El Salvador has become the first country to adopt bitcoin as legal tender, CNBC reported. Lawmakers in El Salvador’s Congress voted by a “supermajority” in favor of the Bitcoin Law. It got 62 out of 84 of the legislature’s vote.
As you might have expected, the price of bitcoin went up by 5% to $34,239.17 shortly after the results of the vote was known. This is a good example of something else CNBC reported:
Bitcoin is known for wild price swings that have prompted critics to suggest it is not suitable as an effective currency. It is still unclear how El Salvador will ultimately roll out bitcoin as legal tender.
As a result of the Bitcoin Law, prices in El Salvador can now be shown in bitcoin, tax contributions can be paid with digital currency, and exchanges in bitcoin will not be subject to capital gains tax. According to the law, the exchange rate with the U.S. dollar “will be freely established by the market.” Currently, El Salvador’s official currency is the U.S. dollar.
CNBC reported that, according to the Bitcoin Law, approximately 70% of El Salvador does not have access to traditional financial services. The use of bitcoin is seen as away to increase financial inclusion.
Reuters reported that President Nayub Bukele has touted the use of bitcoin for its potential to help Salvadorians living abroad to send remittances back home, while saying the U.S. dollar will also continue as legal tender.
The use of bitcoin will be optional – not required. El Salvador will begin using bitcoin as legal tender in 90 days, with the bitcoin-dollar exchange rate set by the market.
It seems to me that the use of bitcoin as one of the official currencies of an entire nation could be risky. Bitcoin has a tendency to plunge based on something random, such as a questionable tweet from Elon Musk. What happens if a Salvadorian living abroad sends bitcoin to a relative in El Salvador – and the price of the currency significantly drops on its way over? That’s something the Salvadorian government will have to figure out.
The U.S. Department of Justice announced that it seized 63.7 bitcoins currently valued at approximately $2.3 million. According to the Department of Justice, “these funds allegedly represent the proceeds of a May 8, ransom payment to individuals in a group known as DarkSide.” This is the group that targeted the Colonial Pipeline, causing it to shutdown.
As alleged in the supporting affidavit, by reviewing the Bitcoin public ledger, law enforcement was able to track multiple transfers of bitcoin and identify that approximately 63.7 bitcoins, representing the proceeds of the victim’s ransom payment, had been transferred to a specific address, for which the FBI has the “private key,” or the rough equivalent of a password needed to access assets accessible from the specific Bitcoin address. This bitcoin represents proceeds traceable to a computer intrusion and property involved in money laundering and may be seized pursuant to criminal and civil forfeiture statutes.
The Wall Street Journal reported a quote from Stephanie Hinds, acting U.S. attorney for the Northern District of California (where the seizure warrant was obtained). “The extortionists will never see this money. This case demonstrates our resolve to develop methods to prevent evildoers from converting new methods of payment into tools and extortion for undeserved profits.”
The Wall Street Journal also reported that the FBI officially discourages victims from paying ransoms because doing so can become a booming criminal marketplace and often won’t actually result in the restoration of the frozen computer systems.
Krebs on Security reported that Colonial Pipeline stated that the hackers only hit its business IT networks – not its pipeline security or safety systems. Colonial Pipeline shut down its pipeline as a precaution.
According to Krebs on Security, DarkSide (which is described as a “ransomware-as-a-service” syndicate) shut down on May 14, 2021, after posting a farewell message to affiliates. The message said that its Internet servers and cryptocurrency stash were seized by unknown law enforcement entities.
Personally, I find it interesting that the U.S. Department of Justice has the ability to seize cryptocurrency from thieves who received it after inflicting a company with ransomware. Perhaps this will serve as a warning to those who are interested in obtaining cryptocurrency through illegal means.
In March of 2021, Elon Musk announced on Twitter that people could buy a Tesla with Bitcoin. Yesterday, Elon Musk changed his mind about that.
Elon Musk tweeted “Tesla & Bitcoin”, and included a screenshot of a statement:
Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel…
The statement continued: “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment. Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.”
The Verge reported that Bitcoin uses up as much electricity as the Netherlands. CNBC reported in March that researchers at the University of Cambridge found that Bitcoin uses more electricity on an annual basis than the whole of Argentina.
According to a recent article on CNBC, when Elon Musk made his announcement, the value of the whole cryptocurrency market stood at around $2.43 trillion (according to data from coinmarketcap.com). A few hours later, the market capitalization had dropped to around $2.06 trillion “wiping off around $365.85 billion”.
Personally, I think it is a very good thing that Tesla stopped selling vehicles for Bitcoin. There are other companies that make electric vehicles that a person can purchase for more conventional currency (such as the U.S.dollar). Bitcoin is terrible for the environment, and I am happy that Tesla is no longer accepting it.
Elon Musk, the “Technoking of Tesla”, used Twitter to post some information that people who love cryptocurrency will probably enjoy. His tweet said: “You can now buy a Tesla with Bitcoin.” In a second tweet wrote: “Pay by Bitcoin capability available outside US later this year.”
CNBC reported that Tesla revealed last month that it had bought $1.5 billion worth of bitcoin and that it would soon start accepting the world’s most popular cryptocurrency as a form of payment. According to CNBC, Tesla’s electric vehicles typically cost between $37,990 and $124,000 before tax.
Tesla’s image as an environmentally-friendly car company sits at odds with the bitcoin network’s colossal carbon footprint. Researchers at the University of Cambridge found that it uses more electricity on an annual basis than the whole of Argentina. A 2018 paper published in Nature, arguably the most prestigious academic journal in the world, found that bitcoin emissions alone could push global warming above 2 degrees Celsius.
