Bukele's Plan — Launching National Cryptocurrency by Year's End
The Bukele administration has been planning to launch a national stablecoin cryptocurrency, which it preliminarily called “Colón-Dollar,” by the end of this year. The move would restore a key element of monetary policy which the country lost when it adopted the U.S. Dollar in 2001: the ability to issue national currency. The government’s plan also includes the use of blockchain technology to digitize a wide array of public and private documents, including personal ID cards and property deeds.
El Faro has over two hours of footage from virtual meetings, as well as documents registering Ibrajim and Yusef Bukele, the president’s brothers and his closest advisors, negotiating on behalf of the Salvadoran government, the rollout plan, and timeline, representing two years of work beginning in November of 2019. At least 50 people have participated in the negotiations, including senior officials from the Secretariat of Innovation from the President’s Office, external advisors, and private contractors.
Asked for a reaction via WhatsApp before publication, press secretary Ernesto Sanabria told El Faro that the government isn’t considering any monetary changes beyond the Bitcoin Law approved on June 8. “The only public policy that [the government] has backed is that of Bitcoin alongside the dollar, with the dollar as the currency of reference. All the rest were discarded ideas or simply third-party proposals,” he wrote.
While the press secretary claims that the administration has discarded these conversations and plans, three fundamental steps discussed in the videos have already been taken: the approval of the Bitcoin Law, the creation of a government cryptocurrency wallet, and the announcement that the government will give each citizen $30 in bitcoin to incentivize use of the wallet. A source familiar with the negotiations confirmed to El Faro that even after the Bitcoin law was passed, the plan remained intact to launch the national cryptocurrency.
The top government negotiators in this effort aren’t formal government officials, but rather, the president’s two brothers. In a series of meetings on May 27, June 4, and June 7, 2021 — from which El Faro had obtained footage — they present themselves as his advisors and indicate that Nayib Bukele has the final say.
Press Secretary Sanabria also told El Faro that Ibrajim and Yusef Bukele do not hold formal posts in their brother’s administration: “The president’s brothers don’t work for the government, but it’s a secret to nobody that the president listens to them and frequently consults with them to make his decisions,” he wrote via WhatsApp.
In a June 4 meeting with blockchain companies WhizGrid and Cardano, Bukele’s brother Ibrajim said, “What we want to do first is build our government wallet and also stablecoin.” Ibrajim then added the government’s next move: “digitizing all of the government.” At that point, the Salvadoran public knew nothing about the government’s plans to adopt bitcoin as a national currency. The next day, President Bukele grabbed global headlines in Miami by announcing that bitcoin would become legal tender.
To oversee this emerging financial system in El Salvador, the administration is looking to create a superintendency called the El Salvador Blockchain Committee (ESBCC), according to slides presented during these meetings which El Faro reviewed. These documents on the ESBCC contain the institutional logos of the Secretariat of Innovation (an agency under the President’s Office), the Central Reserve Bank, the Financial System Superintendency, and the National Registry of Persons.
For now there’s no evidence that the government is planning to replace the U.S. dollar with the Colón-Dollar, but it hopes to have the national cryptocurrency in circulation and changing hands — or phones — by New Year, according to the conversations.
“This is just the beginning,” Ibrajim said in a separate meeting with Massachusetts blockchain company Algorand on June 7, in reference to the Bitcoin Law that the legislature would approve in the span of five hours the next day. “In the future, we’d like to make all cryptocurrencies legal tender, but for that to happen we need government infrastructure that is up to the task for what’s ahead.”
“The decision to make this is already done”
On May 27, eight days before the announcement that bitcoin would become legal tender, Yusef and Ibrajim Bukele met with Jack Mallers, founder of cryptocurrency wallet developer Strike and promoter of the bitcoin experiment in El Zonte, who says he lived in El Salvador for three months. Also in attendance was Strike’s chief financial officer Bob Scully. Strike announced on May 5 that it would create the Salvadoran government’s wallet, called Chivo, a slang term that roughly translates to “cool”.
Public officials who attended the May 27 meeting include: Vladimir Handal and Fabrizio Mena, secretary and undersecretary of innovation, respectively; Andrés Ortiz, a web developer also working for the President’s Office; and Alejandro Muyshondt, national security advisor. Also in attendance were Carlos Alfaro, a private sector advisor; Guillermo Hasbun, a popular YouTuber known as GabeHash who is also president of CIFCO, the International Center for Fairs and Conventions; and Christopher Meléndez Bertrand, who wrote his University of El Salvador thesis on blockchain technology in New York State. El Faro could not identify the other three attendees.
Strike’s CEO, Jack Mallers, claimed during the meeting that his company’s cryptocurrency wallet platform has over 100,000 users. He noted one hurdle for increasing downloads: “The big roadblock that we run into is, at least on the merchant acceptance side, that they get a little nervous when we mention bitcoin because they don't know exactly how that's regulated or if they're going to do something kinda wrong.”
