Nation State Adoption Fallacy
The deeper I reflect and think about things, the more I am convinced that the idea of "nation state adoption" of Bitcoin was a huge mistake. On paper it has its merits, but the biggest fallacy with it was that the state would voluntarily commit financial suicide by handing over control of the money printer to a decentralized network of anons.
The state is neither a charity nor a moral institution. It is also not a neutral arbiter that simply seeks the public good. Like every organization, it responds to incentives, and the incentive structure of the modern nation-state points in one direction above all others; the preservation and expansion of its own power. Money is the bloodstream of that power.
If the state's only goal is the expansion of its power then how does adopting Bitcoin over the USD, sterling or Euro further that goal? It doesn't. The printing press finances wars that taxpayers would never willingly pay for. It also finances sprawling bureaucracies, surveillance programs, intelligence agencies, subsidies, political patronage, and endless deficits that no private institution could survive. Fiat money allows governments to consume resources before anyone notices the theft. It socializes the costs while privatizing the gains.
In a bid to believe in fairytales, this idea gained traction even more so following El Salvador's 2021 Bitcoin legal tender law. Millions of Bitcoiners saw it as the beginning of a domino effect. If one country could do it, perhaps others would soon follow. I was one of those that cheered for it, but looking back a few years later it does seem like the momentum has dampened a bit. Especially given how the IMF has defanged the whole arrangement. Yes El Salvador still holds Bitcoin, and its experiment has produced important lessons, but it has also revealed something else; even governments sympathetic to Bitcoin do not operate in a vacuum. The international financial system has gatekeepers.
The IMF, the World Bank, multinational development banks, and the broader dollar-based monetary order possess enormous leverage over countries dependent on external financing. The pressure exerted on El Salvador demonstrated that sovereign monetary policy is often less sovereign than advertised. In December 2024, the Bukele administration reached a $1.4 billion loan agreement with the IMF, and it came with huge shackles attached.
Under the revised terms, Bitcoin acceptance became voluntary for private businesses, tax payments could only be made in U.S. dollars, and the Chivo Wallet would be gradually unwound and its public funding terminated. The state would also no longer accumulate new Bitcoin and the Fidebitcoin trust fund would be dissolved. Even the public addresses of the government's Bitcoin holdings would be handed over to IMF auditors for quarterly inspection!
Think about that for a moment. The first and only nation-state to embrace Bitcoin as legal tender was forced, by the very financial architecture it sought to escape, to kneel before the IMF and sign away its monetary experiment in exchange for a line of credit denominated in the very fiat currency it had supposedly rejected. The IMF didn't even have to work hard for this victory. As their own report noted with smug satisfaction, "the adoption of Bitcoin as official currency with legal tender status has thus far not led to visible improvements in financial inclusion" and "there is no evidence of any beneficial use case of Bitcoin for the unbanked population." The institution that has spent decades trapping developing nations in debt servitude simply waited for the adoption metrics to disappoint, then moved in for the kill with the patience of a predator that knows its prey is already wounded.
The IMF also pre-emptively blocked the pathway for Argentina to follow in El Salvador's footsteps. That's not to say El Salvador isn't better off with Bitcoin, but its recognition of the fact that if a country that has a pro-Bitcoin govt was pressured by the banksters through the IMF to compromise their Bitcoin adoption policy, how much more those govts that are already Bitcoin hostile?
Furthermore, it's this same idea that invited the strategic Bitcoin reserve nonsense (SBR), where ignorant and economically illiterate politicos were even talking about "backing the dollar" with Bitcoin and paying off the national debt (which is always expanding by the second) via an SBR. LOL! đ
It betrays a fundamental misunderstanding of both Bitcoin and the state. Bitcoin cannot "back" the dollar any more than gold could back the assignat. The dollar is a debt instrument, a claim on future taxation and inflation. Bitcoin is a bearer asset in a decentralized settlement network. The two are structurally incompatible.
