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Bukele’s Bitcoin Bonds Could Be a Double-Edged Sword

Bukele’s Bitcoin Bonds Could Be a Double-Edged Sword



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  1. > Aligning so closely with an unpredictable populist like Bukele won’t end well.

    I think that the Bitcoin City project may have to be incorporated as a state-run corporation, owned by, but still sufficiently at arms length from the Salvadorian State. There may certainly be a need for a Chinese wall of sorts. As project owner, the Salvadorian State would set the rules of engagement and the mission statement, but probably not directly operate the entity. There should be a way to separate its day-to-day operations from its political overlord. Incorporated sufficiently at arms length, the project could be rather immune from local politics.

    > Handing half of Bitcoin’s value to sovereign countries could open the door for worldwide consensus on crypto regulation, taxation, and liquidity controls.

    There has never been worldwide consensus, i.e. cartel-like behaviour, on taxation or liquidity controls. A cartel with 200+ participants is simply not viable:

    > *https://www.sciencedirect.com/science/article/abs/pii/105353579190003C*

    > *The common explanation for the instability of cartels is that a successful cartel agreement creates strong incentives for individual members to cheat. Cheating invites retaliation and the result is that the cartel often fails.*

    Every individual cartel member would benefit from undercutting the 199+ other members. A cartel member also knows that the other members would benefit from undercutting him. Since the first to start undercutting the other ones will reap the highest benefits, it becomes a race to rip off the other ones before they rip you off. Furthermore, if you do not rip them off, then someone else will. So, you could as well be the first one to take the other members to the cleaners.

What do you think?

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