Ibrajim responded that the government will create financial incentives for merchants and consumers to trade using cryptocurrency. “Our plan for rapid adoption is to give out $50 to everyone who signs up. That way, everyone will sign up automatically to the payment app.” In a national broadcast on June 24, President Bukele reduced the quantity to $30 and added that it would be issued in non-convertible bitcoin.
At the close of the meeting, Yusef announced that President Bukele, his brother, had already made up his mind to move forward with bitcoin and the wallet. “The decision to make this, that's already done. The decision of when to launch the first announcement and what announcement that would be, we’ll have to do it in the next few days.”
“We Have to Kickstart This”
Simultaneous to the creation of the government crypto wallet, the government planned the development of a national stablecoin, which the administration tentatively called ‘Colón-Dollar’ in reference to El Salvador’s to the Colón, which it adopted in 1892, and the U.S. Dollar, which it adopted in 2001.
A stablecoin is a class of cryptocurrency whose trade value — unlike bitcoin — doesn’t depend on sheer supply and demand for the coin, but rather matches the value of an influential fiat currency, like the U.S. Dollar or Euro, or a precious metal, like gold. This makes stablecoins attractive to traders who want the more stable price of the paper currency but want to keep their financial assets in cryptocurrency.
The Salvadoran government’s stablecoin, the Colón-Dollar, would be issued by the Central Reserve Bank, backed by a reserve of U.S. dollars, and integrated with the government wallet, Chivo. To incentivize its use, Ibrajim explained in his June 4 meeting with stablecoin experts that the government would start by creating a reserve of dollars to back the Colón-Dollar.
“If we can make this government wallet backed by, I don't know, 500 million U.S. dollars in the Central Bank to have this stablecoin teller where we can give out subsidies and loans to these people, that would help us a lot at the beginning,” he said at the meeting, which had a dozen attendees, including government officials, external advisors, and members of private sector.
“The only way for you to get some government coin is to buy it,” Ibrajim continued. “So let's say we give out, I don't know, a five percent discount on every government service if you pay with our wallet. With our coin.”
One of the attendees was Ramy Copty, the Cyprian cofounder of WhizGrid, a consulting firm based in Cyprus dedicated to developing cryptocurrency infrastructure. “We champion creative untried blockchain concepts and convert them into fully-formed, operational and innovative financial solutions,” says their website.
WhizGrid says its first contact with the Salvadoran government was in November of 2019 at a “digital technology event” in San Salvador on “the benefits of blockchain technology for the government and citizens.” That same month, the company says it met with Vladimir Handal and his advisors to “discuss various possible blockchain solutions.” Eighteen months later, in April, the company finished an extensive report to the Salvadoran government, proposing the name of the stablecoin, potential features and uses for the coin, and a project timeline.
After the government wallet and stablecoin, the administration’s next step, according to a preliminary written timeline reviewed by El Faro, is to gradually digitize all government records and processes, starting with identification, social security cards, and tax records, followed by property deeds, birth certificates, vaccination cards and other medical records, subsidy cards, professional and academic certificates, and criminal records. The digital forms of these documents would be stored on blockchain technology. According to the timeline, the government hoped to complete the digitization between March and November 2022.
In early June, WhizGrid made a proposal to the Salvadoran government, alongside Swiss blockchain company Cardano, to provide consulting services for its stablecoin and other blockchain projects. They promised that, if selected, they would also enlist the help of the Austrian Blockchain Center to train a “local” Salvadoran team and otherwise assist in the project rollouts. “We don't actually have a regional office for Central America or South America,” said Copty. “So if we were to do a project of this scale, why shouldn't El Salvador be the Cardano main hub for the entire region? It makes perfect sense.”
The preliminary timeline shows that, by August, the Salvadoran government hopes to have a strategic and legal analysis on adjusting national laws to blockchain technology. By September 7, they hope to have developed the Colón-Dollar, along with the digital wallet and point-of-sale infrastructure, compatible with Android and iOS. A week later, by September 14, they hope to have a macroeconomic analysis and legal strategy for digitizing public records and issuing subsidies. By the end of this year, they hope that the cryptocurrency would begin circulating.
In his June 7 meeting with Algorand, two days after the bitcoin announcement and one day before the Bitcoin Law passed through the Legislative Assembly, Ibrajim Bukele told those in attendance that his brother, the president, was in a hurry.
“I just got a message from the president, so we have to kickstart this. We have to rush it because there's too many people right now interested in it,” said Ibrajim. “So, we're going to have a discussion today with the president about the next steps to do this. But we're really interested in bringing all the great minds of the world and really building a society for the future.”
FI name: July 2021