The Verge reported that according to Tesla’s bitcoin payment terms and conditions, its cars will continue to be priced in US dollars, and customers who choose to will pay the equivalent value in bitcoin. According to The Verge, Tesla estimates that a $100 deposit paid today equals 0.00183659BTC, for example.
Gizmodo pointed out something that was not explained by either Elon Musk or Tesla. Will Tesla price its cars based upon the number of bitcoins or paid for the fiat conversion of the time? If Tesla starts charging, for example, one bitcoin for a car, that will be the equivalent of roughly $56,000 today, but could be much higher or lower tomorrow.
Personally, I think bitcoin, and other cryptocurrency, are a gamble. The price can rapidly fluctuate based on unpredictable circumstances. It can be said that real currency can also do that. The difference is that the U.S. dollar has value because a society of people have agreed to treat it as though it has value. There is no such agreement connected to cryptocurrency.
Jack Dorsey and Jay Z have created an endowment to fund bitcoin development initially in Africa and India, TechCrunch reported. Jack Dorsey is the CEO of Twitter and Square, and Jay-Z is a rapper. TechCrunch also reported that the two have pledged 500 bitcoin – which is around $23.3 million – toward ₿trust.
On February 11, 2021, @jack tweeted: “JAY-Z/@S_C_ and I are giving 500 BTC to a new endowment named ₿trust to fund #Bitcoin development, initially focused on teams in Africa & India. It’ll be set up as blind irrevocable trust, taking zero direction from us. We need 3 board members to start:”
There appears to be good reason to focus on teams in Africa. According to TechCrunch, Africa (especially Nigeria) has experienced a surge in cryptocurrency transactions recently. Cryptocurrency offered protection against currency devaluation and for value exchange during cross-border transactions. Bitcoin is also useful for situations where the government shut down bank accounts.
India, however, might pose a problem regarding Bitcoin. Bloomberg Quint reported that India has introduced a bill called The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, to the ongoing Budget session of Parliament.
It is possible that the 500 BTC in the irrevocable trust could help people in Africa (who are already using Bitcoin.) It might not work out so well in India if their government is ready to ban Bitcoin.
CNBC reported about the downside of Bitcoin. It has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of CO2 annually, according to Digiconomist’s Bitcoin Energy Consumption Index. It also consumes as much power as Chile. The Cambridge Bitcoin Electricity Consumption index says Bitcoin produces 110.53 TWh, which is more than the entire annual energy consumption of the Netherlands.
I think that Jack Dorsey and Jay-Z mean well and want to help people by making Bitcoin available to them. The environmental cost of bitcoin is too high. Perhaps Jack Dorsey and Jay-Z can invest in something that wouldn’t harm the planet as much as cryptocurrency mining does.
The Department of Justice has arrested a man who allegedly was running a bitcoin mixing service on the dark web that helped criminals launder bitcoin transactions. ZDNet reported that this was the first case the Department of Justice brought against a bitcoin mixer.
The Department of Justice stated that Larry Harmon, from Ohio, was arrested for his operation of Helix, which the Department of Justice describes as a “Dark-net based cryptocurrency laundering service.” He was charged with money-laundering conspiracy, operating an unlicensed money transmitting business and conducting money transmission without a D.C. License.
According to the indictment, Harmon operated Helix from 2014 to 2017. Helix functioned as a bitcoin “mixer” or “tumblr,” allowing customers, for a fee, to send bitcoin to designated recipients in a manner that was designed to conceal the source or owner of the bitcoin. Helix was linked to and associated with “Grams,” a Darknet search engine also run by Harmon. Harmon advertised Helix to customers on the Darknet as a way to conceal transactions from law enforcement.
The indictment alleges that Helix moved over 350,000 bitcoin – valued at over $300 million at the time of the transactions – on behalf of customers, with the largest coming from Darknet markets. Helix partnered with the Darknet market AlphaBay to provide laundering services for AlphaBay customers. AlphaBay was one of the largest Darknet marketplaces in operation at the time it was seized by law enforcement in July of 2017.
When I hear the phrase “money-laundering”, it makes me think of physical money being sneakily transferred through various businesses and/or bank accounts. I had not considered that bitcoin could also be laundered, but it appears it is possible. I think that this precedent – that you can get arrested for laundering bitcoin – could make those who are currently doing it consider stopping.
Another interesting thing about this case is that it makes it clear that bitcoin isn’t really private. There are apparently ways for law enforcement to track where the bitcoins go, how many bitcoins go were transferred, and the people involved in transferring it.
Steam announced that it will no longer support Bitcoin as a payment method. This news is going to affect players who were purchasing Steam games with Bitcoin, but doesn’t appear to change things for those using other methods of payment.
Steam says it will no longer support Bitcoin as a payment method on their platform due to high fees and volatility in the value of Bitcoin. In the announcement, Steam points out: “Historically, the value of Bitcoin has been volatile, but the degree of volatility has become extreme in the last few months, losing as much as 25% in value over a period of days.”
This creates a problem for customers trying to purchase games with Bitcoin. When checking out on Steam, a customer will transfer x amount of Bitcoin for the cost of the game, plus y amount of Bitcoin to cover the transaction fee charged by the Bitcoin network. The value of Bitcoin is only guaranteed for a certain period of time, so if the transaction doesn’t complete within that window of time, then the amount of Bitcoin needed to cover the transaction can change. The amount it can change has been increasing recently to a point where it can be significantly different.
Steam points out that when that situation happens, they either have to refund original payment to the user to or ask the user to transfer more funds to cover the remaining balance. The user gets hit with a Bitcoin transaction fee either way. As a result, Steam says it has become untenable to support Bitcoin as a payment option.