, who keep innovating and onboarding the masses, Bitcoin is now a thoroughly Cuban movement, a resolver that seems unlikely to be stopped.

This is a guest post by Alex Gladstein. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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Can Bitcoin Be Palestine’s Currency Of Freedom?

One day last week I spoke to a Bitcoin user inside the Gaza Strip.

He asked to remain anonymous and go by the name Uqab — the Arabic word for “eagle” — as he took a large personal risk to talk to me.

We spoke on Telegram and had to time our call, as Uqab only has a few hours of electricity per day. For him, our chat was in the middle of the night. A Palestinian friend helped translate the call live. As we spoke, it was hard to fathom what life was like on the other end of the line.

Uqab was talking to us from Rafah, a city in the southern part of Gaza, a war zone only a few weeks removed from being heavily bombed by the Israeli military. I felt like I was speaking to someone from a different planet.

He spoke of roads destroyed, buildings vaporized, power cut and supplies restricted. A map of Israeli missile strikes makes Gaza look like Swiss cheese, and gives a sense of the structural damage.

Uqab asked me to consider how bad things have been economically around the world, even in the U.S., because of the pandemic and ensuing lockdowns, and said, “Now imagine what it’s been like for us.”

I. A Checkpoint That’s Always Open

The Gaza Strip is a piece of territory roughly five miles wide and 28 miles long, sandwiched between Israel’s southwestern corner, the Egyptian Sinai, and the Mediterranean Sea. Originally the site of a Palestinian community flooded by refugees fleeing from what is now Israel after the 1948 Arab-Israeli War, it is today one of the most densely populated places on earth. Gaza is less than half of the size of Austin, Texas, but has more than twice its population. Think Hong Kong, but besieged in a desert, with crumbling infrastructure.

Over the past four decades, the two million inhabitants — half of them under the age of 18 — have suffered from a near-total civilizational collapse.

In 2006, Hamas — which was founded on a mission to destroy Israel and does not recognize its right to exist — won the Palestinian elections, in what was widely seen as a protest vote against the extreme corruption and ineptitude that the ruling Fatah party had displayed in the 12 years since the creation of the Palestinian Authority. The elections were not deemed legitimate by many international actors — the U.S. and EU, for example, consider Hamas a terrorist group — and Fatah clung to power in the West Bank. Gazans, meanwhile, fell under the dictatorial rule of an Islamist police state. In retaliation, in 2007 the Israeli and Egyptian governments closed off Gaza from the outside world.

A 15-year-old living in Gaza today is the survivor of four major wars between the Israeli Defense Forces (IDF) and Hamas, the most recent taking place two months ago.

Between May 10 and May 21 of this year, Hamas fired more than 4,300 rockets towards Israeli cities and towns, and the IDF responded with more than 1,500 missiles of their own. This battle was the worst between the two since 2014. A UN report published last month estimated the damage at between $280 million and $380 million, and projected a recovery budget anywhere from $345 million to $485 million. Amidst the rubble, 800,000 Gazans remain without access to clean drinking water. They can only exit into the outside world officially through two checkpoints, and those had been turned on and off during the violence, too.

In 2012, the UN published a paper predicting that Gaza would be “unlivable” by 2020. That prediction is tragically accurate. According to a World Bank report published two weeks ago, even before the latest spate of bombings, the unemployment rate in Gaza was 48%, and 64% for those under the age of 30. One out of every two Gazans — including more than 400,000 children — live in poverty, and more than 80% of households are dependent on food handouts or some kind of social assistance.

According to a 2017 IMF report, war between Israel and Hamas at the end of 2008 destroyed more than 60% of Gaza’s capital stock, and the bombings in 2014 destroyed 85% of what remained. In the 25 years between 1994 and 2018, Gaza suffered a 44% decline in real GDP per capita, with Gazans going from having 96% of the average income of their West Bank counterparts, to having just 30%. This all despite having one of the world’s highest birth rates, at more than 3.5 children per family today, down from nearly seven children per family in 1990.

Outside investment in Gaza has withered from 11% of total Palestinian GDP in 1994 to just 2.7% in 2018. In the aftermath of the 2008 to 2009 war between Hamas and Israel, it was estimated that more than 90% of the strip’s factories closed. Extreme restrictions on trade with Israel took a heavy toll. Gaza’s sole power plant only operates at a fraction of its capacity, given an inability to import enough fuel and parts. The agricultural sector has collapsed, as farmers lost their main Israeli market for goods, and were forced to sell to the much smaller Gaza population at lower prices. In some cases, they had to destroy their crops.

In 2020, a UN report considered a counterfactual where Gazans did not face additional restrictions after 2006, and where instead their economy continued to grow at the same rate as the West Bank’s. In that “dream” world, per capita income would be 105.5% higher, reaching $1,539. Instead, today, in the real nightmare that Gazans live in, it is well below $1,000.

Gaza’s economic disaster is not new, and is not simply a result of the last 15 years of war and authoritarianism. Rather, it is an outcome of policies that began many decades ago. In 1987, Harvard scholar Sarah Roy published a landmark paper using years of fieldwork and interviews to reflect on the economic toll of twenty years of military occupation in the Gaza Strip since 1967. To describe what she saw, she coined a new term, “de-development.” This was the “deliberate, systematic, and progressive dismemberment of an indigenous economy by a dominant one, where economic — and by extension, societal — potential is not only distorted but denied.”

Gazan incomes and economic output rose significantly from 1967 to 1987, driven by remittances from work in Israel and abroad. But Roy observed that this flow of capital was largely used to purchase consumer goods from Israel, with two-thirds of disposable income going to private consumption by the mid-1980s. This resulted in “increased levels of consumerism within the Gaza Strip with little, if any, of the economic benefits derived from such consumerism accruing to the Strip.”

Roy noted that the high percentage of Gazan labor in Israel was not a sign of a society “experiencing typical patterns associated with the process of industrialization (or modernization) in which labor gradually shifts from agricultural to non-agricultural activities… rather, for Gaza’s labor force, the decision to seek employment inside Israel is a function of the lack of comparable options inside Gaza’s domestic economy.” By 1987, Roy could observe that the distinguishing features of Gaza’s economy were “the erosion of its own internal economic base and its resulting dependency on Israel.”

In 1991 Israeli defense minister Moshe Arens created the Sadan committee, tasked with exploring how Gaza’s economy could be improved. The conclusion was telling: “In promoting the economic interests of the [Palestinian] population, the focus was on wage earners and on the short run. Regarding wage earners, priority was given to increasing their income by employing them in the Israeli economy. Only rarely did the policy opt for the development of an infrastructure and the encouragement of the creation of factories and employment within the Gaza Strip itself. No priority was given to the promotion of local entrepreneurship and the business sector in the Gaza Strip. Moreover, the authorities discouraged such initiatives whenever they threatened to compete in the Israeli market with existing Israeli firms.”

And so the staggering plight of Gazans can be seen as the result of decades of external policies. First, a forced reliance on the Israeli economy and discouragement of sovereign industrial development under Israeli military occupation. Then, a closure of that economic lifeline, as Gazans were over time prohibited from working in Israel and, eventually, cut off from the outside world. And finally, the destruction of their infrastructure through war.

A few weeks ago the Biden Administration sent Secretary of State Antony Blinken to the West Bank to meet with Palestinian president Mahmood Abbas, and promised $75 million in new aid to help rebuild Gaza. But regional history shows that much of these gifts are pocketed by the elites, and fail to improve the lives of the average person. Aid alone cannot fix a dying capital stock.

Through it all, Gazans continue to show incredible persistence. A shop owner named Ashraf Abu Mohammad was quoted by Reuters a few weeks ago as saying, “Life will return, because this is not the first war, and it will not be the last war. The heart is in pain, there have been disasters, families wiped from the civil registry, and this saddens us, but this is our fate in this land, to remain patient.”

But patience has its limits. When I spoke to Uqab, it was clear that he was not going to wait around forever. He told me that he wants to escape and build a better life for his family. And through Bitcoin, he has found a way out.

He said there has been rising demand for bitcoin in Gaza over the past two years, mainly among the youth. Gazans might be physically trapped and economically cut off from the outside world, but Uqab called Bitcoin “a checkpoint that’s always open.”

“It has allowed some people to get out of poverty,” he said. “They are just investing bit by bit, gradually, but it’s working.” He even said that Gazans have been “buying the dip” recently, accelerating their purchasing as the bitcoin price went down.

Some receive bitcoin directly through mobile apps from friends or family abroad. Others use Telegram groups to coordinate in-person meetups to trade cash for bitcoin, or they take cash to brick-and-mortar shops and make the exchanges there. At these stores, Uqab said, the authorities take a cut and keep lists of who is buying and selling. No one yet, he said, has been arrested for Bitcoin use. To store bitcoin on their phones, Gazans might use Binance or Payeer as custodial solutions, or Blue Wallet, which has native Arabic language support, as a non-custodial solution.

Despite warnings from officials, more Gazans join the Bitcoin network every day.

“We have a saying,” Uqab said: “If the government says something is haram, that means it’s halal.”

We spoke about a lot of things: Why Uqab prefers bitcoin to shekels (everything in Gaza is monitored, but you could have a lot of bitcoin, and your family wouldn’t even know); Can the IDF or Hamas stop people from using Bitcoin? (“We’re too smart for this, we’ll always find a way out”); Could Satoshi have predicted that people would be using Bitcoin in Gaza? (“Definitely not”); Had he heard about El Salvador making bitcoin legal tender? (it was a big win, they cheered when they heard the news); Might Gazans adopt Bitcoin faster than Israelis? (They may not take the risk that Gazans are willing to take); And what’s wrong with the banking system? (“We all know charging interest to people you loan money to is sinful”).

In Gaza, Uqab told me, there is no Venmo, no PayPal and no easy way to transact with the outside world. The financial infrastructure is collapsing just as badly as the physical and social infrastructure. But today, he can do with Bitcoin what was impossible before: send and receive money to and from family abroad, quickly, directly, with barely any fees.

For international payments, Uqab said previously a remitter in the Gulf or the U.S. would have to send money through a bank account in a country like China or Thailand, with the money eventually landing in a currency office in Gaza.

“Many middlemen would take their cut,” he said, leaving the recipient with only a percentage of what was originally sent. Also, he said, today, the Western Union offices have started to ask for proof of blood relations, and interrogations and confiscations are frequent.

“With Bitcoin,” Uqab said, “I don’t need to pass any tests or check any boxes. I can just use it.”

Today, he can receive or earn money directly, across borders, and be his own bank in a new financial system.

“It’s so much better,” he said, proudly telling me that he feels at least on some level “peer to peer” with others in the world.

“With Bitcoin, we’re getting on with our lives,” he said. “Inshallah, more Palestinians will discover this technology.”

Uqab hasn’t been able to leave Gaza yet. But at least for now, he is able to save in cyberspace, keeping his money safe from the authorities. It’s a big innovation, the kind that Palestinians desperately need.

In the constant coverage of their political suffering — trapped by Israeli military occupation, Hamas’s terror tactics, the corrupt Palestinian Authority and a largely uncaring world — their monetary and economic situation often goes untold. But money lies at the very root of their struggles.

Palestinians do not have control of their currency. Their lack of economic sovereignty has deeply damaged their growth and prospects for the future. But many like Uqab are turning to Bitcoin as a way to seize financial freedom.

II. A History of Financial Repression

More than 30 years after her 1987 paper on Gaza, Sarah Roy reflected that “events have reduced the Palestinians to a humanitarian issue, deprived (and undeserving) of political and economic rights and dependent on the international community for sustenance, where relief not progress becomes the primary if not the only political option.” She wrote that “Palestinians see the present as better than the future.”

Many reasons for this despair are tied to their financial and economic situation, where Palestinians have become deeply dependent on the outside world, yet cut off at the same time. But the topic of money itself is marginalized and sometimes ignored in the present discourse. For example, in an exhaustive, book-sized report on Israel and Palestine published in April 2021 by Human Rights Watch, the issues of currency, banking, remittances and trade go virtually unmentioned. The Paris Protocol — a hugely important document signed in 1994 that still determines the rules of money and economics for Palestinians — was completely missing.

To dig deeper, we have to ask new questions. Why is the Palestinian economy so dependent on the Israeli economy? Why do Palestinians use the shekel, and not their own currency? Why can’t Palestinians easily order goods on Amazon or receive money from abroad? To learn more, I spoke to Palestinian political economist Alaa Tartir.

Tartir, who now lives in Switzerland with his family, was born in Ramallah and credits his days working as a teenager for his interest in money. When he was 14, he started long shifts at a grocery store to support his family and save up for his education. He could take nothing for granted, and was entirely self-dependent. This motivated him to keep working for seven years until he finished a degree in finance and accounting.

All the while, he grew up studying the economic system around him. He was “dealing with aristocrats and elites,” he said, and began to understand how the Palestinian Authority exploited its position and siphoned off aid and other revenue to enrich itself, while colluding with the Israeli government to leave the average Palestinian in the cold.

Tartir walked me through modern Palestine’s economic and monetary story, which is usually ignored or, at least, takes a backseat to the more well-known political story.

“It is basically hidden,” he said, “even though the dominance of the Israeli actor over the Palestinian actor is entrenched in everything from the use of the shekel to the way that the Israeli government collects our income abroad to how we have no central bank.”

He said money is arguably the driving force behind why the Palestinians are where they are today, where occupation, corruption and war have led to de-development, civilizational stagnation and the erosion of capital stock.

We started in the years after Israeli’s military occupation began in 1967, when its policies initially appeared to help Palestinians from an economic perspective. Trade opened up with other Arab nations, and Palestinians were able to increasingly work in Israel for higher wages than what they could make at home.

But this was with a bigger agenda. In the ’60s, ’70s and ’80s, the Israeli government designed an occupation system that incentivized Palestinians to work in Israel, and prevented them from developing a manufacturing base, increasing dependency on Israeli imports. In the two decades from 1968 to 1987, the industrial share of GDP in the Occupied Palestinian Territories (OPT) (The West Bank, East Jerusalem and Gaza Strip) fell from 9% to 7%. In 1970, there were 59,000 agricultural workers in the OPT, making up 5.4% of the population, compared to just 54,000 or 2.3% of the population in 1993.

Tartir explained that in the 1970s and 1980s, dependence on Israel became near total, as its products exceeded 90% of OPT imports, making Palestinians the second-largest buyer of Israeli goods after Americans. As Israeli economic scholar Shir Hever wrote, “The main source of income to the Palestinians became remittances from Palestinian workers… by 1974, a third of the Palestinian workforce was already employed in Israel… many Palestinian farmers abandoned their farmlands in order to work in Israel, and Israeli authorities took advantage of this and confiscated land that remained uncultivated for a certain period of time.” This is evidenced by how “Palestinian agricultural productivity [fell] sharply from 53% of GDP in 1967 to 13% by the late 1980s.”

