Why Liechtenstein is adopting Bitcoin
Why Liechtenstein is adopting Bitcoin
Europe's hidden tiger principality knows the value of sats.
If I were to write a script on how to slowly introduce the alien concept of "Bitcoin" into a world ruled by fiat money, a variation of the following themes would surely feature:
Inflation (as in stuff getting so expensive, people notice)
Micro monetary Warfare (like censoring of the Canadian truckers’ currency because of their political beliefs)
Macro monetary Warfare (like censoring of Russia’s foreign exchange reserves)
A good old fashioned banking crisis that undermines the public trust in banks
A couple of corruption scandals that shake the public’s worldview and undermine their trust in politicians
An evil bogeyman that wants to eat your privacy and dignity (Central Bank Digital Currencies)
Hyperinflation and banking collapse in a few countries
Small countries slowly adopting Bitcoin by accepting it for certain use cases (like taxes)
Putting Christine Lagarde in charge of the European Central Bank
Ok that last one was a bit tongue in cheek - but you get the point.
One thing I wouldn't add to the script is a whole nation adopting Bitcoin as legal tender. In my eyes the move by El Salvador is still to be considered extremely bold. I'm going there in November to check it out myself. But today I'd like to talk about the other sort of nation state adoption. The quiet one.
The tiny country of Liechtenstein is even tinier than the tiny country of Austria.
In fact, Liechtenstein is somewhat of a "Little Austria" that has done many things differently than its big brother. Here in Vienna, many Palaces and Castles are still named "Liechtenstein", but the actual country is far away, tucked in between the western province of Vorarlberg and Switzerland, whose currency Liechtenstein uses: the legendary Swiss Franc.
The Principality of Liechtenstein is a semi constitutional monarchy headed by the Prince of Liechtenstein, Hans-Adam II. He is the wealthiest monarch in Europe, boasting a personal net worth of $6.2 billion.
I won’t bore you with the details of the complicated history of Liechtenstein and Austria, let's just say: It's a tiny, very wealthy country where people speak German and once a year all 39,000 inhabitants are invited for a party with the prince. Coincidentally, Liechtenstein’s National Day is the 15th of August and has been since 1940. Exactly 31 years before Nixon ended the Gold Standard.
Here's the thing: Prince Hans-Adam is a friend of German anarcho-capitalist economist Hans-Hermann Hoppe. And the prince actually wrote a book that seems to be heavily inspired by "The Sovereign Individual". It's called The State in the Third Millennium.
No, I haven't read it (yet), but here is Wikipedia:
He stated that government should be limited to a small set of tasks and abilities, writing that people "have to free the state from all the unnecessary tasks and burdens with which it has been loaded during the last hundred years, which have distracted it from its two main tasks: maintenance of the rule of law and foreign policy."
His brother Philipp is big on Austrian Economics. I met him once when I received a journalism award sponsored by the Liechtenstein bank LGT - for an interview I did with fellow Austrian Austrians Mark Valek and Ronald Stoeferle who run Incrementum out of Liechtenstein - and publish the legendary "In Gold We Trust Report".
I'm telling you all this to give some context on the recent decision by the government of Liechtenstein (the democratic part so to say) to introduce tax payments in Bitcoin. This was announced just a few days ago. There aren't too many details yet, but to me it seems like a move they thought about a lot before they announced it. In a bull market things like this just happen - in a bear market they bear (sorry) more significance.
There is no reason for euphoria. Some parts of Switzerland (Zug, Lugano) have had this option for a while and as far as I know, very few people are taking advantage of Bitcoin payment.
But there is one truly fascinating angle here. By accepting Bitcoin as **money** to pay for taxes, these small nations destroy the most ridiculous of arguments that statists and fiat bros use: that their paper has value *because* you can pay taxes for it.
It's the opposite of El Salvador’s approach. A slow and steady implementation of Bitcoin into the state's affairs. For starters, Liechtenstein will swap the Bitcoin payments into Swiss Francs - but who is to say they won't change course at some point and keep some Bitcoin?
We've recently also been introduced to the third way to adopt Bitcoin: Secretly mining it with surplus energy like the kingdom of Bhutan does.
We should expect these news to continue, even in a bear market like we have now. I do hope the experiment in El Salvador works out as putting a country on a Bitcoin standard is probably the single best thing a leader can do for his people.
But even if the powers that be manage to stop Bukele, they won't stop all the small independent nations adopting Bitcoin because it's in their interest to adopt Bitcoin.
Until next time, Niko
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