The Legal Regimes of Bitcoin: “A Form of Order Without Law”

Abstract

On September 7, 2021, El Salvador became the first country to adopt Bitcoin as its legal tender by establishing the “Bitcoin Law.” The Bitcoin Law is the first statute that describes its main objectives and endows Bitcoin with the status of a legal tender in El Salvador. Pursuant to the Bitcoin Law, El Salvador not only accepts Bitcoin as a means of payment methods for taxes and outstanding debts, but also requires all business enterprises to adopt Bitcoin as a medium of exchange for all commercial transactions. However, the soul of Bitcoin is not the state; instead, it belongs to a decentralized entity with incentives to maintain this currency. Therefore, the essence of Bitcoin is “a form of order without law.” A successful Bitcoin ecosystem would generate a mixture of law and nonlegal orders. In the midst of growing literature on digital currency, El Salvador offers a rare opportunity to understand the functions and limitations of Bitcoin as a legal tender in a monetary sovereignty.