By the mid-1980s, Palestinian economic growth began to slow. A collapse in the oil price and extreme inflation in Israel brought Palestinian remittances from abroad crashing down. In 1987, after enormous political frustration, and after their rising quality of life stalled out, the Palestinians rose up in a decentralized movement aimed at self-sovereignty, known as the Intifada.

According to political scientist Tariq Dana, the Intifada was “economic warfare” in two parts: “The first sought to harm Israeli economic interests in the OPT through tactics of civil disobedience such as commercial strikes, boycotting of Israeli products, withholding tax payment, and refusing to work in Israeli marketplaces and settlements… the second involved the Palestinians embracing domestic models of household and neighborhood economies to ensure survival and self-sufficiency.”

Initially, Tartir said, the Israeli government profited from the occupation. Taxes collected outweighed expenditures; Israel was flooded by low wage workers; it obtained a captive market for low-quality exports; and it could exploit, at below market prices, the OPT’s natural resources. The intifada succeeded in making the occupation much more expensive for Israel — after the early 1990s, it no longer made a profit and became a costly enterprise — but the uprising did not succeed at achieving real independence for Palestinians.

III. The Paris Protocol

On April 29, 1994, delegates from the Palestinian Liberation Organization (PLO) and the Israeli government met in France to sign a rarely-discussed document called the “Protocol On Economic Relations,” also known as the “Paris Protocol.”

This meeting was part of the Oslo Accords, an internationally-supported peace process through which Palestinians received political autonomy. Oslo marked an end to the intifada and a start to the Palestinian Authority (PA) and its state-building process. It sparked the age of foreign aid for Palestinians, as previously donors were reluctant to fund Israel when it was a straightforward occupying power. Most notably, it won PA president Yassir Arafat and Israeli prime ministers Shimon Peres and Yizhak Rabin the Nobel Peace Prize for “efforts to create peace in the Middle East.”

Why would the Israeli government give up total control over the OPT, a position it held for the previous 25 years? Palestinian resistance and international and domestic pressure were primary factors, of course, but Tartir thinks a key reason was the ability to be seen as “gifting” political autonomy to the PLO through the creation of the PA while actually retaining economic control behind the scenes through the Paris Protocol.

Today, the Paris Protocol still steers Palestinian monetary, fiscal, tax, agricultural, insurance, industrial and labor policy, as well as tourism and trade with Israel. It was supposed to boost Palestinian trade, allow the PA to establish a formal public sector and generate tax revenue from its citizens, and increase job opportunities.

But according to Tartir, the Oslo process has only fueled a consumerist culture and increased dependence. “Individual freedom and economic sovereignty,” he said, “were sacrificed by Arafat and his cronies for their personal gain.”

The protocol was supposed to be temporary — meant to last only five years until 1999 — but remains in effect 28 years later. The document decreed that Palestinians would not have a central bank, nor their own currency. Instead, they would get the “Palestinian Monetary Authority,” (PMA) which was misleadingly named, because it did not have any.

Israel would control Palestinian monetary policy and its banking system. The Israeli New Shekel would be mandatory legal tender in the West Bank and Gaza Strip. Banks would denominate deposits and loans in shekels. The PMA would have discretion over reserve requirements, but little else. Any change to this system would require a vote from the Joint Economic Commission — an organization that over the years fell into dormancy and Israeli control.

By signing the Paris Protocol the Israeli government cemented the following:

  • Control over the amount of customs duties, VAT and import taxes collected on goods heading into the West Bank or Gaza, and the deduction of a 3% “processing” fee for payments cleared to the PA
  • The ability to make Palestinian goods artificially expensive, preventing them from competing with Israeli goods, forcing Palestinians to import and allowing Israel a specialized market to export high-margin, low-quality goods that could not be sold elsewhere
  • Control over trade policy, giving Israel veto power on what goods enter the West Bank or Gaza, limiting anything considered “dual-use” that could be utilized by the military, including medicine and fuel. This is enforced with the help of the Egyptian government.
  • The ability to collect income taxes and social transfers from Palestinians working in Israel or the settlements, which the Israeli government “clears” once a month to the PA, enabling it to delay payments, collect interest on the capital in its banking system, and even use it to pay debts

  • Social security taxes, union fees and security taxes were imposed on Palestinian workers, but they did not receive the benefits.

The collective impact of the Paris Protocol reforms can be seen in one simple yet shocking statistic: Palestine’s manufacturing sector declined from 19% to 10% between 1994 and 2011.

Tartir said that this foreign dependence puts Palestinians in a difficult situation because it is so hard to actually get funds from abroad back home. “If I want to transfer any amount of money from Geneva to Ramallah,” Tartir said, “it has to go through an Israeli correspondent bank.”

“As a Palestinian exporter or importer you can’t do anything alone,” he said. “You need to rely on an Israeli counterpart to help you execute your trade. You can’t have your own space at Israeli ports. This element of enforced counterparty not only increases the cost of every transaction but also benefits the Israeli economy. But we have no choice.”

On average, between 1997 and 2017, Israeli-controlled clearance payments and foreign aid flows made up 72% of the PA’s total revenue.

Tartir also points to the lack of fintech in Palestine. “In Ramallah, we have no PayPal, no TransferWise, no Venmo, no Revolut. If you want to receive money from abroad, you have to go pick up the cash from Western Union,” he said.

He explained that even Western Union used to be more flexible, and available at stores all over the West Bank, but due to counter-terrorism measures, these payments are now only receivable through one or two banks. They can take time — often days or even weeks if they are flagged as suspicious by the Palestinian Monetary Authority — and they are hugely expensive: A $500 remittance could cost $30 or $40.

But that’s the best option if he wants to send money from Europe to the West Bank today. A bank wire is a much more difficult process, he said. And, either way, sending anything over $10,000 is “pretty much impossible.”

A 2019 UN report estimated that the total fiscal cost of occupation for Palestinians from 2000 to 2017 was $47.7 billion, or three times the 2017 GDP of the OPT. The report concluded that 3.7% of Palestinian GDP annually leaks to the Israeli treasury as a result of the mechanisms set up by the Paris Protocol.

What was pitched as a step towards Palestinian independence was really a set of rules and policies which increased Palestinian dependence on foreign aid and the Israeli economy. Israel gave responsibility over millions of Palestinians to the PA, but did not give up control of monetary policy, banking, natural resources, transport and borders.

As a result, even though the 1990s were boom years for Israel, the Palestinian economy contracted. Despite hope from the Oslo peace deal, the Palestinian standard of living fell during the following decades, according to some estimates, declining as much as 40% by 2008.

In September 2000, triggered by Ariel Sharon’s visit to the Al-Aqsa Mosque and a drinking water crisis in Gaza, a second Intifada began. The Israeli reaction was harsh, and ultimately devastating for the Palestinian economy.

According to the World Bank, between 2000 and 2003, Israeli restricted the number of West Bank Palestinians permitted to work in Israel by 53%, and Gazans by a staggering 86%. As a result, Palestinian per capita GDP dropped by 40%, surpassing the decline felt during the 2001 financial collapse in Argentina and the U.S. Great Depression in the 1930s.

IV. The Dependency Problem

Taken all together, the Paris Protocol restrictions have led to a chronic Palestinian balance of payments deficit. Typically when a nation finds itself in such a situation, it has a few options. First, it can print more money, devaluing the currency. But Palestine has no monetary discretion, no central bank, no way to do debt monetization, and no way to print money. A second option is drawing down reserves. But given its lack of monetary independence, it has few reserves. Third, would be to borrow through debt financing. But since Palestine is not a nation, few want its debt. So the fourth option is foreign aid.

Palestine has become dependent on foreign aid to function. If the aid checks do not arrive, the government often cannot finance the public budget. Since 1993, more than $40 billion has been spent in the West Bank and Gaza Strip by international donors, making Palestinians one of the highest per-capita recipients of aid in the world.

According to Tartir, “Palestinians have been forced to live in an aid-development paradox: large amounts of aid associated with a downward decline in socioeconomic and human development indicators. In cases like Gaza, those declines have been dystopian.”

Despite all of the aid, unemployment and poverty and debt are up; per capita income is down; the economic base deteriorated; costs of living and food insecurity are up; and the promised foreign investment has not materialized.

A 2010 analysis by Nikki Tillekens showed that 71% of aid to Palestinians ended up in the Israeli economy.

“Of the more than 12 billion dollars of foreign aid given to the Palestinians between 2000 and 2008,” she wrote, “8.7 billion dollars ended up in the Israeli economy.”

International donors are, Tartir said, whether they know it or not, helping to preserve this status quo.

Each year, Washington supplies Israel with $3.8 billion of aid, and remains by far Israel’s primary market for exports and source of imports. This makes for a bizarre situation where even though the Palestinians are highly dependent on aid, Israelis receive much more of it per capita. Before 1999, U.S. foreign aid covered the entire cost of the occupation.

Today, the U.S. still heavily subsidizes the occupation in an arrangement Shir Hever called a “profitable venture” where Israeli receives payments in dollars, but builds walls and pays troops in shekels. As a result, the foreign currency reserves in the Israeli central bank increase, which can be used to pay for trade deficits or to strengthen the shekel, which has appreciated against the dollar 25% over the past 20 years. Hever argued that the Israeli government goes to great lengths to protect this mechanism, even theorizing that a main motivation behind its attack on Gaza in 2008 was to stop an outflow of shekels that was pouring into Egypt through underground tunnels, in effect draining Israeli reserves.

The U.S. government also supports the Egyptian military dictatorship, the Jordanian king and the Saudi tyranny, who all work in concert with Israel to oppose threats from Iran and its allies in the region. Even with their nuclear arsenal, Israelis are understandably wary about the Iranian threat of annihilation, as it is not an idle one. Especially when one considers Israel’s history, where it was attacked upon its independence from all sides. So it would be naive for Palestinians to expect outside support for Israel to end anytime soon.

Supporters of the status quo insist that it is just a matter of time, and that with continued gradual improvements in Palestinian standards of living, that peace will one day come. This idea dates back to the 1970s and the Carter administration, which thought that “happy” Palestinians, “who had steady employment and a functioning administrative structure, would be willing to negotiate for a settlement while under occupation.” The result of this philosophy was to de-link economic aid from sovereignty.

Many Israeli, American and European officials and donors vehemently disagree, and say that they are doing their best to help support a vulnerable Palestinian population under the thumb of corrupt and violent leaders who pose a threat to regional stability.

Tartir also blames the PA for preserving the status quo. As we speak, he said, it is repressing protestors because it does not want anyone to disrupt the deal it has, where its inner circle benefits from cooperating with the Israeli government in running a broken rentier state.

V. Yasser Arafat’s Legacy of Corruption

Fadi Elsalamaeen is a Palestinian democracy advocate. As we spoke on the phone, he told me that Palestinians were protesting in huge numbers against President Mahmood Abbas, who has ruled the west Bank for 16 years. Elsalameen called him “extremely corrupt.”

Yasser Arafat’s kleptocracy was legendary: He was estimated to be worth billions, large chunks of which he plucked out of flows of income coming from the backs of Palestinian workers in Israel, and diverted to his own bank accounts, or to French accounts belonging to his wife.

Elsalameen said that Abbas has now followed in Arafat’s footsteps, where Abbas and family have used their political power to build an empire in industries like insurance, telecommunications, construction and tobacco. According to leaked documents from the Panama Papers, Abbas and his two sons “used power and influence to control the two major Palestinian economic boards (Arab Palestinian Investment Company, Palestinian Investment Fund) and built a West Bank economic empire worth more than $300 million.”

Abbas’s son Yasser owns Falcon Tobacco, which holds a monopoly over the sale of U.S.-made cigarettes in the West Bank. According to Elsalameen, Abbas raised taxes so high on West Bank tobacco producers, to benefit his own import business, that they collapsed. Critics have accused Abbas of pilfering hundreds of millions of dollars of Palestinian state money for personal gain. A 2016 poll showed that 95.5% of Palestinians viewed him as corrupt. He continues to rule by decree.

“I hate Hamas more than Abbas,” Elsalameen said, “but we have to target the head of the pyramid scheme here in the West Bank.”

Elsalameen told me that a reliance on foreign aid has made it so that the PA is less accountable to the people, and has also created a special elite class, separate from the rest of society. Public revenues, he said, have propped up this system for decades. In 2015, “only 16% of the PA’s annual budget was spent on education, nine percent on health and one percent on agriculture,” according to Al Jazeera, but 26% was spent on the security sector, which, Elsalameen said, often targets Palestinians.

Recent protests regard a case where Abbas had activist Nizar Banat, one of his fiercest critics, killed.

“His thugs,” Elsalameen said, “went at night and abducted Banat from his home and beat him to death with clubs. Abbas gave them complete immunity. So the family of the victim said: ‘We’re going to protest until he leaves.’ And then everyone else joined them on the streets.”

Thousands marched across the West Bank and demanded an “overthrow of the regime,” Elsalameen said, in scenes that reminded some of the Arab Spring a decade ago. But Abbas continues to survive. Elsalameen said Abbas stays in power by telling the Israelis, Americans and the World Bank: If you do not have me in power, you’re going to have Hamas.

“That’s how Abbas gets them to protect him,” he said. “He is their client.”

Elsalameen pointed to the failed protests and said that politics is proving of limited use to the Palestinian struggle. “You can only get so far with the ballot box,” he said.

When asked about Bitcoin, he said, “Yes, we can start fighting back peacefully with Bitcoin. It’s something that any young Palestinian can do. You give up price stability, perhaps, but in return you get freedom.”

A challenge, he said, is that “we have to get people to know about it.” It’s a new, weird concept, he said. But once people understand, he has no doubt they will use it. “It’s an upgrade over today,” he said, “where people keep cash under a mattress, or where they wait a month to receive a payment from their family abroad.”

Bitcoin could also fight corruption, he thinks.

“Today, if you bribe the payment authorities, they will let your wire go through faster,” he said. “They grow fat on this. That could end with Bitcoin.”

He noted that in the young generation, many Palestinians are already buying bitcoin.

“They don’t have the S&P 500,” he said.

Elsalameen thinks the fact that both the Israelis and the PA are criticizing Bitcoin is a good thing.

“That’s how you know it’s going to help the average Palestinian,” he said.

VI. From Banking To Bitcoin In Ramallah

With average daily wages at 264 shekels in Israel, compared to 123 shekels in the West Bank, who could blame Palestinians for seeking a higher income elsewhere, even if by doing so they deepen their own dependence?

Given this reality, I asked Alaa Tartir what a decolonial Palestinian economy would look like.

“It’s a future project,” said Tartir, depressingly. “It’s nothing very close.”

He did say that there has long been an idea in the Palestinian discourse of a “resistance economy” which would allow them to stay, resist and gain sovereignty. After the second Intifada, the Arab-Israeli author Azmi Bishara “lamented the lack of a single Palestinian bank, insurance company or printing press, and called on Palestinian investors to ‘begin to think of local economic ventures with their own structures, market, and labor.”

