El Salvador / Politics

'Dismantling democracy is antithetical to bitcoin'


Tuesday, November 2, 2021
Nelson Rauda

Alex Gladstein thinks that Bitcoin is a revolution as seismic as the invention of email, that El Salvador made history in adopting the cryptocurrency as legal tender, and that Nayib Bukele’s government is becoming a dictatorship.

Gladstein, born in Connecticut in 1986, is an activist for human rights and bitcoin. He knows that in El Salvador, perhaps more than anywhere in the world, the causes seem polarly opposed. On one hand, Bitcoin — which turned 13 this Halloween — is one of the Bukele administration’s biggest gambles, garnering attention and positive headlines around the globe. On the other, Bukele’s attack on democracy is one of the reasons why he has actively sought and even paid millions of dollars to earn those headlines. Although he recently began preaching the gospel of Bitcoin, human rights and democracy are Gladstein’s specialty — in fact, his career. 

Gladstein is Chief Strategy Officer of the Human Rights Foundation, a non-profit established in 2005 that promotes human rights and focuses on authoritarian regimes. Gladstein, who majored in international relations at Tufts University, has worked on Cuba and North Korea. Every year, HRF organizes the Oslo Freedom Forum, which has been described as a “Coachella for activists and dissidents”. This year’s conference took place in Miami, bringing together bitcoiners with human right defenders from places like Nicaragua, Venezuela and North Korea. Gladstein spoke to El Faro on October 6, poolside in the glitzy SLS hotel at Miami Beach. 

“My theory is that Bitcoin is a trojan horse. Governments will adopt Bitcoin out of their own self-interest and self-preservation, but what they don't know about or care about or even understand is that Bitcoin is a machine that turns greed into freedom,” he says. 

Gladstein sees the contradictions in El Salvador. “Bitcoin use is overwhelmingly and virtually entirely voluntary on this Earth. They're choosing to use it, in India, in Nigeria, in Russia. Only in one place is it not voluntary,” he says.

Alex Gladstein, an activist for human rights and bitcoin, in an interview in Miami Beach on October 6, 2021. Photo: Nelson Rauda/El Faro
Alex Gladstein, an activist for human rights and bitcoin, in an interview in Miami Beach on October 6, 2021. Photo: Nelson Rauda/El Faro

Gladstein penned an essay,  “The Village and the Strongman,” for Bitcoin Magazine. President Bukele has retweeted other posts from Bitcoin Magazine, but not that one. Gladstein called him the “personification of digital populism”, said that he is “following the blueprint Hugo Chávez used in the 2000s in Venezuela to consolidate power, only much faster,” and concluded: “A Bukele dictatorship is not inevitable, but it looks more likely every day.”

“When I first started analyzing the situation I said the big question will be:  Will he abuse his power to change the law and run again? That was in June and I was thinking that maybe next year. In three months, he did it!  Things are happening so fast it's shocking.”

He believes Bukele will go down in history for his bitcoin gamble. 

“If Bitcoin grows and thrives. He’ll look like a visionary, regardless of whether he's a dictator or beautiful Democrat. It doesn't fucking matter. The price is the only thing that will determine his legacy and I'm here to tell you that I think the price is going to go up. So we need to start dealing with that now.”

There are both explicit and hidden reasons for El Salvador’s adoption of bitcoin. The administration touts the attraction of foreign investment and cheaper remittances, which constitute one fifth of the Salvadoran economy. Experts see the move as a way for Bukele to have leverage in the event the Biden administration sanctions him, as it already has with nine officials loyal to him, for corruption or attacking democracy. The Salvadoran government has gone as far to plan the creation of its own cryptocurrency.

Gladstein’s theory is that Bukele saw bitcoin “as a way to get famous cheaply and to try to become the most well known Central American leader, and he succeeded in all of that within a year.” Just how cheap is yet to be seen. The administration has sealed all information on how they’ve spent a $150 million trust fund approved to get the Bitcoin Law in motion, according to the Salvadoran chapter of Transparency International, which requested the information.

“Bitcoin knows that you want to just make money, and it doesn't need to be seen in an evil way, but the more people see Bitcoin, they want to get in, because the price goes up over time. Bitcoin twists that and it knows that and it turns that greed into expanding freedom for everybody in the world,” says Gladstein.

“With Bitcoin your phone is your bank”, he explains. “You don't need to go to a bank, you don't need to deal with the government. You can earn and save by yourself without an ID and you can connect with anyone in the world.”

The Salvadoran Bitcoin Law doesn’t fit that definition. For one, it makes the use of bitcoin mandatory. The government also promotes a wallet that offers a $30 sign-up bonus and discounts on gasoline. Gladstein believes that one of his key messages for a Salvadoran audience is to dissociate bitcoin from the government. “Don’t use Chivo,” the government wallet, he recommends.

