Cash on the Blockchain

Cash on the Blockchain

Disclaimer: Your capital is at risk. This is not investment advice.

ByteFolio Issue 93;

President Nayib Bukele has been re-elected as El Salvador’s president with an impressive 85% share of the vote. Having imprisoned 2% of the adult male population, identified as gang members with their facial tattoos, the crime rate has collapsed, making El Salvador a safer place to live.

Bukele famously made Bitcoin a legal tender in El Salvador in 2021 and instructed the central bank to buy some. The establishment, such as the IMF, was gleeful when bitcoin’s price collapsed in 2022 and briefly saw the country’s bonds collapse. Yet today, their bonds trade close to par.

El Salvador Bonds and Bitcoin

Source: Bloomberg

El Salvador is also embracing stablecoins, which, as I mentioned last week, are growing again. They are the ultimate expression of an open economy by enabling fiat transactions without the constraints of the banking system.

There is no doubt a bright future for digital dollars, but some want to see central bank digital currencies flourish, such as the ECB, China, and the UK’s Labour Party. Others are opposed, such as Donald Trump, because they are concerned about the impact on financial freedom.   

It is a simple argument. We should all agree on the need for 21st-century money that sits on faster and unconstrained payment rails. But at the same time, why do governments need to be involved at all? The stablecoin is the private sector’s solution, and Tether is thriving and most probably patched up due to the vast profits courtesy of higher interest rates. The government can tax and regulate, and that ought to be enough. 

At ByteTree, we believe stablecoins are one of the most important investment themes in crypto, and given they already exceed $120 billion, they will soon become a major force within the global financial system. Regulators will wrestle for control, but they’ll probably fall short of total control, at least outside of their borders, for that is the nature of crypto.

ByteFolio adds a new holding that is relevant to this important conversation.