But, Tartir said, they have always been reliant on the shekel and the Israeli financial rails, and “have always lacked the tool to make this happen.”

A Palestinian former banker named Abuwedad thinks Bitcoin can be this tool. He did not want to give his real name for our interview, but spoke to me from his home in Ramallah, where he recently left his job after seven years in the industry. By the time he quit, he was a deputy financial manager for a major bank servicing the West Bank and Jordan. He left because he had grown sick over his personal role in spreading what he considers a financial disease hurting Palestinians: too much borrowing.

“The whole system,” he said, “has been based for the last 15 years on making people borrow much more than what they can afford.”

Even worse, he said, the loans are not used to start businesses or build infrastructure, but are spent on weddings, cars or apartments downtown. According to policy researcher Yara Harari, “over the past 10 years, car loans have jumped sixfold from $40m in 2008 to $250m. Thus, Ramallah… could easily be mistaken for a prosperous city with middle-class neighborhoods full of plush villas and shiny BMWs. But this is just a facade.”

Abuwedad said that with all the easy money — and with no Robinhood, no E-Trade and no access to the world’s top stock markets — people have piled into real estate. Between 1994 and 2016, 80% of Palestinian capital formation was in buildings. This has made costs “surreal.” It could be $100,000 for a small apartment, he said, or $1,000,000 for 1,000 square meters of land, all in a place where the GDP per capita is somewhere around $3,500.

He said that banks are guilty of helping Palestinians increase their reliance on Israel, and decrease their own sovereignty. This is as a result of reforms brought in 2007 by then-Palestinian Prime Minister Salam Fayyad, which Abuwedad said “prioritized consumerism over independence.”

The laws “required banks operating in Palestine to extend 40% of their credit locally… credit facilities skyrocketed from $1.3 billion in 2008 to $7.1 billion in 2018, a 450% increase,” according to “Political Economy Of Palestine, a new collection of essays edited by Alaa Tartir and others.

“Consider a member of the Palestinian security forces making $600 per month,” Abuwedad said. “They can now take a monthly loan 5 times or even 10 times their salary, and with 10% down in cash buy a fancy 120 square meter apartment in Ramallah.”

The banks are happy, of course, as they can make $200,000 over 25 years on every $100,000 they give out. But the people are now indebted, oftentimes for their entire lives. This is the reality now, Abuwedad said, for huge segments of Palestinian society that have borrowed to finance not just apartments but all kinds of personal goods.

Very little borrowing, he wrote, goes into industry, agriculture or entrepreneurship. In 2008, only 7% of credit was used for agriculture and manufacturing, versus 33% for “cars, credit cards, and consumption goods,” per “Political Economy Of Palestine.”

“It’s the same policies that many decades ago forced us away from creating an industrial base and made us reliant on external powers,” Abuwedad said, “just dressed up in new clothes of “state building” and “economic empowerment.”

Today, all Palestinians still look forward to freedom, he said, but the system “makes it much more difficult to focus on that ultimate goal and distracts them with immediate financial concerns.” People, he said, “are living paycheck to paycheck to pay back loans and enrich the bankers instead of saving and investing for their future.”

After leaving his job in banking, Abuwedad worked for a tech company in Ramallah for a few years, then tried to start a business with friends in the online gaming industry. He believes Palestinians can be competitive in eSports — even though they are not today — and that gaming can help with cooperation, team-building, increasing personal dignity and connecting with people abroad. However, there are so many obstacles, mainly, that the internet is not good enough (despite it being blazing fast a few miles away in Israel) and that computers are so expensive.

Abuwedad points to a laptop that might cost $1,500 in the U.S. or in Israel, and said that if he wants to buy the same thing in Palestine, it will cost as much as $3,500. At first glance, one might assume that because Israelis and Palestinians use the same currency, that inflation of the shekel would damage them equally. Abuwedad walked me through why that is not the case.

“When Palestinian imports arrive in Israel,” Abuwedad said, “they get taxed, then they cost money to store as they have to wait to be sent into the West Bank, as truck schedules are very restricted. Along the way, inventory often gets stolen. Then, local sellers mark up the goods to cover their own taxes and profits. By the time the laptop is sold in Ramallah, it could be two-to-three times more expensive than in Tel Aviv, even though everyone is using the same currency.”

Another account said that it took on average “38 days” for Palestinian traders to import and sell goods, while their Israeli counterparts could do it in 10 days. This led to an average cost per transaction of three times as much in Ramallah as in Tel Aviv. This aggressive inflation, Abuwedad said, is true for many consumer products.

“If we could import directly,” he said, “then it would be much cheaper.” He blamed the Paris Protocol, which he said is “outdated” and has not been updated in almost 30 years despite the fact that the world has changed dramatically.

Israeli and Palestinian inflation tracked together through the 1980s, when the shekel crash decimated Palestinian purchasing power, and through the 1990s. But they split after the second Intifada in October 2000. Israel experienced deflation, but the Palestinians experienced stagflation with a fall in income and a rise in prices. Palestinian purchasing power began to massively trail Israeli purchasing power. Shir Hever notes that by 2008, “the same product would have been 32% more expensive in a Palestinian city than in an Israeli city.”

Abuwedad’s plans to get out of this trap through starting a company were foiled by the COVID-19 pandemic, which he said hit the West Bank particularly hard, depressing economic activity. In the time since, he has gotten very into Bitcoin. He said there is a whole community in the West Bank and Gaza, now getting involved. I mentioned to him that global adoption of Bitcoin today is roughly around the same level as it was for the internet in 1997 — about 200 million people, or 2% of the population. He thinks that’s probably the percentage of Palestinians who are using Bitcoin, and said that will grow quickly in the coming years.

But how do Palestinians buy bitcoin?

“We always find the holes,” Abuwedad said.

He told me about a loophole, where the Palestinian Monetary Authority will block transactions from local bank accounts trying to buy cryptocurrency on exchanges. But there’s one exception, the tether stablecoin (USDT). He thinks that because Tether is linked to the dollar, they have let it slide, and so purchases of tether on platforms like Binance go unblocked. Abuwedad said that almost everyone he knows gets into cryptocurrency through tether. From there, he said, they may buy bitcoin as a savings instrument, or stay in tether as a “checking” account. He said that some people also go around the banking system entirely and use Telegram or Facebook groups to coordinate to buy tether or bitcoin in a peer-to-peer way.

Abuwedad seems to know that tether is not an ideal solution. But it works for now, he said. We discussed the idea that in the near future, Palestinians could have Lightning wallets that are “pegged” to a fiat currency like the dollar, and could use those instead of having to rely on tether. He did not know much about Lightning, but during our WhatsApp call, I showed him how to download a Muun wallet, and sent him $5 via Lightning.

“That was really fast,” he said, impressed by the instant transfer from Boston, where I was staying, to Ramallah. I told him there were virtually no fees either, and that got him even more excited. We took a moment to reflect on the fact that it is such a struggle for Palestinians to move money from one place to another, and discussed how game-changing Bitcoin is: from thousands of miles away, I sent him money and we did not have to deal with any customs police, delays, red flags, confiscations or VAT. The Israeli government did not get a cut, and neither did the PA.

He thinks stable Lightning wallets could be huge for Palestinians: a bank account where you do not need any ID, where you control your own funds, where you can transact instantly anywhere in the world for virtually no fees, and where you can choose to peg the value to the dollar or keep your money natively in bitcoin. “That’s the dream,” he said.

Abuwedad considers Bitcoin a peaceful protest against a corrupt, exploitative and centralized financial system: one that he saw from the inside during his career as a banker. The obstacle, according to Abuwedad, is that only a small number of Palestinians are using Bitcoin today.

“Most see it as an investment,” he said, “and not as a currency.”

It will take time, he said, for it to become a mass movement. Education, he said, is very important.

“People have a lot of questions, but over time, they learn, and they use,” he said.

He’s seen reports lately of the Palestinian Authority launching its own digital currency, but he does not think people will trust it. If anything, he said, it may encourage more people to use Bitcoin.

“If we want to make Bitcoin our way to say no to the world, to live free from the Oslo and Paris agreements, then we need to start using it in daily life. And that will take time,” he said.

“We all know,” he said, “that the international community will not give us freedom. So we must take it on our own.”

He told me that he chose the name Abuwedad as Wedad is the name he would call his daughter, if he eventually has one. And maybe, he said, she will grow up in a Bitcoin world.

VII. The New Resistance Economy

Kefah Abukhdeir is a third generation Palestinian-American. She grew up in Atlanta, but settled with her husband in East Jerusalem, and works as an educator.

Abukhdeir’s family originally left Jerusalem when it was under Ottoman rule, fleeing conscription to the U.S. and South America, but retained ties to the homeland. Her father returned to Palestine and became an outspoken dissident against the presence of the Jordanians in the West Bank in the 1960s. Eventually he left for good to the US, where he went to Georgia Tech and started a family in the American south. Like her family before her, Abukhdeir went back to the West Bank to Birzeit University in the late 1990s to learn Arabic. She ended up earning an education degree and eventually moved to East Jerusalem.

“If you want to break a Palestinian mother’s heart,” she said, “tell her that her child is going to study business or agriculture.” To achieve actual independence, she thinks, these two fields are critical, but it is discouraged or even shunned. It is a result, she said, of indigenous economic progress being seen as a “waste of time.”

Abukhdeir has spent the last decade working in education with Palestinian youth, with U.S. State Department programs and through Edureach, an organization that provides for teacher training and extracurricular programs for kids. There, she faced a dilemma: to be more competitive, the students have to learn English and go to school in Israel. She knows this continues to prolong the situation where Palestinians remain dependent on the world around them, and that it boosts the economy in Israel, but she wants the best future for the children, who want to be as employable as possible. “We stay up all night debating this,” she said.

“I started to feel guilty because I felt like I was facilitating brain drain,” she said. “If the kids are successful, they’ll go to college in Israel or the U.S., and they don’t want to come back.” They are then overqualified for jobs in Palestine. Best case, they could end up working for an NGO or foreign entity, like her. “We aren’t really part of the local economy,” she said. “We aren’t helping to reinvest.”

Her experience encapsulates the dilemma for many Palestinians since 1967. You could stay at home, or you could go work in Israel for higher wages and do more for your family. But you made a tradeoff, bringing economic activity and development there, instead of back home.

“Independence is financial,” Abukhdeir told me. “If we don’t have financial freedom, nothing is going to change.”

Abukhdeir pointed out that the currency usage in Palestine has varied over time. People still use the Jordanian dinar, as well as U.S. dollars, but lately, she said, the shekel has become even more popular, even in Gaza.

“Easily 80%” of your daily transactions are in shekels,” she said. This means that nearly every transaction a Palestinian makes “is supporting and deepening reliance on Israel.”

Growing up in Atlanta, she said that she learned a lot about the American civil rights movement, and studied similar movements in South Africa and Ireland.

“One of the first things they’d do,” she said, “is set up an independent economy. But we don’t have that. We just have red flags, confiscations and taxes that pay for benefits that we don’t even receive.”

Recently Abukhdeir started spending time at tech hubs in Ramallah and Jerusalem. There, she said, she was introduced to “tech colonialism.” Here, Israelis would come into recruit the best and the brightest, but there were no Palestinian companies recruiting.

“We’re creating a labor force for the ongoing occupation,” she said. “Tech is important because we need a plan that does not require raw resources. We can’t own land, we can’t manufacture — so what can we do?”

To make a change, Abukhdeir is looking at Bitcoin. She is part of a movement that will try to map the Palestinian business ecosystem, both Palestinian-owned businesses in Israel, as well as enterprises in East Jerusalem and the West Bank, and encourage new practices.

The idea is, if you’re a Palestinian-owned business, you can offer to take bitcoin for payment. It would, she said, spark curiosity, launch a circular economy, encourage more people to learn about Bitcoin, and teach them more about how money works.

“This,” she said, “is how we could end our reliance on the shekel.”

Today, Abukhdeir has teachers working for her in Gaza. She says that paying them is hugely complicated. “I can’t use PayPal, even though I’m a dual Israeli-American citizen. Even with my financial privilege, it’s hard to do,” she said.

She describes how she might take money out of her Israeli account through an ATM, deposit it in a Palestinian bank — which she could only open with her American passport — and then she can make a wire to the teacher’s account. This takes time and is expensive. But with Bitcoin, she said, she can send value instantly to the teacher in Gaza.

She said that she’s still putting the future picture together in her head.

“With Bitcoin, you could build a company that’s totally independent, where you don’t have to use a PA bank, and where you don’t have to rely on the shekel and the Israeli economy,” she said.

Abukhdeir thinks that change will ultimately come only through “huge amounts of violence or huge amounts of economic activity” and thinks the latter is the only way to find success. “We can’t settle for a half-baked solution,” she said, pointing to how the Oslo process failed.

“We need to escape completely,” she said. “If we don’t opt out of the currency, we are just going to end up strengthening the system.”

VIII. The Israeli Bitcoin Community

It is clear that some in the Palestinian community view Bitcoin as a way forward. But what about their Israeli counterparts? For background, I spoke to several Israeli Bitcoiners on the condition of anonymity.

Some are worried about the political environment in Israel right now. Some say it’s “not that bad,” but one entrepreneur told me that it is risky to do anything that could be described as “left-wing” (such as helping Palestinians through Bitcoin) and that it is getting harder and harder to speak one’s mind.

“The sentiment is getting worse by the day,” he said. “It reminds me of bad days in world history.”

He went on: “It makes it hard to think about a bright future here. It’s a huge dilemma about whether to even stay in the country.”

But while he said connecting with Palestinians about Bitcoin use has not been a topic or priority at the meetups in Tel Aviv so far — “never,” he said — he thinks it could be successful.

He said Bitcoin continues to build bridges, not walls. And when he stopped to think about how Israelis could actually extend freedom to Palestinians, Bitcoin could be a way.

“It’s not fake freedom,” he said, “like the kind we have tried to give before.”

“I’m here for coexistence,” the entrepreneur said. “I want a single state solution. I want one country with bitcoin as the currency, with the same rules for everyone. How Bitcoin can help create this atmosphere of co-existence is very important. It’s not about creating two states: it’s about reducing the power of the state.”

IX. An Israeli Settler’s View On Bitcoin

Many Israeli Bitcoiners are relatively progressive, and even sympathetic with the idea of helping Palestinians with open-source money. But what about nationalist Zionists? Or even settlers? Surprisingly, at least one of them is trying to promote Bitcoin in Palestine.

Jonathan Caras is an American tech entrepreneur and Bitcoin advocate who has been living in the West Bank for 10 years.

“I can see Ramallah from outside my window,” he told me as we spoke by video chat.

Today some 14 million individuals — approximately half Jews and half Palestinians — live between the Mediterranean Sea and Jordan River under the economic control of the Israeli government.

On one side in the state of Israel there are nine million citizens living in a robust, if eroding, democratic society. On the other, there is a military occupation of nearly five million Palestinians, now entering its 54th year. A 700-kilometer barrier — which is in many places a literal concrete wall — has been under construction for two decades, and separates the two. Caras and hundreds of thousands of other Israeli settlers live east of this barrier.

