Wagging the Bitcoin Dog

On Wednesday, thousands of Salvadorans celebrated the 200th anniversary of the country’s independence by marching in protest against President Nayib Bukele’s administration. President Bukele’s decision to make Bitcoin an officially recognized currency in El Salvador succeeded in getting a lot of attention. And that was precisely the point. The boldness of the plan, its bungled rollout, and its embrace of “the new” no matter the predictable disruptions associated with insisting that Bitcoin be widely accepted as legal tender, meant that some of the attention that should have been paid to Bukele’s anti-democratic efforts was diverted. Bukele is playing a massive game of wag the dog, but instead of doing so with a foreign invasion, his administration is doing the same through its strategic embrace of Bitcoin.

Bukele came to power in 2019, riding on a wave of anti-establishment sentiment. Exhausted and frustrated by the inability of the traditional parties on the right and the left (ARENA and FMLN) to deliver on their promises of security and shared economic growth, the country turned to a young, charismatic politician whose primary qualification was that he was not aligned with either traditional party. Early in what is supposed to be a five-year term in office, Bukele had to deal with the COVID-19 crisis and he took a hard line, imposing a toque de queda, a stay at home order, with only limited exceptions. Though the order faced opposition, it arguably did succeed in saving the country from the harms experienced by countries whose leaders did not take the virus seriously. His success was rewarded in the midterm elections, with his party winning a supermajority of seats and both ARENA and FLMN reduced to shells of their former selves.

With the legislative branch fully in his pocket after the midterms, Bukele moved to neutralize the only remaining the check on his ambitions, the country’s high court. Using their supermajority, Bukele’s party sacked the sitting judges of the Constitutional Chamber of the Supreme Court as well as Attorney General Raul Melara in early May of this year. Earlier this month, the reconstituted Supreme Court did the master’s bidding, signing off on the President seeking reelection and serving a non-consecutive second term. For a country that passed through a lengthy civil war, a long series of coups, and that continues to suffer from deeply entrenched insecurity and violence, the current move towards authoritarianism should be deeply troubling.

Not coincidentally, at the same time as Bukele has been consolidating power, he also has been promoting the move to Bitcoin. Western media reports include fawning quotes from technology company CEOs without even a mention of Bukele’s power grabs. Living up to its deserved reputation as a tool associated with criminality, the Salvadoran move to Bitcoin is very much political theater. This is not to defend the country’s status quo when it comes to currency—El Salvador dollarized twenty years ago, moving from a pegged exchange to the U.S. dollar as the official currency—which continues to generate periodic calls (mainly from the left) to bring back the colón. But compared to the dollar, Bitcoin promises to be highly disruptive, risky at both the individual and national level, and involve transition costs that invite corruption. El Salvador remains heavily dependent on remittances from the United States, remittances that come primarily in the form of dollars sent home by immigrants. Forcing parties on both sides of this relationship to move to Bitcoin-based exchange and Bitcoin-enabled electronic wallets is not a small ask.

Bukele likely knows all this. Part of the wave of modern internet populists, Bukele has shown that he is both clever and attentive to political winds. Coopting the word “chivo”—which in Spanish traditionally means goat but which in El Salvador means cool and is, arguably, the most commonly used word in the country—as the name for El Salvador’s Bitcoin wallet, is either a sign of Bukele’s political genius or of his outsized ambition. Bitcoin stations were vandalized during the protests on Wednesday, with protestors holding up signs calling Bukele a dictator and crossing out the symbol for Bitcoin.

With few official checks left to constrain Bukele, it is not clear what effect these and future protests may have, but hopefully a new generation of politicians can sense these same political winds. Die-hards on the right and the left likely hope that pushback against Bukele is a signal that the country is ready for a return to two party dominance by ARENA or FLMN, yet the past two elections show that Salvadorans are not looking for a return to the failed politics of the past. Bukele remains popular, and for many good reasons. The country was ready for a new brand of politics, one that stepped forward rather than clung to the war era, one that embraced youth and vibrant potential. Bukele seemed to offer such a break, which makes it all the more disappointing that Bukele’s main interest seems power rather than transformation.

Hopefully the Bitcoin switch is seen for what it is, a misguided attempt to deflect attention from efforts to undermine the country’s constitutional order. It may turn out to be the misstep that creates space for a new and necessary opposition party to rise from the ashes of the old order. That will be up to the Salvadoran people, but Wednesday’s protests are cause for cautious optimism.

Check Also

How Corporations Won the War on Terror

The costs and consequences of America’s twenty-first-century wars have by now been well-documented — a …