For Salvadorans, especially the ones who don’t like Bukele, the relationship between the government and the cryptocurrency has been written in stone. On Independence Day, during the first massive protest against the administration, protestors burned a bitcoin ATM in the center of San Salvador. “There are a lot of misconceptions and the government has done a terrible job with education. They kept everybody in the dark, so I totally empathize with the protesters and I understand why they were angry,” says Gladstein. 

“Chivo promises to pay in Bitcoin, just like Cashapp in America”, he argues. “When I go to my Cashapp and buy ten dollars of Bitcoin it's not mine. It's Cashapp's. It's a promise to pay you, because they could just go out of business tomorrow and you don't get your money. Salvadorans will appreciate that it's important to have physical cash, because it's your actual money. In the same way, you don’t want your Bitcoin on Chivo because that's  somebody else's promise to pay.”

“If you actually want to be your own bank, you need to withdraw to your own control. I think the campaign needs to be ‘no to Chivo’ [because] Chivo is contradictory to bitcoin. Chivo is not bitcoin. I think protesting Chivo is a great way of expressing displeasure and fighting the government.”

A small group of protestors set the Chivo ATM in Gerardo Barrios Plaza on fire during mass anti-government protests in San Salvador on September 15, Bicentennial Independence Day. Photo: Carlos Barrera/El Faro
A small group of protestors set the Chivo ATM in Gerardo Barrios Plaza on fire during mass anti-government protests in San Salvador on September 15, Bicentennial Independence Day. Photo: Carlos Barrera/El Faro

HRF, where Gladstein works, has called El Salvador a “competitive authoritarian” regime with “residual freedom,” the same category for Nicaragua. Gladstein says bitcoin and the technology it runs on are tools for dissidents of authoritarian regimes.

“The Chinese government is abusing technology to put leaders in prison camps, to abuse millions of people and to surveil them. At the same time, technology can be an empowerment tool. And that's the Bitcoin side of the story. Encrypted messaging, Signal, virtual private networks, VPNs, navigators like Tor, and Bitcoin are all freedom technology. Most technology is surveillance and authoritarian technology: AI, Big Data surveillance, Big Data analysis. All will be abused by governments to spy on and control you. Bitcoin allows you to be free. So Bitcoin is anti-authoritarian technology.”

“When I talk to journalists, we talk about how they can set up Bitcoin to keep their work going because the government shut down their bank account. The cosmic irony is that El Faro may soon enough need bitcoin, because the government may close your bank account because they don't like you and they're turning into a dictatorship.” 

The Problem with the Dollar

Gladstein believes the international financial system doesn’t work and that bitcoin is the solution. “If money was good and neutral, Bitcoin would die. If the money that governments made was neutral, open, a good store of value, and connected us all in a beautiful way, and was fair and just, Bitcoin would be completely useless,” he says. “Public money today is subjective, discriminatory, exclusionary, broken, nationalized, and vulcanized, and breaks people apart instead of connecting them. That's why Bitcoin will win.”

He places himself on the far end of the range of economists who have pointed to the risks of Bukele’s gambit on an untested currency, and who have defended the dollar stability and pointed to corruption in bitcoin and the environmental cost of validating bitcoin transactions by huge computer centers. Gladstein believes dollarization has been bad for the world and, especially, for Salvadorans. 

“I'm a beneficiary of the dollar and the dollar has dominated the world, but the dollar has negative externalities that people don't like to talk about. The dollar is backed by the U.S. military, the largest consumer of oil in the world. The dollar is propped up by our relationship with Saudi Arabia, because we need the Saudis to price oil in dollars. Money used to be backed by gold until the 70s, when Nixon took us off the gold standard. We've been on the oil standard since, and that's bad for the planet,” he argues.

On the issue of corruption, Gladstein doesn’t go into security risks, identity theft, extortion, or hackers. He points to problems with the U.S. dollar. “You can do corruption with bitcoin, but the bitcoin itself cannot be corrupted. No one can print more or censor it. The dollar is corrupted all the time. They print more to bail out banks. Salvadorans are dollarized, but you guys aren't getting stimulus checks whenever we have inflation. America prints a bunch of money and sends checks to the people. Did you guys get checks? No, so you're getting the worst part of the deal,” he argues.

Soldiers and police officers guard a Chivo ATM near the lunchrooms in the municipal market of Santa Tecla, La Libertad.
Soldiers and police officers guard a Chivo ATM near the lunchrooms in the municipal market of Santa Tecla, La Libertad. 'They ask us to make a report on those who come to see the ATM,' said a soldier as he took down the name of a photojournalist from El Faro. Photo: Víctor Peña/El Faro

Gladstein draws a comparison with dollarization, which took El Salvador by storm 20 years ago. “Let's go back to January 2001. Why should Salvadorans care about the dollar? Because it's gonna change your life, even if you really don't like Bitcoin, or you don't like Bukele,” he says.

If fiat money is a horse and buggy, bitcoin is the automobile, says Gladstein. He sees it as a better technology that the current bank transfer system. “Why did we go from mailing postcards and letters to email? Bitcoin is better money than fiat,” he says.