According to the Israeli civil rights group B’Tselem, “More than 2.6 million Palestinian subjects live in the West Bank, in dozens of disconnected enclaves, under rigid military rule and without political rights. In about 40% of the territory, Israel has transferred some civilian powers to the PA.” However, it reminds us, even there “the PA is still subordinate to Israel and can only exercise its limited powers with Israel’s consent.”

Sixty-one percent of the West Bank’s territory is classified as Area C — comprised of vast open spaces and farmland — and is directly controlled by the Israeli military. A 1995 agreement decreed that resource-rich Area C would be “gradually transferred to Palestinian jurisdiction” by 1997. But that has not happened. Instead, Palestinians have been prevented from harvesting or investing in this land, and Israeli settlers and companies have increasingly colonized the area.

Israel utilizes many resources in Area C, including solar power for more than 10,000 Israeli homes, water sources and farmland. At the same time, it confiscates Palestinian property. In the past 20 years, Israeli forces have, for example, uprooted more than one million productive Palestinian trees. Israel and Jordan make $4.2 billion per year selling minerals like potash and bromine from the Area C regions around the Dead Sea. A World Bank report states that Palestinians could increase their GDP by almost 10% if they were allowed to invest in this operation, too. In total, the report concludes that Palestinians could increase their GDP by 35% if they were allowed to harness Area C for agriculture, minerals, mining, construction, tourism and telecommunications.

The Israeli military has closed off most of the West Bank to Palestinian civilian access, and has installed checkpoints and barriers to stifle human movement in the remaining Areas A and B. A dizzying array of restrictions — imposed in the name of counter-terrorism — limit the ability of Palestinians to move, build, go abroad, marry, buy property, work and vote to participate in the system that governs them. The technology used to enforce this system is sold by Israeli companies like Candiru, Cellebrite and NSO Group to governments around the world. Marketed as tried and tested in the West Bank and Gaza, these surveillance products are highly sought after and considered world-class.

Hundreds of thousands of Jewish settlers now live permanently in West Bank settlements east of the Green Line, the border established as separating Israel and Palestine after the 1948 war. These settlers are financially incentivized and subsidized to move there by Israeli policies, including tax and housing benefits. In total, there are more than 280 Israeli settlements and a variety of industrial zones in the West Bank, with more than 60 outposts created in the past 10 years, all in contravention of international law. The maps of this shift in control are striking.

When the Oslo process began in 1993, there were a little more than 100,000 Israeli settlers in the West Bank, not counting East Jerusalem. Today, there are more than 475,000.

Caras is one of them. He said he is a “religious Zionist settler.” His goal is to “reinstate the Kingdom of David and build Solomon’s Temple.” Twenty years ago, he first came to Israel, and realized that “the best way for me to fulfill my Biblical obligation is to settle on an empty hilltop in the West Bank.”

In the past few years, Caras has given a number of lectures about “how technology can promote mixed interaction and co-existence.” He said that Bitcoin allows humans to cross borders that previously were impassable: legal, financial, and ideological.

“It allows us to come together,” he said. He sits on the Judea and Samaria Chamber of Commerce, and interacts frequently with Palestinians as part of his role.

He said that if he does business with a Palestinian, that could be a danger to their life. “If I want to start a business with my neighbor, his children could be killed,” said Caras. “So Bitcoin allows us to work together and keep him safe.”

He tells me that he’s seen cars get burned to the ground as a warning message for doing business with Israelis.

Caras argued that Palestinians have actually benefited from the strong shekel, comparing their plight with that of Lebanese, Syrians, Egyptians and others in the region who have suffered from high inflation or hyperinflation. He says Hamas and the PA are corrupt, but that the shekel has partially protected Palestinians from their misrule by providing a reliable unit of account, medium of exchange and store of value.

When I mentioned to him that Palestinians still suffer from significant price inflation, he said “a glass of water is always going to be more expensive in the desert than at Niagara Falls” and said this doesn’t have to do with the money, it has to do with control over the borders and goods and services.

“In the West Bank, Palestinians can’t just get stuff on Amazon,” he said. “There’s always going to be a price discrepancy.”

He said the restrictive economic regime that holds Palestinians back is “stomached” by the Israelis and the international community because of violent threats from Palestinians. “As long as Hamas and the PA are aiming to annihilate the Jewish state, there isn’t a hope for Palestinians to have the same prices as in Tel Aviv,” he said.

Ultimately, though, from a religious perspective, Caras thinks that the shekel and all fiat money will be “viewed as unethical and immoral from an Islamic Judeo-Christian perspective.”

He said that “fiat is rent-seeking, clearly a form of theft, you are paying interest to the government for building your own family’s wealth.”

He contrasted this to commodity-based money, like gold and bitcoin, where “every member of society is equal underneath heaven.”

With Bitcoin, “we all know what the rules are and we know that we can participate without people changing the rules in the future,” he said. “This is not the case when we work in a fiat system, where it’s by nature a two-party system. There’s the oligarchy of fat cats who set the monetary policy and control the flow of funds, and then the peons and serfs who are subject to its enforcement. It’s built into the name ‘fiat’ that we are not equals.”

Caras believes we are “in a messianic era” and that “Biblical prophecies are unfolding” and there’s “a lot of evidence” that Bitcoin falls under those prophecies.

When asked if he thinks the Israeli government will try to ban or restrict Bitcoin as a tool of terror or resistance, he said the Israeli people know that technological innovation and opportunity far outweighs the risks. He said that if Hamas is trying to circumvent banking restrictions by collecting funds in Bitcoin (as the Israeli government has recently alleged, seizing bitcoin on exchanges that it claimed was connected to Hamas), then that is more easily regulated than Caras “paying a gardener or web developer in bitcoin.”

He said the new Israeli prime minister has a background in cybersecurity and entrepreneurship and said a ban is unlikely.

“Banning Bitcoin,” Caras said, “is as ridiculous as banning marijuana. If I have a seed in my pocket, I can plant fields of crops. If I have 12 words in my head, you can’t stop me.”

Caras pointed out that Bitcoin is already much larger by market cap than the shekel today. He thinks countries are going to be forced to add bitcoin to their balance sheets as a reserve asset and make it legal tender, or try to ban or fight Bitcoin, a battle they will lose, and have to buy in later at a higher price.

He is a big critic of central bank digital currencies (CBDCs), and talked about how cash is helpful because it is unstoppable and private.

“I would vehemently oppose replacing cash with a CBDC: it’s a form of control,” he said. “It can hurt your business if Twitter freezes your account for 72 hours. It can literally kill your business if there is no cash in society and the government doesn’t like who they saw you holding hands with on a security camera and so they freeze your account.”

But cash, he said, is still subject to debasement, and it hurts people’s ability to save for the long term.

“It will allow for a generation that believes in their ability to invest in themselves and to put money away every month that can be time locked, that can be used as collateral,” he said. “This will have a socio-economic impact, eventually, on a personal and national level for Palestinians and Israelis.”

“I put my money away for my children in Bitcoin,” he added. “I have more faith in Bitcoin than the Central Bank of Israel over the next 20 years. And I’m a big supporter of Israel. Think about that.”.

Caras does agree that paying someone in shekels is a power dynamic.

“That resonates with me,” he said, which is why he always offers to pay people in bitcoin first. “Even if they are just going to dump it,” he said, “first they’ll have to create a wallet, and begin to understand it.”

When asked if he thought Israel might lag behind Palestine in the adoption of Bitcoin, he said he is lobbying the Israeli government to be on the cutting edge. But if Palestinians made the switch to a Bitcoin standard first, he thinks it would cause Israel to “chase after them.”

Caras said he does not view himself as unbiased, and knows that some Palestinians will call him a war criminal, and a “physical representation of all of their hardships.” But, he said, he’s still been able to sit down and geek out about Bitcoin with Palestinians.

“We all want financial sovereignty,” he said. “I am interested in prosperity for everyone, not just the Jews.”

X. The Fight for Sovereignty

Many Palestinians are trying to push back against Israeli settlements, and some view Bitcoin as a possible tool that can aid this effort. To learn more, I spoke to Adam Albarghouthi, who works for the Palestinian Social Fund, an organization that is crowdfunding from the Palestinian diaspora to seed agricultural activities in the West Bank.

Albarghouthi said Palestine is “totally dependent on foreign aid and imports. Our production capacity has dwindled. We don’t have sovereignty.” He believes that the future is in “producing our own food.” His plan is to grow cooperatives across West Bank villages, and launch a new governance paradigm, not dependent on foreign aid or the Palestinian Authority, but one “that the individuals and communities own.”

It is a left-wing vision, for sure. I mentioned to him that there’s also a libertarian Bitcoin community in the U.S. that is trying to achieve agricultural self-sufficiency, to go “off grid,” raise animals and crops, and seek freedom and distance from the federal government.

“At the end of the day,” he said, “we are all human. We are occupied by Israel and what we are seeing now is that an agricultural solution is necessary. The Americans you speak of might be occupied instead by consumerism, but they seek the same thing. It’s two sides of the same coin.”

Achieving agricultural independence is hard. Israeli settlements, Albarghouthi said, are expanding.

“They are cutting us up geographically into Bantustans,” he said. “First they take the hilltops as vantage points, and then they go for the areas with the most fertile soil — for example the region around the Dead Sea — these places are great for growing produce all year round.”

According to B’Tselem, only one-eighth of the land under Palestinian control is even under cultivation because of Israeli’s strict permit regime.

“We must start with what we have,” he said: “the land around our houses. We can start to build a resistance economy that is more and more decentralized.”

Agricultural self-sufficiency was the spirit of the first Intifada, Albarghouthi said, but that was sacrificed by Yasser Arafat and his PLO cronies for money and personal gain.

“We have to try again,” said Albarghouthi.

A big problem Albarghouthi and his team face is that any money going into Palestine is inspected by Israel. The financial borders are controlled. Money gets delayed, taxed, trimmed and sometimes confiscated.

“Whenever they deem us a risk, they can freeze our assets in seconds, even if we are in Canada,” he said. So, he said, they are planning to raise money in bitcoin, and sidestep the whole restrictive system. His team is currently working on setting up BTCPay Server, an open-source payment processor.

But Albarghouthi wants to make it clear that an anti-colonial currency is, by itself, an incomplete solution.

“Monetary freedom must go hand-in-hand with building our production powers,” he said. “At the end of the day, any currency is an alias to resources, and we have to generate our own resources from nature and build them into valuable products that can be used in our society to further innovation and education and healthcare and food security.”

“In doing so, Palestinians should use a currency that we control, not one pegged to the Israeli economy or the petrodollar or anything else,” he added.

XI: The Future Of Bitcoin In Palestine

A few weeks ago, the Israeli government publicly announced the seizing of bitcoin funds connected to Hamas. It seems certain that the IDF will begin to demonize Bitcoin as a tool of terrorists and perhaps, make it harder for Israelis and Palestinians to use.

Given that the Israeli government has prioritized centralizing as many economic flows as possible under its control into and out of Gaza and the West Bank, any money moving outside “official channels” will likely be deemed suspicious. This could be a deterrent to future adoption.

But already today, Paxful and LocalBitcoins have vibrant peer-to-peer marketplaces in Palestine. If Bitcoin could become adopted by hundreds of Palestinian businesses, and hundreds of thousands of individuals, then it could become a remarkably powerful peaceful protest.

There is a possibility here for Palestinians — or any vulnerable population, whether trapped by foreign occupation, domestic authoritarianism, a collapsing economy, or a structural lack of opportunity — to adopt Bitcoin as a new currency. Millions of individuals are already making this choice in Turkey, Argentina, Nigeria, Iran, Lebanon and beyond.

More than two-thirds of Palestinians are under the age of 30, and more than 70% have internet access. Young people are more comfortable with the idea of mobile money, and will be looking for technological solutions to their problems. It is a risk, but adopting Bitcoin as a circular economy could very well give Palestinians a leg up on their neighbors, and position them relatively well for the next century.

El Salvador has provided a national template of how Bitcoin can be used not just as a savings instrument to invest in the future, but also as a payment network that can allow citizens to connect with anyone in the world instantly.

Could Palestine be the El Salvador of the Middle East? President Nayyib Bukele is, after all, Palestinian. His grandparents originally emigrated to El Salvador from the Jerusalem and Bethlehem areas during the fraying of the Ottoman Empire. His father even converted to Islam and “became a prominent imam in San Salvador and a vocal defender of the Palestinian cause.”

Bukele has been quoted as saying that he is very proud of his Palestinian origins, saying he “would like to see a thriving Palestinian state.” It is ironic that a person of Palestinian descent would be the first world leader to adopt bitcoin as a national currency.

There is no question that the Israeli government, American government, Palestinian Authority, World Bank and United Nations would all oppose such a move. They are all too invested in the status quo. So any adoption would have to come from a people power movement.

As for traditional attempts at reform, in the last few weeks there has been discussion of restarting the “Joint Economic Committee” (JEC) — the organization created at the time of the Paris Protocol, which would ultimately have the power to make a new currency for Palestinians. The JEC has not met since 2009 and has largely been used to oversee operations in the OPT, but Israeli and PA ministers are planning to revamp the JEC and “remove obstacles” to PA economic activity.

Palestinians have seen this movie before. An Israeli government push to help the PA has typically not done much for the average person in the West Bank or Gaza, beyond siphoning more money to PA leadership and introducing new controls on the ground. The stated goals this time are to issue 17,000 more permits to Palestinian laborers to “work in construction and industry in Israel” and to bolster the Palestinian Fuel Administration. Again, any reform here is likely to deepen Palestinian dependence on the Israeli economy and put the PA on additional life support.

Recently, the news broke that the Palestinian Monetary Authority is mulling a “central bank digital currency,” a new kind of asset meant to replace banknotes and coins with a digital central bank liability that individuals would hold on their phones. Critics have been blunt: “It’s not going to replace the shekel or the dinar or the dollar. It’s certainly not going to be a store of value or a unit of accounting,” said Barry Topf, a former senior advisor to the Bank of Israel.

Palestinians have not been able to mint their own cash — per the Paris Protocol — but even if they could, there’s no guaranteeing that the Palestinian Authority would not abuse its power and create massive inflation. Its track record on fiscal matters is poor. Topf might be right.

Moreover, the creation of a “Palestinian” currency (digital or otherwise) runs the risk of prolonging the power imbalances that exist today with the Palestinian economy. Would it provide financial “inclusion” — or global financial exclusion?

Even worse, transitioning the Palestinian economy to a digital one — whether it’s controlled by the PA, World Bank, Israel or anyone else — would be disastrous for the small amount of freedom that Palestinians do receive from cash and their informal economy, where they can save and transact outside of government control. A CBDC would enable greater blacklisting, confiscation and surveillance, no matter who is in charge of design.

XII: Activism Beyond Virtue Signaling?