None of these ideas are realistic but a lot of folks, due to craving legitimacy from the same system they were meant to obsolete, applauded these statements. Bitcoin became a political talking point, that would be conveniently mentioned during political fundraisers and was thus exploited by the marauding charlatans running for office, while looking to fill their coffers with the donations of gullible Bitcoiners who would become moonstruck whenever Bitcoin was mentioned, along with the ever elusive SBR.
The movement that once proudly declared "Don't trust, verify" increasingly found itself trusting politicians whose incentives had never changed. That was another obvious red flag. Yet the SBR nonsense continued because it offered something seductive; legitimacy. The craving for state validation is the original sin of every revolutionary movement that has ever been neutralized. We saw it with Occupy Wall Street, whose radical critique of crony capitalism was absorbed and redirected into Democratic Party fundraising. We also saw it with the Tea Party movement, whose libertarian energy was harnessed by establishment Republicans to elect the same corporatists they had railed against.
The state has centuries of experience in this art and also used it to lull some Bitcoiners into a deep slumber of inaction, while being hustled for political donations. The powers that be know that infiltration is often cheaper than confrontation and that that the most effective way to kill a threatening movement is not to oppose it, but to embrace and eventually co-opt it. This ensures that the system remains intact while its loudest critics become stakeholders in its continuation. Talk about bringing the fox into the hen house.
In fact, the state actually seized this moment of temporary hypnosis and started working on CBDCs, a far worse iteration of fiat money, while simultaneously preaching the SBR doctrine. Through the lobbying efforts of BlackRock type firms, regulations were introduced that favoured and promoted stablecoins over Bitcoin.
Despite the orange pilling of politicos, endless conference panels featuring policymakers, and numerous SBR bills; what has materially changed? Not much, as there's still no meaningful nation state adoption anywhere outside of El Salvador.
Instead what we do have are more CBDCs, Bitcoin ETFs, stablecoin proliferation, travel rule implementation, more KYC, more devs on trial or in prison, more restrictions on cryptocurrencies in general, more surveillance and zero financial privacy. This isn't to mock the efforts of those that are working hard to engage policymakers on these issues, as there are principled individuals fighting difficult battles inside legislatures and regulatory bodies, and their work often prevents even worse outcomes; but it's just a reality check on the soundness of a particular strategy.
The truth of the matter is that genuine social transformation rarely emerges through political participation in the stateâs institutions and political processes. States possess overwhelming advantages within their own arenas because they write the rules, interpret the rules, and enforce the rules. Genuine change happens through building parallel institutions and the network of voluntary exchanges that operate outside the state's regulatory and taxation frameworks. Bitcoin perfectly embodies this and it spread because individuals found it useful, not because governments endorsed it. Its success has always been bottom-up and never top-down.
This is why the focus should have been on grassroots adoption the whole time. This is the path we should have been walking on, not because it's easier, after all building parallel institutions is exponentially harder than writing a check to a political campaign; but because it is the only path that does not lead back into the belly of the beast. Expecting the powers that be to give up the money printer for the greater good was a fool's errand. The printing press is simply too intoxicating, too politically useful, and too deeply woven into the machinery of modern government to be abandoned voluntarily.
The challenge was never convincing the state to adopt Bitcoin, but it was ensuring that Bitcoiners never adopted the state's way of thinking. The moment Bitcoiners begin measuring success by legislation rather than liberty, by elections rather than adoption, they have already accepted the premise that political power is the engine of social change. It is not. Mñarkets are.
Free people cooperating voluntarily accomplish more than governments legislating compulsorily ever will. Perhaps the greatest lesson of the past several years is not that nation-state adoption was impossible. Rather, it is that Bitcoin's greatest strength has always been its complete indifference to political approval. Bukele is not a template for a movement's success. He is the exception that proves the rule; a singular figure operating in a singular political environment, and even he was forced to bend under IMF pressure. Betting a movement's future on more Bukeles appearing is not a strategy; it's vain hope.
So where does this leave us? It leaves us exactly where we started, but with the advantage of hard-won wisdom. The task before us is not to persuade the powerful to relinquish their power. It is to make their power irrelevant by building alternatives that are so robust and so economically superior that the state's offerings become the equivalent of a buggy whip in the age of the automobile.