“Lightning, the Bitcoin Network, allows money to go from one place to another instantly in the world almost for free. It's a major upgrade on the existing Swift banking system, which can freeze money for days.” Swift is a safe messaging system that the majority of banks in the world use. Gladstein predicts that every remittance in the world will be sent over Lighting, eventually taking over Swift. 

“I'm not basing this on some religious zeal. I'm basing this on what my eyes have seen and on macroeconomic and political knowledge of the world through my 15 years of experience doing human rights activism, and studying the way that dictatorships and democracies run their economies into the ground over time. Bitcoin will continue to increase in value and  governments, individuals, and businesses will adopt it because it's simply better money”.

Media Malpractice on Bitcoin

Bitcoin just recently emerged as a topic of national discussion in El Salvador, and Gladstein thinks the media hasn’t done its job.

“In my country the media has gaslit the people. During the last 10 years, the New York Times and all these prestigious newspapers said Bitcoin is dangerous and risky. It has been dangerous and risky to not own Bitcoin in the last 10 years. Things might be changing right now. Maybe they're working on new stuff and changing their mind, but for the last 10 years, it's been an open and closed book.”

Gladstein believes it’s important to point out price volatility and to register when it drops. “It's also your responsibility to tell them [bitcoin] has gone up 10-fold in the last year, 100-fold in the last five years and 5,00-fold in the last 10 years.”

A glance at recent economic history shows, says Gladstein, that the rise in the price of bitcoin isn’t a symptom of a financial bubble ready to burst.

“At the end of the 1990s, technology stocks in the United States became over-inflated.  There was a buying frenzy and then fear came, the market crashed, and everybody lost everything. A bubble would also be like in the great financial crisis in the United States: the values of homes were over-inflated and then it popped. If you think it's a bubble, I would urge you to look very carefully at the history of bitcoin. Bubbles don't last 12 years.”

As to whether Salvadorans should trust the cryptocurrency, Gladstein leans on a bitcoin motto: “don't trust, verify.”

Bitcoin’s founding document concludes: “We have proposed a system for electronic transactions without relying on trust.” Gladstein reinforces that idea: “Bitcoin went from a dollar to $55,000. That’s a fact. You need to be reasonable and look at the price history of Bitcoin yourself and make your own decisions.”

“Bitcoin is a law that benefits only wealthy businesspeople,” said Jorge Magaña (in the red handkerchief) in the minutes before the march on Roosevelt Alameda in front of Cuscatlán Park.
“Bitcoin is a law that benefits only wealthy businesspeople,” said Jorge Magaña (in the red handkerchief) in the minutes before the march on Roosevelt Alameda in front of Cuscatlán Park.

Gladstein spent a couple of weeks in El Zonte, best known as El Salvador’s Bitcoin Beach, a coastal community where people have been experimenting with bitcoin for years. There he met Karla, a barista. “She told me: ‘I don't want my salary in bitcoin. I don't trust it yet, but I'm willing to take the risk on tips.’ That's a conservative, careful, smart way of thinking about it. Of course, if you need to spend every cent, then bitcoin is not very useful for you right now.” 

“Crypto is the continuation of the existing financial system by other means”

As convinced as he is that bitcoin is revolutionary and the future, Gladstein thinks the same cannot be said for the rest of crypto. 

“Crypto is just the continuation of the existing financial system by other means. That's something a lot of people don't want to admit because they're very invested in these other cryptocurrencies.”

There are hundreds of cryptocurrencies. Brock Pierce, a billionaire that hosted a beach party on the night that Bitcoin Law was implemented, created his own coin, Tether. Milena Mayorga, the Salvadoran ambassador in Washington, met Pierce in June and has referenced him as a “bitcoin ambassador and investor.” Gladstein says Pierce is not a good representative of bitcoin. 

“Those guys didn't go to El Salvador to promote Bitcoin. They went to promote crypto. People like Brock printed their own money and they're trying to convince Salvadorans to use it.”

“It's very tempting. It's a greedy thing. These people come in and they want you guys to use their coin. Crypto is manipulated. It's centralized. It's all a sham. Somebody's in control and you need to be careful of that. Bitcoin is decentralized. No one controls it and it's equal for everybody. Panama is talking about a crypto law. That's not interesting. It’s not going to be revolutionary for anybody”. 

Gladstein says he’s trying to educate bitcoiners about the reality of the small Central American country they are so thrilled about. “I've tried to use my influence in the bitcoin community to educate bitcoiners about Bukele. It’s been controversial because bitcoiners want to just be positive about what's happening in El Salvador, and I’m raining on their parade.”

“My recommendation to people who want to go to El Salvador is to study what Bukele has done and read your coverage. They could read what I wrote, they could read Jose Miguel Vivanco,” Americas director for Human Rights Watch. “It’s quite clear that Bukele is dismantling democracy very fast, and that's antithetical to bitcoin.”

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