A lot of the online activism for Palestine can be classified as “virtue signaling.” What does posting #FreePalestine actually achieve? Usually, very little. But by helping someone understand how to use Bitcoin, one can help them achieve a degree of real freedom: the ability to protect value from confiscation and to connect with anyone in the world.

For a people whose history is so filled with confiscation, Bitcoin gives Palestinians a way to take the fruits of their labor and time and lock it into an asset in cyberspace, beyond the control of Hamas, Israel, the PA or the World Bank, and secure it with math. It is a peaceful protest, a digital shield, that could lead to big change.

This has been underscored by the many interviews that I conducted to inform this essay. Beyond those whose stories were told, I spoke to a half-dozen other Palestinians for background. They all seemed to echo a few things:

First, as one said, “If we’re not taking matters into our own hands, then no progress will be made.” There is a tremendous (and understandable) lack of trust of the authorities on all sides, and a realization that the status quo will continue unless something new is tried.

Second, if only a few people are using Bitcoin, then everyone seems to agree that the authorities would go after them and put them in jail. But if 100,000 people are using it, then there is nothing they can do. Building a movement is paramount.

Third, if critics on the left do not get it, and continue to attack Bitcoin from their position of privilege, then, said one, they “seem to be more interested in talking about the problem than actually fixing it.” They went on: “Where’s their solution?”

The left traditionally dislikes or ignores Bitcoin. Left-wing critics and economists often call it useless: a Ponzi scheme, a tool for criminals, an environmental disaster and so on. Amnesty International and Human Rights Watch continue to be silent on Bitcoin. Yes, they have done admirable work to detail the suffering of the Palestinians, but why not speak up about a technology that so many of them are already using for empowerment? The same can be said for the international community in general. If they actually want to get involved in changing the situation on the ground, it has to involve changing the money. And Bitcoin is one way to do that.

The Bitcoin silence is perhaps most sadly reflected by a search for the term on the websites of the establishment Palestinian economic think tank MAS or the Israeli civil liberties group B’Tselem: zero results. It is clear that Palestinians will continue to adopt Bitcoin. But it remains unclear if their supporters around the world will help them in this regard.

Today, Palestinians have no monetary independence, are increasingly forced to use the currency of their occupier, are unable to increase their capital base, have become more consumerist and debt-saddled, are entirely reliant on foreign aid and, in Gaza, face civilizational collapse.

When Sarah Roy reflected recently on “what is to be done,” one of her conclusions was that “knowledge production is itself a form of resistance.”

There is nothing to lose by sharing information about Bitcoin, which has already helped so many Palestinians. Perhaps the world’s largest open-source money project can help, where everything else has failed.

XIII: Fix The Money, Fix The World

In the Bitcoin community, there is a saying: “Fix the money, fix the world.”

Obviously, money is just one part of our social fabric. But it is a very important part, and at the end of the day, if Palestinians are not able to fix their money, they will not be able to fix their world.

At the end of my call with Uqab, he told me that many people were becoming so desperate in Gaza that they were selling their homes for Bitcoin. It was the same for businesses. “Any enterprise that opens in Gaza is doomed to fail,” he said, “so the owners would rather sell it than keep it.”

He said their calculation was the following: Real estate is “going to zero” in Gaza, so worst-case scenario, if bitcoin crashes, “it is the status quo for us.”

But if bitcoin continues on its historical trajectory and gains value versus fiat currencies? “Then we have a door to freedom.”

“I’m saving up for my kids,” he said, right before we hang up. “Bitcoin is going to be my ticket out of here.”

This is a guest post by Alex Gladstein. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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Fighting Monetary Colonialism With Open-Source Code

In the fall of 1993, Fodé Diop’s family was saving up for his future. A brilliant 18-year-old living in Senegal, Fodé had a bright path in front of him as a basketball player and an engineer. His father, a school teacher, had helped him find inspiration in computers and in connecting with the world around him. And his athletic talents had won him offers to study in Europe and in the United States.

But when he woke up on the morning of January 12, 1994, everything had changed. Overnight, his family lost half its savings. Not due to theft, bank robbery or company bankruptcy — but a currency devaluation, imposed by a foreign power based 5,000 kilometers away.

The previous evening, French officials met with their African counterparts in Dakar to discuss the fate of the “franc de la Communauté financière africaine” (or Franc of the Financial Community of Africa), known widely as the CFA franc or “seefa” for short. For Fodé’s entire life, his CFA franc had been pegged to the French franc at a rate of 1 to 50, but when the late-night meeting concluded, a midnight announcement set the new value at 1 to 100.

The cruel irony was that the economic fate of millions of Senegalese was completely out of their own hands. No amount of protest could overthrow their economic masters. For decades, new presidents came and went, but the underlying financial arrangement never changed. Unlike a typical fiat currency, the system was far more insidious. It was monetary colonialism.

The Mechanics Of The CFA System

In their eye-opening book, “Africa’s Last Colonial Currency: The CFA Franc Story,” economic scholars Fanny Pigeaud and Ndongo Samba Sylla tell the tragic and, at times shocking, history of the CFA franc.

France, like other European powers, colonized many nations around the world in its imperial heyday, often brutally. After its occupation by Nazi Germany in World War II, the “Empire colonial français” began to disintegrate. The French fought to keep their colonies, inflicting a massive human toll in the process. Despite waging a costly series of global wars, Indochina was lost, then Syria and Lebanon, and, eventually, French territory in North Africa, including cherished oil and gas-rich settler colony Algeria. But France was determined not to lose its territories in West and Central Africa. These had provided military manpower during the two World Wars and offered a cornucopia of natural resources — including uranium, cocoa, timber and bauxite — which had enriched and sustained the metropole.

As 1960 approached, decolonization seemed inevitable. Europe was united in disengaging from Africa after decades of depredations and state-sponsored looting. But the French authorities realized they could have their cake, and eat it too, by ceding political control while retaining monetary control.

This legacy still stands today in 15 countries that speak French and use a currency controlled by Paris: Senegal, Mali, Ivory Coast, Guinea-Bissau, Togo, Benin, Burkina Faso, Niger, Cameroon, Chad, the Central African Republic, Gabon, Equatorial Guinea, the Republic of Congo and the Comoros. In 2021 the French still exert monetary control over more than 2.5 million square kilometers of African territory, an area 80% the size of India.

France began formal decolonization in 1956 with “La Loi-cadre Defferre,” a piece of legislation giving colonies more autonomy and creating democratic institutions and universal suffrage. In 1958 the French constitution was modified to establish La Communauté (The Community): a group of autonomous, democratically-administered overseas territories. President Charles de Gaulle toured colonies across West and Central Africa to offer autonomy without independence through La Communauté or immediate total independence. He made it clear there would be perks and stability with the former, and great risks and even chaos with the latter.

In 1960, France actually had a larger population — around 40 million people — than the 30 million inhabitants of what are now the 15 CFA nations. But today, 67 million people live in France and 183 million in the CFA zone. According to UN projections, by the year 2100, France will have 74 million, and the CFA nations more than 800 million. Given that France still holds their financial destiny in its hands, the situation is increasingly resembling economic apartheid.

When the CFA franc was originally introduced in 1945, it was worth 1.7 French francs. In 1948, it was strengthened to 2 French francs. But by the time the CFA franc was pegged to the euro at the end of the 1990s, it was worth .01 French francs. That is a total devaluation of 19,900%. Every time France devalued the CFA franc, it increased its purchasing power against its former colonies, and made it more expensive for them to import vital goods. In 1992, the French people were able to vote on whether or not to adopt the euro through a national referendum. The CFA nationals were denied any such right, and were excluded from the negotiations that would peg their money to a new currency.

The exact mechanism of the CFA system has evolved since its creation, but the core functionality and methods of exploitation are unchanged. They are described by what Pigeaud and Sylla call “dependency theory,” where the resources of peripheral developing nations are “continually drained to the benefit of core wealthy nations… the rich nations do not invest in income-poor nations to make them richer… [this] exploitation evolved over time from brutal slavery regimes to the more sophisticated and less obvious means of maintaining political and economic servitude.”

Three central banks service the 15 CFA nations today: the Banque Centrale des États de l’Afrique de l’Ouest (BCEAO) for West African nations, the Banque des États de l’Afrique Centrale (BEAC) for Central African nations and the Banque Centrale des Comores (BCC) for the Comoros. The central banks hold the foreign exchange reserves (i.e., national savings) for the individual nations in their region, which must keep an astonishing 50% with the French Treasury at all times. This number, high as it is, is a result of historical negotiations. Originally, the former colonies had to keep 100% of their reserves in France, and only in the 1970s did they earn the right to control some and cede “just” 65% to Paris. The CFA nations have no discretion whatsoever with regard to their reserves stored abroad. In fact, they do not know how this money is spent. Meanwhile, Paris knows exactly how each CFA nation’s money is spent, as it runs “operation accounts” for each country at the three central banks.

As an example of how this works, when an Ivorian coffee company sells $1 million worth of goods to a Chinese buyer, the yuan from the purchaser gets exchanged into euros in a French currency market. Then the French treasury assumes the euros and credits the amount in CFA francs to the Ivorian account at the BCEAO, which then credits the coffee maker’s account domestically. Everything runs through Paris. According to Pigeaud and Sylla, France still manufactures all of the notes and coins used in the CFA region — charging 45 million euros per year for the service — and still holds 90% of the CFA gold reserves, around 36.5 tons.

The CFA system confers five major benefits to the French government: bonus reserves to use at its discretion; big markets for expensive exports and cheap imports; the ability to purchase strategic minerals in its domestic currency without running down its reserves; favorable loans when CFA nations are in credit, and favorable interest rates when they are in debt (for stretches of history the French inflation rate has even exceeded the loan interest rate, meaning, in effect, France was forcing CFA nations to pay a fee to store their reserves abroad); and, finally, a “double loan,” in which a CFA nation will borrow money from France, and, in looking to deploy the capital, have little choice given the perverse macroeconomic circumstances but to contract with French companies. This means the loan principal immediately returns to France but the African nation is still saddled with both principal and interest.

This leads to a kind of “petrodollar recycling” phenomenon (similar to how Saudi Arabia would take dollars earned through oil sales and invest them into U.S. treasuries), as CFA exporters historically would sell raw materials to France, with part of the proceeds being collected by the regional central bank and “reinvested” back into the metropole’s debt through French or, today, European government debt. And then there is the selective convertibility of the CFA franc. Businesses can easily sell their CFA francs for Euros today (previously French francs), but citizens carrying CFA francs outside of their central bank zone cannot exchange them formally anywhere. They are about as useless as postcards. If an Ivorian is leaving her country, she must exchange the notes for euros first, where the French Treasury and the European Central Bank (ECB) extract seigniorage through the exchange rate.

The monetary repression at play is that France forces the CFA nations to keep a huge amount of reserves in Parisian coffers, preventing the Africans from creating domestic credit. The regional central banks end up loaning out very little at very high rates, instead of loaning out more at low rates. And the CFA nations end up, against their wishes, buying French or, today, European, debt with their strategic reserves.

The most surprising part, perhaps, is the special privilege of first right of refusal on imports and exports. If you are a Malian cotton producer, you must first offer your goods to France, before you go to the international markets. Or if you are in Benin and want to build a new infrastructure project, you must consider French bids, before others. This has historically meant that France has been able to access cheaper-than-market goods from its former colonies, and sell its own goods and services for higher-than-market prices.

Pigeaud and Sylla call this the continuation of the “colonial pact,” which was centered around four fundamental tenets: “the colonies were forbidden from industrializing, and had to content themselves with supplying raw materials to the metropole which transformed them into finished products which were then resold to the colonies; the metropole enjoyed the monopoly of colonial exports and imports; it also held a monopoly in the shipping of colonial products abroad; finally, the metropole granted commercial preferences to the products of the colonies.”

The result is a situation in which “the central banks have ample foreign exchange reserves remunerated at low or even negative rates in real terms, in which commercial banks hold excess liquidity, where access to household and corporate credit is rationed and in which the states are increasingly obliged, in order to finance their development projects, to contract foreign currency loans at unsustainable interest rates, which further encourages capital flight.”

Today, the CFA system has been “Africanized,” meaning the notes now show African culture and flora and fauna on them, and the central banks are located in Dakar, Yaoundé and Moroni — but these are only superficial changes. The banknotes are still made in Paris, the operation accounts are still run by French authorities, and French officials still sit on the boards of the regional central banks and hold de facto veto power. It is a remarkable situation where a citizen of Gabon has a French bureaucrat making decisions on her behalf. Just as if the ECB or the Federal Reserve had Japanese or Russians making decisions for Europeans and Americans.

The World Bank and the International Monetary Fund have historically worked in concert with France to enforce the CFA system, and rarely, if ever, criticize its exploitative nature. In fact, as part of the post-WWII Bretton Woods system — where Americans would lead the World Bank, and Europeans would lead the IMF — the position of IMF managing director has often been held by a French official, most recently, Christine Lagarde. Over the years the IMF has helped the French pressure CFA nations to pursue its desired policies. A prominent example was in the early 1990s, when the Ivory Coast did not want to devalue its currency, but the French were pushing for such a change. According to Pigeaud and Sylla, “at the end of 1991, the IMF refused to continue lending money to the Ivory Coast, offering the country two options. Either the country reimbursed the debts contracted with the Fund or it accepted devaluation.” The Ivory Coast and other CFA nations caved and accepted devaluation three years later.

Contradicting the values of “liberté, égalité, fraternité,” French officials have propped up tyrants in the CFA zone for the past six decades. For example, three men — Omar Bongo in Gabon, Paul Biya in Cameroon and Gnassingbé Eyadéma in Togo — have amassed 120 years in power between them. All would have been tossed out by their people far sooner had the French not provided cash, weapons and diplomatic cover. According to Pigeaud and Sylla, between 1960 and 1991, “Paris carried out nearly 40 military interventions in 16 countries to defend its interests.” That number is certainly higher today.

Over time, the CFA system has served to allow the French state to exploit the resources and labor of the CFA nations, without allowing them to deepen their accumulation of capital and develop their own export-led economies. The results have been catastrophic for human development.

Today the Ivory Coast’s inflation-adjusted GDP per capita (in dollars) is around $1,700, compared with $2,500 in the late 1970s. In Senegal, it wasn’t until 2017 that inflation-adjusted GDP per capita surpassed the heights reached in the 1960s. As Pigeaud and Sylla note, “10 states of the franc zone recorded their highest levels of average income before the 2000s. In the last 40 years, the average purchasing power has deteriorated almost everywhere. In Gabon, the highest average income was recorded in 1976, just under $20,000. Forty years later, it has shrunk by half. Guinea-Bissau joined the [CFA system] in 1997, the year in which it recorded the peak in its average income. 19 years later, this fell by 20%.”

