Crypto Evangelists Enter Bukele Government: The Dark Business of Bitcoin in El Salvador | International

American crypto-evangelist Max Keizer has compared Salvadoran President Nayib Bukele to John F. Kennedy and El Salvador to the Kingdom of Camelot, describing it as a kind of promised land for bitcoin where taxes and central banks are ridden like dragons. Until a few months ago, Keizer – an American former stockbroker and reporter close to Russian propaganda sites – was just one of the many foreign characters who began arriving in the country in 2021, after Bukele announced that El Salvador would be the first in the country. the world to accept bitcoin as legal tender.

Many of these characters – a mix of anarcho-capitalists, cyber-utopians and plain old opportunists – left El Salvador as enthusiasm for the bitcoin project began to wane. Only 14% of the country’s businesses have ever used bitcoin, according to official figures. But those characters who are still in the country have gone in all the way — people like Keizer and his wife, Stacy Herbert. Since the end of last year, Keizer and Hebert have been responsible for the country’s national Bitcoin office. El Salvador, one of the smallest and poorest countries in the region, has crypto-evangelicals in its government.

The creation of the National Bitcoin Office, like the rest of Bukele’s crypto project and much of the government’s leadership, is shrouded in secrecy. The only figures that have been released are the $200 million spent on the infrastructure to launch the digital currency, such as bitcoin ATMs and a mobile phone app. Beyond what Bukele has announced on Twitter, it is not known how much the country has invested in bitcoin. Like Bukele, Keizer and Herbet are also active on social media, with more than 700,000 followers. Their YouTube shows and podcasts are the main source of information about El Salvador’s bitcoin policies.

Keizer and Herbert both present themselves as a sort of crypto police or crypto judges. They have the authority to investigate possible fraud, and it is they who decide which investors are allowed in and which are not. – We don’t get paid for this. We do it for President Bukele,” Herbert often says, while her husband calls their work “an act of love”. Apart from their alleged altruism, the couple owns Heisenberg Capital, a fund belonging to Bitfinex, one of the world’s largest platforms for buying and selling bitcoin. And they also own El Zonte Capital, another fund dedicated exclusively to digital investments in El Salvador.

Propaganda and corporate diplomacy

Ricardo Valencia, professor of political economy at California State University, argues that for Keizer and Herbert, “the true value of the office is not monetary, but for propaganda and corporate diplomacy.” The National Bitcoin Office is linked to the Presidency of the Republic and has the power to establish international relations. Valencia, who is also a specialist in communications, points out that “it has the ability to draft public policies that are mandatory for other ministries in the country and gives Keizer and Herbert official titles to inaugurate bitcoin embassies in Europe and the United States.”

Texas and Switzerland have already welcomed Salvadoran bitcoin embassies, which work in parallel with official diplomatic channels. “A network of apocryphal diplomats is being built up that will serve to spread official and corporate propaganda. It is an exchange of services within the patrimonial use of the state. In El Salvador, there is no difference between Bukele’s personal deposits and public finances, Valencia adds. Given the risks associated with bitcoin, such as its high volatility and lack of transparency, Bukele’s decision to make the cryptocurrency legal tender has drawn sharp rebuke from the International Monetary Fund (IMF), rating agencies and even the US government.

Bitcoin City

In June 2021, Bukele announced that bitcoin would be the official currency of his country, along with the dollar. He made the announcement during the Bitcoin conference in Miami, a large-scale event with concerts, sumo wrestlers, TV-style presentations and slogans such as “death to the dollar” and “all against the Federal Reserve.” Crypto-evangelicals criticize the state because they consider it the enemy of what they call “individual sovereignty.” For them, neither Elon Musk nor Mark Zuckerberg is disruptive enough. They understand life in society as a jungle or a casino, where practically the only law is the direct exchange of digital money.

Bukele also shares this messianic tone and flashy exhibitionism. In late 2021, Bukele hosted Bitcoin Week in El Salvador — an event that tried to mimic the vibe of the Miami conference. At the party to celebrate the end of the event, Bukele walked to the main stage, at the foot of the beach, while a giant screen projected in neon blue letters: “The President”. Laser lights, smoke cannons and fireworks went off as the president took the microphone: “When Alexander the Great was about to conquer the world, he decided to establish 20 Alexandrias throughout his empire. These cities were beacons of hope for the rest of the planet. We must establish our first Alexandria here, in El Salvador. Let’s build Bitcoin City.”

Bukele said his Bitcoin City would be powered by geothermal energy from a nearby volcano, and that the money to set up schools, hospitals and the rest of the services needed would come from so-called volcano bonds or bitcoin bonds: new Salvadoran public debt securities backed by bitcoin. A year and a half after the announcement, El Salvador – turning a deaf ear to the IMF’s warnings – has drafted a law that will allow it to raise $1 billion via bitcoin-backed bonds. Keizer and Herbert have played a key role in this process. According to a survey by The Wall Street JournalBitfinex – the parent company of their two funds – will not only provide the technological platform for the bonds, but will also request a license to operate as a trader.

But Keizer and Herbert aren’t the only influential figures from the crypto world who have collaborated to implement El Salvador’s bitcoin transition. Jack Mallers, a 27-year-old who created an application for instant money transfers via bitcoin, was one of the president’s closest advisers in drafting the law that formally introduced the currency to the country. Like Keizer and Herbert, he also had a vested interest in El Salvador’s bitcoin project: he hoped his application would be able to gain ground in the country’s money transfer market. About 20% of El Salvador’s gross domestic product (GDP) comes from money sent by Salvadorans living abroad, especially in the United States. But the project did not work, and according to sources close to Mallers, he has not set foot in the country again.

Only 2% of transfers are transferred via bitcoin, according to data from the central bank. And about 70% of Salvadorans don’t even have a bank account. “Financial inclusion was one of the goals of the bitcoin project. But there is no public policy that develops these goals, says economist Tatiana Marroquín. “The other goals were to promote the country’s brand image and the reception of tourists. But with everything that has happened with bitcoin in recent months – falling prices, financial fraud – El Salvador’s financial profile has fallen instead of rising.”

Bitcoin has lost 40% of its value in the past year. And since Bukele announced that it would be legal tender, the IMF has issued more and more warnings. The latest warning was a response to the impending issuance of the so-called volcano bonds. In a statement last month, the international institution stressed: “Given the legal risks, fiscal fragility and largely speculative nature of crypto markets, governments should reconsider their plans to expand government exposure to Bitcoin, including by issuing tokenized bonds.”

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