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Salvadoran President Nayib Bukele. Photo: MARVIN RECINOS / Getty Images

El Salvador, wracked with gang violence, has a reputation for being the deadliest place on the planet that isn’t an actual war zone.

Driving the news: It’s also newly hot in the crypto world, after President Nayib Bukele announced (and swiftly enacted) a law saying his country would accept bitcoin as legal tender.

Context: El Salvador hasn’t had its own currency since 2000, when it switched to the dollar. It therefore loses no sovereignty or seignorage by adopting a second external currency as legal tender.

  • The law makes any capital gains from investing in bitcoin tax-free, which Bukele hopes will attract some of the crypto industry to his country.

Between the lines: Bukele’s authoritarian and anti-democratic tendencies are probably stronger than his grasp of economic concepts like the distinction between stocks and flows.

How it works: The Salvadoran government intends to set up a trust at the Development Bank of El Salvador “to instantly convert bitcoin to U.S. dollars.”

  • The risk here is that El Salvador, either by accident or design, will become a commission-free laundromat for any criminals wanting to turn dirty bitcoin into clean dollars.
  • Bukele has frequently been accused of working closely with the MS13 gang in particular.

Be smart: Bukele has framed this move as helping facilitate remittance flows into the country. But bitcoin has not played an important role in remittances anywhere.

  • As cryptocurrency consultant Eloisa Marchesoni told Fortune, Bukele’s idea, given bitcoin volatility and gas fees, “does not make sense at all.”

Our thought bubble via Coindesk's Nikhilesh De: Most other countries are letting businesses make their own decisions around whether they want to handle bitcoin. Others prevent them from touching the cryptocurrency. El Salvador is bucking the trend by trying to force businesses to accept the cryptocurrency.

  • Few countries — even those without their own currency — are expected to follow suit.

The bottom line: El Salvador’s move does nothing to reassure observers who worry that bitcoin’s prime real-world use case is crime.

Go deeper

El Salvador’s bitcoin experiment begins

Street vendors in San Salvador have put stickers in their carts that say “No to Bitcoin”. Photo: Marvin Rencinos/AFP via Getty Images

El Salvador’s law making bitcoin legal tender goes into effect today, despite skepticism that the decentralized digital coin can actually work as a country’s currency.

Why it matters: The Central American nation is the first to establish bitcoin as a formal currency.

Felix Salmon, author of Capital
Sep 8, 2021 - Economy & Business

El Salvador's bitcoin experiment has rocky start after sell-off

Data: FactSet; Chart: Axios Visuals

It was a rocky start: Bitcoin suffered a disorderly sell-off on Tuesday, alongside most other cryptocurrencies, to mark the day on which it officially became legal tender in El Salvador, along with the more widely accepted U.S. dollar.

Why it matters: While a 17% daily swing is far from unprecedented for bitcoin, it's not the kind of thing most citizens want from their currencies. Neither is having a payments mechanism that can be unplugged by the government at will.

Updated 5 mins ago - Science

This powerful new accelerator looks for keys to the center of atoms

Illustration: Eniola Odetunde/Axios

Nuclear physicists trying to piece together how atoms are built are about to get a powerful new tool.

Why it matters: When the Facility for Rare Isotope Beams begins experiments later this spring, physicists from around the world will use the particle accelerator to better understand the inner workings of atoms that make up all the matter that can be seen in the universe.