A staggering 10 of the 15 CFA nations are considered among the “least developed countries” in the world by the United Nations, alongside the likes of Haiti, Yemen and Afghanistan. In various international rankings, Niger, the Central African Republic, Chad and Guinea-Bissau are often counted as the poorest countries in the world. The French are maintaining, in effect, an extreme version of what Allen Farrington has called the “capital strip mine.”

Senegalese politician Amadou Lamine-Guèye once summed up the CFA system as citizens having “only duties and no rights,” and that “the task of the colonized territories was to produce a lot, to produce beyond their own needs and to produce to the detriment of their more immediate interests, in order to allow the metropole a better standard of living and a safer supply.” The metropole, of course, resists this description. As French economic minister Michel Sapin said in April 2017, “France is there as a friend.”

Now, the reader may ask: Do African countries resist this exploitation? The answer is yes, but they pay a heavy price. Early nationalist leaders from the African independence era recognized the critical value of economic freedom.

“Independence is only the prelude to a new and more involved struggle for the right to conduct our own economic and social affairs [..] unhampered by crushing and humiliating neo-colonialist control and interference,” declared Kwame Nkrumah in 1963, who led the movement that made Ghana the first independent nation in sub-saharan Africa. But throughout the history of the CFA region, national leaders who stood up to the French authorities have tended to fare poorly.

In 1958, Guinea tried to claim monetary independence. In a famous speech, firebrand nationalist Sekou Touré said to a visiting Charles de Gaulle: “We would rather have poverty in freedom than opulence in slavery,” and shortly therafter left the CFA system. According to The Washington Post, “in reaction, and as a warning to other French-speaking territories, the French pulled out of Guinea over a two-month period, taking everything they could with them. They unscrewed lightbulbs, removed plans for sewage pipelines in Conakry, the capital, and even burned medicines rather than leave them for the Guineans.”

Next, as an act of destabilizing retribution, the French launched Operation Persil, during which, according to Pigeaud and Sylla, the French intelligence counterfeited huge quantities of the new Guinean banknotes and then poured them “en masse” into the country. “The result,” they write, “was the collapse of the Guinean economy.” The country’s democratic hopes were dashed along with its finances, as Touré was able to cement his power in the chaos and begin 26 years of brutal rule.

In June 1962, Mali’s independence leader Modibo Keita announced that Mali was leaving the CFA zone to mint its own currency. Keita explained in detail the reasons for the move, such as economic overdependence (80% of Mali’s imports came from France), the concentration of decision making powers in Paris and the stunting of economic diversification and growth.

“It is true that the wind of decolonization has passed over the old edifice but without shaking it too much,” he said about the status quo. In response, the French government rendered the Malian franc inconvertible. A deep economic crisis followed, and Keita was overthrown in a military coup in 1968. Mali eventually chose to re-enter the CFA zone, but the French imposed two devaluations on the Malian franc as conditions for reinstatement, and did not allow re-entry until 1984.

In 1969, when President Hamani Diori of Niger asked for a more “flexible” arrangement, where his country would have more monetary independence, the French refused. They threatened him by withholding payment for the uranium that they were harvesting from the desert mines that would give France energy independence through nuclear power. Six years later, Diori’s government was overthrown by General Seyni Kountché, three days before a planned meeting to renegotiate the price of the Nigerien uranium. Diori wanted to raise the price, but his former colonial master disagreed. The French army was stationed nearby during the coup but, as Pigeaud and Sylla dryly note, they did not lift a finger.

In 1985, the revolutionary military leader Thomas Sankara of Burkina Faso was asked in an interview, “Is the CFA franc not a weapon for the domination of Africa? Does Burkina Faso plan to continue carrying this burden? Why does an African peasant in his village need a convertible currency?” Sankara replied: “If the currency is convertible or not has never been the concern of the African peasant. He has been plunged against his will into an economic system against which he is defenceless.”

Sankara was assassinated two years later by his best friend and second in command, Blaise Compaoré. No trial was ever held. Instead, Compaoré seized power and ruled until 2014, a loyal and brutal servant of the CFA system.

Farida Nabourema’s Struggle For Togolese Financial Freedom

In December 1962, Togo’s first post-colonial leader Sylvanus Olympio formally moved to create a Central Bank of Togo, and a Togolese Franc. But on the morning of January 13, 1963, days before he was about to cement this transition, he was shot dead by Togolese soldiers who had received training in France. Gnassingbé Eyadéma was one of the soldiers who committed the crime. He later seized power and became Togo’s dictator with full French support, ruling for more than five decades and promoting the CFA franc until his death in 2005. His son rules to this day. Olympio’s murder has never been solved.

Farida Nabourema’s family has always been involved in the struggle for human rights in Togo. Her father was an active leader of the opposition, and has served time as a political prisoner. His father opposed the French during colonial times. Today, she is a leading figure in the country’s democracy movement.

Farida was 15 years old when she learned that the history of Togo’s dictatorship was intertwined with the CFA franc. By that time, in the early 2000s, she had started to get close to her father, and asked him questions about her country’s history. “Why did our first president get assassinated just a few years after we gained independence?” she inquired.

The answer: he resisted the CFA franc.

In 1962, Olympio began the movement toward financial independence from France. The parliament voted in favor of beginning such a transition, and of creating a Togolese franc and holding their reserves in their own central bank. Farida was shocked to learn that Olympio was assassinated just two days before Togo was supposed to leave the CFA arrangement. As she put it: “His decision to seek monetary freedom was seen as an affront to hegemony in Francophone Africa. They were afraid others would follow.”

Today, she says, for many Togolese activists the CFA is the major reason to seek broader freedom. “It is what animates many in the opposition movement.”

The reasons why are clear. Farida said France keeps more than half of Togo’s reserves in its banks, where the Togolese people have zero oversight over how those reserves are spent. Often, these reserves, earned by Togolese, are used to buy French debt to finance the activities of the French people. In effect, this money is often loaned to the former colonial master at negative real yield. The Togolese are paying Paris to hold their money for them, and in the process financing the living standards of the French people.

In 1994, the devaluation that stole the savings from Fode Diop’s family in Senegal hit Togo hard, too, causing a huge increase in national debt, a reduction in public funding to local infrastructure and an increase in poverty.

“Remember,” Farida said, “our government is forced to prioritize holding our reserves in the French bank over spending at home, so when a shock hits, we have to degrade ourselves, to ensure that a proper amount of cash is in Parisian hands.”

This creates a national climate of dependence, where Togolese are forced to ship raw goods out, and bring finished goods in, never digging their way out.

Farida said that about 10 years ago, the anti-CFA movement started to gain more traction. Because of mobile phones and social media, people were able to unite and organize in a decentralized manner. It used to just be Ivorians and Togolese struggling separately, she said, but now there is a regional effort between activists.

For decades there has been the idea of an “Eco” currency, for all of the Economic Community of West African States (ECOWAS) nations, including regional economic powerhouses Nigeria and Ghana. Farida said that the French tried to hijack this plan, seeing it as a way to expand their own financial empire. In 2013, then-president François Hollande formed a commission which created a document for the French future in Africa. In it, they stated it was an imperative to get Anglophone countries like Ghana involved.

Emmanuel Macron’s administration is now trying to rename the CFA franc the Eco, in a continuing process of “Africanizing” the French colonial financial system. Nigeria and Ghana backed out of the Eco project, once they realized the French were going to continue to have control. Nothing has formally happened yet, but the countries currently managed by the BCEAO central bank are on track to switch to this Eco currency by 2027. The French will still have decision-making ability, and there are not any formal plans to adjust the central banking of the Central African CFA nations or of Comoros.

“It is the high point of hypocrisy for French leaders like Macron to go to Davos and say they are done with colonialism,” Farida said, “while in fact, they are trying to expand it.”

She said that originally, the CFA franc was created on the basis of the currency plan used by the Nazi occupiers of France. During WWII, Germany created a national currency for the French colonies so it could easily control imports and exports by just using one financial lever. When the war ended and the French regained their freedom they decided to use the same exact model for their colonies. So, Farida said, the foundation of the CFA franc is really a Nazi one.

The system has a dark genius to it, in that the French have been able to, over time, print money to buy vital goods from their former colonies, but those African countries have to work to earn reserves.

“It’s not fair, it’s not independence,” Farida said. “It’s pure exploitation.”

France claims that the system is good because it provides stability, low inflation and convertibility for the Togolese people. But the convertibility tends to end up facilitating capital flight — when it is easy for businesses to flee the CFA and park their profits in euros today — while trapping the Togolese in a seigniorage regime. Whenever the CFA is converted — and it must be, as it cannot be used outside of a citizen’s economic zone — the French and the ECB take their slice.

Yes, Farida said, inflation is low in Togo compared to independent nations, but a lot of their earnings are going to fight inflation instead of supporting infrastructure and industry growth at home. She pointed to the growth of Ghana, which has an independent monetary policy and higher inflation over time than the CFA nations, compared to Togo. By any metric — healthcare, middle class growth, unemployment — Ghana is superior. In fact, when one zooms out, she said that not a single CFA nation is among the 10 richest countries in Africa. But of the bottom 10 poorest, half are in the CFA zone.

Farida says that French colonialism goes beyond money. It also affects education and culture. For example, she said, the World Bank gives $130 million per year to support Francophone countries to pay for their books for public schools. Farida says 90% of these books are printed in France. The money goes directly from the World Bank to Paris, not to Togo or to any other African nation. The books are brainwashing tools, Farida said. They focus on the glory of French culture, and undermine the achievements of other nations, whether they be American, Asian or African.

In high school, Farida asked her dad: “Do people use any other language but French in Europe?” He laughed. They only learned about French history, French inventors and French philosophers. She grew up thinking that the only smart people were French. She had never read an American or British book before she traveled abroad for the first time.

In general, Farida said, French Africa consumes 80% of the books that the French print. President Macron wants to expand on this dominance, and has promised to spend hundreds of millions of euros to boost French in Africa, declaring that it could be the “first language” of the continent and calling it a “language of freedom.” Given current trends, by 2050 85% of all French speakers could live in Africa. Language is one pillar of support for the CFA franc’s survival.

Politics is another. An important part of the CFA system is French support for dictatorship. With the exception of Senegal, not a single CFA bloc country has ever had meaningful democratization. Every single successful tyrant in Francophone Africa, Farida said, has had the full backing of the French state. Whenever there is a coup against democracy, the French support the coup-makers as long as they are friendly to the CFA regime. But the moment anyone has anti-French tendencies, you see sanctions, threats, or even assassinations.

Farida points to the example of Chad and Mali today. Both countries are under threat from terrorism and rebellion. In Chad, late military dictator Idriss Deby was propped up by France for three decades until his death in April. According to the Chadian constitution, the head of the parliament is normally next in line to be the president, but instead, the military installed Deby’s son, a general in the army. The French government applauded this illegal transition and President Macron even visited Chad two months ago to celebrate this sham. In a tribute speech, he called Deby a “friend” and “courageous soldier” and said “France will not let anybody put into question or threaten today or tomorrow Chad’s stability and integrity.” The son, of course, will promote the CFA franc.

Mali, on the other hand, Farida said, had a coup a month after Chad’s. The junta and the population are not as friendly to Paris and appear to be seeking in Russia a new partner to stymie terrorism. So the French government has called the coup “unacceptable,” is threatening to withdraw troops from Mali to “leave them alone with the terrorists,” as Farida said, and is preparing sanctions. Mali is being punished by France for doing the same thing that Chad did. There is despotism and corruption on both sides. The only difference is that Mali wanted to move away from French monetary control, while Chad is still cooperating.

“When you are a dictator, as long as you are working for France, they will continue finding excuses to help you stay in power,” said Farida. They did the same in 2005 in her country of Togo, which led to a son taking over from his dictator father and to her own political awakening.

Fode Diop’s Mission To Bring Bitcoin To Senegal

It was not until Fodé Diop had the opportunity to travel to the U.S. that he could start to look at his country Senegal from the outside.

At first, the 1994 devaluation of the CFA franc had put his academic future in jeopardy. He had an opportunity to go study and play basketball at a university in Kansas, but his family’s savings had been destroyed. Luckier than most around him, his family had one more option: his father had book rights for teaching materials that he had created, and he was able to use those to borrow what was needed to get Fodé to school.

One day, a few years after graduating from college, while living in the U.S. and working on a new video-on-demand site with his brother, Fodé stumbled across a YouTube video of Dr. Cheikh Anta Diop, a Senegalese scientist and historian, talking about how money and language were tools of controlling people’s minds and livelihoods.

Fodé had heard about Dr. Diop before — the biggest university in Senegal was named after him — but he had not listened to his critique of the CFA system. It hit Fodé hard. He says it was like the moment in “The Matrix,” one of his favorite movies, when Neo takes the red pill from Morpheus, and breaks out of his pod into the jarringly brutal real world. He finally saw the water that he swam in while growing up.

“This was the first time in my life I started thinking for myself,” Fodé said. “The first time when I realized my own country’s currency was a mechanism of control.”

He said that it is more than just control over currency. Because the French print and control the money through each country’s operation accounts, they have data.

“They know what’s going where, they have information on all the countries. They have an edge over these countries. They know who is corrupt. They know who is buying property in France. They know what is available. They have first right of refusal on preferential import and export pricing. They have total domination,” said Fodé.

He would later reflect on the 1994 devaluation. At the time, he was only 18, so he did not understand what had happened, other than the fact that the family’s finances had gotten a lot more difficult.

“They put a bag over your head so that you don’t notice your reality,” he said.

But in retrospect, there was a big public debate about it. People realized that when they would go to convert to the French franc, they would only get half as much for their money, even though they were doing the same amount of work. The French reasoning, Fodé said, was to make exports cheaper so that the African countries could produce more competitively. But Fodé sees it differently: this allowed France to crack the whip and buy cheaper goods.

Fodé would have two more “red pill” moments. The next came in 2007, when he was working in Las Vegas in the technology scene. He was watching a video of Steve Jobs, who had just announced the iPhone to the world. Fodé was stunned: a mobile phone that had a native touch-screen browser. The same thing that was on your computer was now on your phone. He knew instantly it would change the world. His next thought: How do we get native payments into the iPhone apps, so people with no bank accounts and credit cards could use mobile money?

The final red pill for Fodé was learning about Bitcoin in 2010. He was living in Los Angeles when he first read Satoshi Nakamoto’s white paper for a “peer-to-peer electronic cash system.” From the moment he read it, Fodé thought: For the first time, we have a weapon to fight back against oppression and colonialism. Money of the people, not controlled by governments. “This,” he said, “is exactly what we need.”

Years earlier, Fodé had read “Out Of Control” by Kevin Kelly. One of the chapters was about e-currencies. He knew that eventually, all money would be digital, part of a great global electronic revolution. But he had never thought too deeply about the transformative power digital money could have, until Bitcoin.

“What is money? Where does it come from? Asking these questions, this is what Bitcoin did for me,” he said. “Before that, you don’t question it.”

Maybe, he thought, one day, France would not have the right or ability to print and control the money of the Senegalese people anymore.

Fodé and his roommate in Las Vegas would stay up late many times over the coming years, thinking about what Bitcoin could make possible for payments, savings and all economic activity. He learned about what happened when you swiped your credit card, what kind of information this revealed. And what third parties were doing with that information.

He thought that the marriage of the smartphone and Bitcoin would make an incredible empowerment tool. Fodé would frequently go back to Senegal, and each time he would go, he would bring a bunch of phones with him to give away. He viewed them as connections to the outside world for his friends back home.

Over the coming years, he worked at different startups, all in the industry of digitizing different parts of our lives. In 2017, he left Vegas and went to San Francisco. He joined a coding bootcamp and decided to become a computer engineer. Initially, he got very involved with the cryptocurrency scene as a whole, but eventually, he says he “fell out of love” with Ethereum, right around the time he started to go to San Francisco’s Socratic seminars with River founder Alex Leishman. He met a lot of the Bitcoin core developers and early Lightning users.

In 2019, he won a transportation hackathon, making a Lightning invoice that would unlock a Tesla. This gave him a big confidence boost that he could help change the world. He decided to go home to Senegal to spread Bitcoin education. On his way, he was gifted a ticket to the Lightning conference in Berlin by Lightning Labs CEO Elizabeth Stark. There, he met Richard Myers of GoTenna and developer Will Clark, who were thinking about how to fight internet censorship with mesh networks. Fodé thought: In Senegal, the French telecom Orange controls all the phone networks. Maybe they could figure out a way to circumvent French control over communications and ability to “turn off the internet” through Bitcoin and Lightning.

Senegal’s telecom gateways are controlled by France, and can be shut down in case there are protests against the country’s leader, whom they support as long as he sticks to the CFA system. But, it is possible to find endpoints, Fodé said, through other providers. They could be other national phone networks, or even satellite connections. Fodé created a box that would pick up on these other signals. Mobile phones could tunnel into that box, allowing users to go online even when the French turned off the internet. To incentivize people running such boxes, he would pay them in bitcoin. For routing data and maintaining these boxes in Senegal, one is paid through Lightning. This is what Fodé is working on today.

“It’s very risky,” Fodé said. “You can face jail or fines. But with monetary incentives, people are willing.”

The next time Orange turns off the internet to protect its ally in government, the people may have a new way to communicate that the regime cannot stop.

Lightning, Fodé said, is everything.

“We need instant and cheap payments. We can’t do on-chain Bitcoin payments. The fees are just too expensive. We have to use Lightning. There is no other option,” he said. “And it works.”

This rings especially true in the area of remittances, which, according to the World Bank, are a major source of GDP for many CFA nations. For example: 14.5% of Comoros’ GDP is based on remittances. For Senegal, it is 10.7%; Guinea-Bissau, 9.8%; Togo, 8.4%; and Mali, 6%. Given that the average cost of sending a $200 remittance to sub-Saharan Africa is 8%, and that the average cost of sending $500 is 9%, and given that Bitcoin-based remittance services like Strike can reduce fees to well under 1%, anywhere from 0.5% to a full 1% of CFA nations’ GDP could be saved by adopting a Bitcoin model. Zooming out, each year roughly $700 billion is sent home by remitters globally. Between $30 billion and $40 billion could be saved, which is roughly the same amount the U.S. spends each year on foreign aid.

Fodé understands why people in the West might be skeptical about Bitcoin. “If you have Venmo and Cash App, you might not see why it is important. You have all the conveniences of a modern monetary system. But when you go to Senegal, more than 70% of our people have never stepped foot in a bank. Mom never had a credit card or debit card,” he said.

He wonders: How are they ever going to participate in the global financial system?

He said the marriage of smartphones and Bitcoin will liberate people and change society. Fodé mentioned “The Mobile Wave,” the book that MicroStrategy CEO Michael Saylor wrote about the handheld revolution, as being “so salient.” When Fodé first touched the iPhone, he knew that it was what he was waiting for. The universe was conspiring, he thought. In just a few short years, he saw the iPhone, the Great Financial Crisis, Satotshi’s release of Bitcoin and his own transition to becoming an American citizen.

He said that since he has spent half of his life in Africa, and half in the U.S., that he can see a path forward.

“When I go home, I see how people are being held down. But in the same way we leapfrogged landlines and went straight to cell phones, we’re going to skip banks and go straight to Bitcoin.”

Another effect he is seeing in Senegal is that when people are exposed to Bitcoin, they start saving.

“Today, at home, I’m thinking about how to help people save money,” he said. “Nobody saves anything here. They just spend every CFA franc they can get.”

Fodé is “forever grateful” for the BTC that Leishman gave him, as he ended up giving it away in small parts to people in Senegal — those who came to events or who asked good questions. People saw its value grow over time.

He has watched what has happened in El Salvador with great excitement. When he stood in a conference hall in Miami earlier this month and listened to Strike founder Jack Mallers announce that a country had added bitcoin as legal tender, Fodé said that he teared up. He thought this would never happen.

“What began as a store of value, is now evolving to a medium of exchange,” he said.

El Salvador has some similarities to the CFA zone countries. It is a poorer nation, fixed to a foreign currency, reliant on imports, with a weaker export base. Its monetary policy is controlled by an external power. 70% of the country is unbanked, and 22% of the nation’s GDP relies on remittances.

“If it could be a good option for them,” Fodé thought, “maybe it could work for us.”

But he knows there are major obstacles.

One is the French language. There is not a lot of French information on GitHub, or in the documentation materials for Lightning or Bitcoin core. Currently, Fodé is working on translating some of this to French so that the local developer community can get more involved.

Could a Bitcoin Beach community eventually happen in Senegal? Yes, Fodé said. That is why he moved back, and that is why he is running meetups, collecting donations through a Lightning tip jar and building a citizen-powered, Bitcoin-based version of Radio Free Europe.

“They could jail me,” he said. “But through the meetups, I’m making it so that I’m not a single point of failure.”

He thinks it will be hard to get Bitcoin adoption in Senegal, because of the French influence.

“They won’t go out without a fight,” he said.

As Ndongo Samba Sylla put it, “Today, France faces relative economic decline in a region it long considered its own private preserve. Even faced with the rise of other powers like China, France has no intention of abdicating its mastery — it will fight to the last.”

But maybe, instead of a violent revolution, it could be a gradual peaceful revolution over time that kicks out colonialism.

“Not a sudden off switch, but a parallel system, where people can opt in over time by themselves,” Fodé said. “No coercion.”

As for people who think we should just ask the government to protect our rights?

“They don’t know that democracies like France have this bad side,” Fodé said. “They won’t gift us liberty. Instead, we should follow in the footsteps of the cypherpunks, and seize our freedoms with open-source code.”

When asked about Bitcoin’s chances at replacing central banking, Fodé said that the idea “may sound crazy to Americans, but for Senegalese or Togolese, central banks are a parasite on our society. We have to fight back.”

Fodé considers Bitcoin “life changing.”

“Never before did we have a system where money could be minted in a decentralized fashion. But this is what we have today. It’s a solution for those who need it most. For the first time, we have a powerful tool to push back against oppression,” he said. “It might not be perfect, but we gotta use the tools we have today to fight for the people. Not wait around for someone to come help us.”

The Separation Of Money And State

In 1980, Cameroonian economist Joseph Tchundjang Pouemi wrote “Monnaie, servitude et liberté: La répression monétaire de l’Afrique.” The thesis: monetary dependence is the foundation of all other forms of dependence. The final words of the book ring especially strong today: “Africa’s fate will be forged through money or it won’t be forged at all.”

Money and currency are buried beneath the surface in the global human rights movement. They hardly ever come up at human rights conferences, and are rarely discussed among activists. But ask a democracy advocate from an authoritarian regime about money, and they will tell amazing and tragic stories. Demonetization in Eritrea and North Korea, hyperinflation in Zimbabwe and Venezuela, state surveillance in China and Hong Kong, frozen payments in Belarus and Nigeria, and economic firewalls in Iran and Palestine. And now: monetary colonialism in Togo and Senegal. Without financial freedom, movements and NGOs cannot sustain themselves. If their bank accounts are shuttered, notes demonetized or funds debased, their power is limited and tyranny marches on.

Monetary repression continues to be hidden, and not spoken of in polite circles. The reality today for the 182 million people living in CFA nations is that while they may be politically independent in name, their economies and money are still under colonial rule, and foreign powers still abuse and prolong that relationship to squeeze and exploit as much value from their societies and geographies as possible.

In recent years, CFA zone citizens are increasingly rising up. The slogan “France Dégage!” has become a rallying cry. But the system’s loudest critics, Pigeaud and Sylla among them, do not seem to offer a viable alternative. They dismiss the status quo and IMF bondage, only to suggest either a regional currency, controlled by local leaders, or a system where each CFA nation creates and runs its own currency. But just because Senegal or Togo get monetary independence from France, does not guarantee that they will perform well, or that the country’s leaders will not abuse the currency.

There is still the threat of domestic dictatorial misrule, or new capture by Russian or Chinese foreign powers. It is clear that people are in need of a money that actually breaks the wheel, one that they can control and that cannot be manipulated by governments of any kind. Just as there was a historic separation of church and state that paved the way for a more prosperous and free kind of human society, a separation of money and state is underway.

Could citizens of CFA nations, over time, with increasing access to the internet, popularize Bitcoin to the point that governments would be forced to de facto adopt it, as happened in Latin American countries like Ecuador with “dolarización popular”? History remains to be written, but one thing is for sure: the World Bank and IMF will resist any trends in this direction. Already, they have come out swinging against El Salvador.

A few weeks ago, the actor Hill Harper was quoted in The New York Times regarding his activism for Bitcoin in the African American community. He said, quite simply, “They can’t colonize Bitcoin.”

Farida Nabourema agrees. “Bitcoin,” she said, is “the first time ever that there is money that is actually decentralized and accessible to anyone in the world regardless of their skin color, ideology, nationality, amount of wealth or colonial past.”

She said it is the people’s currency, and even goes a step further.

“Maybe,” she said, “we should call Bitcoin the currency of decolonization.”

This is a guest post by Alex Gladstein. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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Bitcoin is The Only Way Out: The Jack Dorsey Interview

On Friday, June 4, at Bitcoin 2021 in Miami, I had the opportunity to interview Square and Twitter CEO Jack Dorsey on the global adoption of Bitcoin and the future of money and social media. Here’s an edited transcript of our conversation.

Alex Gladstein: Hello Miami! And welcome Jack. We have 12,000 Bitcoiners here.

Jack Dorsey: [To the audience] You’re incredible.

A: And I think there’s 20,000 out there listening. We are happy to see this phenomenon grow. I wanted to start with the big question that most people are probably asking: Why are you on stage with a human rights activist? What does Bitcoin have anything to do with human rights? Isn’t it just about investment?

J: Not for me. For me Bitcoin changes absolutely everything. What I’m drawn to the most about it is the ethos, is what it represents, are the conditions that created it, which are so rare and so special and so precious. I don’t think there’s anything more important in my lifetime to work on and I don’t think there’s anything more enabling for people around the world.

A: We often hear in our community this mantra that Bitcoin is for everybody. That it’s non-discriminatory, that it’s open and opening for many people around the world who are walled off from transactions, saving, connecting with the world. What is your perspective on this idea that Bitcoin is for everybody?

J: That’s what I’m focused on making sure that I help with. Whatever I can do, whatever my companies can do to make Bitcoin accessible to everyone is how I’m going to spend the rest of my life. If I were not at Square or Twitter, I’d be working on Bitcoin. If it needed more help than Square and Twitter, I would leave them for Bitcoin. But I believe both companies have a role to play and I think anything we can do as companies to help find the right intersection between a corporate narrative and a community open narrative is for the best.

A: The theme for today is banking the unbanked. As you all probably know, there are billions of people around the world who are completely unbanked, or they are underbanked. Yet, the mobile phone is growing at a remarkable pace. Even in countries like Ethiopia and Sudan, you now have 20 or 25% of the population with a mobile phone, and in the next five years that’s going to pass 50%. So we are now in a position where the increase of technology is going to allow more people to come online and with Bitcoin it doesn’t matter what passport you have, or what nationality you are, or what ethnicity you are, or what you believe in, you can connect to this network. So when we think about banking the unbanked, what’s your vision for what is most important for helping onboard people into this new system?

J: Well, we don’t need the banks anymore. There’s so much work to do around accessibility, there’s so much work to do around education so that people can own the idea themselves. And I want to thank you by the way — I appreciate you so much for all the work you do to take away a bunch of the myths that people have in their head and give a strong case for why Bitcoin can be used by everyone — but we don’t need the financial institutions that we have today. We have one that is thriving, that is sound, that is owned by the community, that is driven by the community, and that has this incredible and amazing consensus that always manages to do the right thing over time. It’s noble. And it’s so rare and so unique. So anything we can do to build it and protect it, we’re down to do.

A: You recently personally launched a new fund with Jay-Z, where you guys dedicated 500 BTC to help the Bitcoin ecosystem in Africa and India. Can you talk a little bit more about the vision for that fund and what you all hope to do over the coming years?

J: I spent November of 2019 roaming around the continent of Africa, I went to Nigeria, I went to Ethiopia, I went to Ghana. And I saw that the number one problem that entrepreneurs were working on there — and I only met the entrepreneurs, I didn’t meet anyone in the government or the media — they are all working on payments and the most interesting of them were working on Bitcoin. And when I saw the reports of Nigeria considering banning Bitcoin, when I saw the reports of India considering banning Bitcoin, it was a reminder that we could use a lot more help developing around the world. Finding developers on the continent on Africa, enabling them to do their work without having to think about taking another job, is important. So, I talked to Jay about it. Jay loves Bitcoin, he goes very deep in what he loves, he believes in it, and he also believes in this idea of making sure that if we’re going to create a money for the world, it has to be developed around the world. And anywhere there are gaps, we should try to fill. So, right now we’re trying to find the right board for it. It’s going to be a completely separate entity. I have no control or say or direction over it. Once we find that board, we’ll hire a lead, and they’ll start making grants denominated in bitcoin.

A: So Jay might have 99 problems but being his own bank won’t be one.

J: [Laughs] He’s more than a bank.

A: Let’s speak a little more about that. Nigeria is a country of more than 200 million people. They have a 15% inflation rate. They are in many ways closed off from the outside world in terms of fintech and payments. How has traveling the world and going to different countries like this opened your eyes to the global impact of Bitcoin that maybe people in Wall Street or in Silicon Valley or in London may not be seeing? What are people missing when they say there is no social value to Bitcoin?

J: I mean they are missing everything. They’re not getting out of New York. Go to Nigeria for one day and see the struggle that people have to put up with, with their government and with their money. And go to Ghana that has a bunch of transplants from all over the continent and you witness the same thing every single day. Go to India and you see the same.

A: My advice is that they should try living on the Sudanese pound for six months and then come back and tell us that Bitcoin is not useful. And I think they’ll get a little reality check there. Today we’ve got maybe — and estimates vary — anywhere from 150 million to 200 million people have used Bitcoin in some way. So we’re at maybe 2% or 2.5% of the world population. I believe we’re going to a billion people by 2025, certainly by the end of the decade. When you have so many more people on-ramping into this system, we’re probably going to have a situation where fees on the main chain are going to get pretty high in fiat terms. So can you talk about — for people who like in Nigeria or Sudan who are going to need micropayments, who are going to want to send $5 or $10, can you talk a little bit about your commitment at Square to Lightning, how you understood how Bitcoin will scale in layers perhaps instead of on the main chain, and why you are so committed to Lighting in a time where we are going to get a lot more users?

J: That’s why I’m committed to Lightning, because this is going to be used by more and more people. My belief in bitcoin is that it’s an amazing asset, but my belief is that the internet needs a native currency, and we need to be able to transact with this every single day. And everyone around the world needs to transact with it every single day. So the only reason Square got into Bitcoin is to that end. It’s not just to be an exchange. And that’s why we don’t deal with any other “currencies” or “coins” because we’re so focused on making bitcoin the native currency for the internet.

Author’s note: at this point, political activist Laura Loomer came to the front of the stage and asked Dorsey how he could say this when Twitter is censoring users like her. She said “How can you say that bitcoin is a currency for everyone in the world, when you are the king of censorship? Bitcoin is about decentralization, and you have no right to be here today… censorship is a human rights violation.”

Dorsey responded by saying, “We’re working on that.” After a minute, Loomer was removed from the front stage area, and we continued the interview.

A: Why don’t we just go right to that issue? We hear a lot about censorship. Can social media be more like Bitcoin? Bitcoin is censorship resistant. Nobody controls it. What’s your thought on this? It’s a thorny problem.

J: Yes, I do believe it can. I know that there’s a lot of you out there who disagree with a lot of actions that Twitter has taken. I know there’s a lot of you out there who disagree with our policies and the way we have evolved them. I appreciate that and recognize it. I also recognize the fact that there is an incentive and a corporate incentive and a business incentive that is different than what might be needed for global communication and for a public conversation. And my goal in my life in this moment is to remove as much as I can the corporateness of our companies and find better intersections with the open-source community. Certainly, Bitcoin has taught me that with Square, and we’re doing everything in our power to do that. And we’re trying to do the same thing with Twitter, by creating a new platform, a new open-source standard called Blue Sky, we’re just starting it. And it will have none of the restrictions that you see on Twitter. Inspired entirely by Bitcoin. We want to do the same thing for social media. And again, I know you aren’t going to believe me. I know you’re saying “liar.” I’m going to prove it to you. And then we can have another conversation later.

A: When you look at something like Lightning, it’s not just a payments network, it can also be a censorship-resistant social media platform. There’s folks out there building stuff like Sphinx.

J: Sphinx is amazing.

A: Sphinx is really cool, basically what you can do is you can follow your favorite creators. Maybe your favorite podcast. Maybe you’re following what Marty and Matt are doing, and you can go into a “tribe” on Sphinx and you can stream them censorship-resistant private money on Lightning and nobody can stop you. And that’s happening. It’s inevitable. It’s coming. This vision to stream money to people that you care about, in a way that the government cannot stop, I know that’s what Laura wants, and that’s what you all want where you are upset with Twitter. Well guess what, it’s coming, and nobody can stop it. Maybe that’s a good segue to get back to the idea of Lightning and why you at Square and especially Square Crypto have focused so heavily on it as opposed to any number of other things. Why the focus on Lightning?

J: Again it goes back to the currency. Square Crypto and Steve and team and Matt have been focused on making sure that any wallet can easily turn on Lightning and to make this accessible to everyone. The more people we have considering using Bitcoin for payments, for tips, for streaming money, the stronger this ecosystem is and the more we achieve our goal.

A: We’re really building out a parallel economy here that is not controlled by governments or corporations. And I just wanted to show you how this works and then Jack and I can reflect on it. Our friend Jack Mallers has created a company called Strike, with a lot of help from a lot of other people — an amazing Bitcoin company — and he started a campaign recently to help Bitcoin development. So I’m on the Strike page right here. And I’m going to go ahead and donate $2 of bitcoin to Strike. I’m going to copy that Lightning invoice, I’m going to go to my Muun wallet — created by an awesome team in Argentina — and I’m going to send that Bitcoin right now and it’s going to go and it’s gone. That’s a bearer asset that has just moved instantly around the world. And I didn’t ask permission from anybody. So again we get back to this conflict about how are we going to build social media and communicate with each other without censorship and surveillance? It’s through Bitcoin. I just want to underline why I think Jack is so persistent in this. Because it must be such a struggle to watch the entire world criticize everything you do and I think that’s fair. We should do that and hold you to a higher standard.

J: You should definitely do that.

A: But this is not some magic fairy dust. This is real. Lightning is real. And I just sent a bearer asset around the world and nobody could stop me. I didn’t have to ask any permission, I didn’t have to prove my identification. This is an actual revolution. So when we talk about Bitcoin and Lightning, if we’re going to build it the right way, it has to be non-custodial. Now, minutes before you walked on stage, you announced something pretty big that you are going to do at Square. Do you want to talk about your vision for non-custodial Bitcoin use?

J: Yeah we’re considering building a non-custodial hardware wallet. The thing we want to do is make it completely in the open. From all of our software to all of our hardware design will be open source and will be on Github. We want to build it in collaboration with the community. So we started a thread today asking some questions about our design principles. We don’t want to compete with the hardware wallets out there. We just want to take it to the next level and take it to 100 million more people who have non-custodial solutions. And we’re likely to do it sometime very soon. But we wanted to make sure that we’re thinking about this in the correct way and that we’re reaching out to the right folks in the community to build it.

A: I think that non-custodial use of Bitcoin is so important. And Satoshi, the creator of Bitcoin, knew this. Satoshi chose his or her birthday as April 5. This was the day that the U.S. government basically banned private ownership of gold in 1933. So when Satoshi was designing Bitcoin he or she was thinking about how the U.S. government centralized and confiscated gold away from the people and how they could make a system that could prevent that. They chose the year for their birthday of 1973 which is when gold was made available for the American people again. So non-custodial use of Bitcoin is built into Satoshi’s vision for the project. So it’s really exciting to see Square support this. I think a lot of the custodians in the space won’t be very happy, but as you said earlier in your thread, as inspired by Isaiah, not your keys, not your cheese.

J: As a custodial exchange we need to push more companies like us to make sure that more people have non-custodial solutions. And we’re going to show up.

A: Earlier you brought up a point that you are Bitcoin only. Let’s talk a little bit more about that. There’s a lot of discussion about proof of stake and other coins. What are your thoughts on Bitcoin and its proof of work and full nodes model versus other models?

J: Again, the conditions that created Bitcoin — everything that went into it from the proof-of-work model to the development model — no single points of failure — everything about it is why we’re into it. There’s nothing else that compares to it. And we have no interest other than making sure that we are building a native currency for the internet and helping in every way that we can. So all the other coins to me don’t factor in at all.

A: Bitcoin is about user control. Users control the monetary policy. You control it, you control it, I control it. There’s not a small group of people controlling the monetary policy. And that’s really what we are here for. We’re here to create an alternative to the fiat system where a small group of people can basically determine the rules. I was in a meeting yesterday with an amazing guy named Fodé Diop from Senegal, and he’s telling me this story from the late 1990s. Where he is living in a country that uses the CFA. It’s a French colonial currency so the French in Paris control these people and they make decisions on behalf of them. His father had saved up all this money for him to go to college and the French just decided to devalue the currency overnight. And he could no longer pursue his dreams. That’s why when he saw Bitcoin later he was so open to it and excited and he said, this is my ticket out of here. At the end of the day the difference between Bitcoin and all the other coins is that with Bitcoin, we control the monetary policy, it’s not going to change, and with every single other coin, it’s up to some small group of people who are going to, best case, do their best.

J: Until they don’t. Until they get corrupted in some other way.

A: The track record for this globally is not so great. There’s always this temptation to print more to fix the problems. Well, you can’t do that with Bitcoin.

Now, when we talk about other digital currencies, there is a digital currency phenomenon that I did want to talk to you about and that’s central bank digital currencies. So it appears that around the world there’s this drive to move beyond paper cash and bring us to a system where citizens actually may have a liability of the central bank on their phone, as opposed to using paper money. This obviously presents a lot of civil liberties concerns. Even Christine Lagarde has said that the digital euro won’t really have full privacy. Obviously the Chinese government is pursuing an aggressive CBDC. These things are likely to lead to forced spending, negative interest rates, confiscation, blacklists. This is all happening, there’s this war on cash. What are your thoughts on this idea of financial freedom and privacy in a world that is moving beyond paper money?

J: I think all of the things that you mentioned in terms of what central banks are trying to do are just bumps in the road and they are bullshit. We have a much better alternative in Bitcoin. We have designs for that privacy and that freedom within it. The more that we — and especially our governments — can realize that and get in the boat sooner, the better we all are.

A: A lot of people say Bitcoin is just for bad people. It’s just for bad actors. What’s your response to that — that it’s just for criminals, the same sort of stuff that they said in the early ’90s about encryption. Right, they said it’s going to be for bad people, we don’t want Americans to have privacy. Well thankfully the cypherpunks make it possible for us to have tools like Signal. What is your response when you talk to regulators or government officials and when they say this is just too risky or it’s going to hurt people?

J: It feels like it’s a cover for something else going on. I don’t actually hear that a lot from regulators. Square was one of the first companies that was public that talked to the SEC [U.S. Securities and Exchange Commission] about Bitcoin and that never came up. So it feels like there’s probably something a little bit deeper when you’re hearing any of these excuses and it’s just about trying to understand what that really is. I think it’s just about losing power, effectively.

A: One of the interesting things about Bitcoin is how the incentives align. Recently there was a little bit of a controversy with some of the companies that are doing Bitcoin mining, and a software upgrade that’s going to bring new privacy to Bitcoin called Taproot, which is in the process of activating right now, which is very exciting, but one of these companies, they weren’t signaling for Taproot. And then there was this huge community backlash and the company was actually forced to come out with a video message and say ‘sorry, we’re definitely going to signal.’ They basically bent the knee to the community. Have you seen that unique phenomenon before?

J: It was awesome.

A: Where a corporation is virtue signaling for censorship-resistance and privacy? What do you see when you look at stuff like that?

J: It was awesome the community could change the path and the mindset. I think it’s incredible. I don’t know why it didn’t happen sooner but it’s just another lesson for any company trying to get into the space.

A: There’s a lot of people who say Wall Street’s just going to control Bitcoin. They are just going to make it a tool for themselves. This is a nice example of how that’s probably not the case.

J: It can’t and it never will, it never will. And the more companies, small, big, that try to demonstrate that and try to offset their corporateness by doing things that are more supportive of the community such as creating a Square Crypto-like thing, such as creating a [Cryptocurrency Open Patent Alliance] COPA-like thing to give up Bitcoin patents to protect the community, it becomes more and more resilient every single day.

A: I often think about how the world is focused on the micro-movements of the bitcoin exchange rate versus the dollar. And meanwhile this incredible foundational upgrade has essentially been transformed into reality by the users and nobody is paying attention to this. It’s kind of interesting, right, it’s almost like running interference for the real revolution.

J: It’s working, it’s incredible.

A: I wanted to hit another topic. We hear a lot about Bitcoin’s energy use. And you all at Square just put out a paper with Ark that described how actually, Bitcoin mining might incentivize the adoption of renewable energy and it may actually help unlock renewable sources that are stranded or otherwise unused around the world. Can you talk to us a little bit about why you have this belief or philosophy that Bitcoin mining is actually helpful for our species and our planet?

J: You just look at the economics of it and ultimately miners have to make a profit. And getting cheap renewable energy maximizes their potential for profit. It’s really that simple. And I thought I had an agreement with some notable figures out there, and that seemed to change in a matter of weeks and now it’s in a weird kind of place. But I believe fully that Bitcoin over time and today does incentivize more renewable energy. And I think it does incentivize more awareness around how we’re getting that power and gives people more freedom to convert unused, wasted power into something that provides value for billions of people around the world.

A: Just a couple facts I’d throw out to the audience. The U.S. government this year is decommissioning for political reasons more nuclear power than is necessary to essentially power the entire Bitcoin network. We need to think carefully about energy and waste and the environment but there’s more than meets the eye here and I’d encourage all of you to dig in and learn more about Bitcoin mining.

I also wanted to share briefly this example of how it could benefit people in emerging markets. So a lot of philanthropists and outside investors have been trying to help Virunga National Park in the DRC, in the Congo. And they’ve been building some hydro facilities there, they have this mighty river, and incredible natural resources, but the problem is when they build the dam it takes time to connect the transmission lines to the dam, so the project remains fairly inert for awhile, and it’s not that exciting of a development project for that reason. But about a year and half ago, the people who run the park — which, by the way, is an incredible park that supports an area of five million people and some of the most amazing wildlife on the planet — they decided to start Bitcoin mining. And it gave them a source of revenue that can allow them to bootstrap the rest of their operations. And more of this is coming online across the country. This is going to happen in so many countries that can start unlocking solar, wind, renewable, you name it. They are going to start realizing that this can help bootstrap them into some energy independence. I think that’s important for you to consider when you are reading these headlines about how Bitcoin is boiling the oceans, you need to think deeper.

J: 100%. Well said.

A: We’re going to wrap up. I have one more thing to say. 32 years ago today, these incredibly brave students in Tiananmen Square stood up for freedom. The Chinese people are still fighting that fight today, especially the Uyghur people, especially the Tibetan people, especially people in Hong Kong. We often hear that Bitcoin is a threat to America and is a threat to our values. But is it really? Isn’t Bitcoin’s free speech and property rights and sovereignty, don’t you think that vibes better with us than a closed, Communist police state? Don’t you think that we’re going to benefit a little more than some other countries? Could you even say that Bitcoin is patriotic?

J: 100%. But I think Bitcoin benefits the entire world. That’s what makes it incredible. Is that every single person in the world will benefit and get value from utilizing this. And the more accessible we can make it — just that realization that we finally have a currency that can be traded to any single point on the planet — is pretty incredible and what that enables going forward is mind-blowing. And I’m going to do everything in my power to make sure that happens.

A: This concept that Bitcoin is for everyone is I think what I want you to go home with. Bitcoin is non-discriminatory, it cannot choose who uses it, and none of you can block our access or her access, or his access, it is something that is open for all of us, and it’s open source, and as a human rights activist I am grateful that companies like Square are supporting the open-source side of Bitcoin, are supporting non-custodial use, are supporting Lightning — these are things that I don’t think may have been possible before Bitcoin’s incentive structure. So I really wanted to thank you Jack for coming out and sharing your thoughts. It’s obviously a tricky political situation out there but I think we agree that Bitcoin is the way forward.

J: 100%. It’s the only way out.

This is a guest post by Alex Gladstein. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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