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Will the tiny Polynesian island state of Tonga be the next country to embrace Bitcoin? If it were up to Lord Fusitu'a, yes. He wants to encourage the use of Bitcoin in Tonga and introduce a bill similar to the one in El Salvador. In addition, he is exploring bitcoin mining, and ideally, he would also like to see Tonga convert at least 30% of its cash reserves into Bitcoin. He expects there to be strong political support for the plans.
El Salvador's national bitcoin adoption elicited reactions from around the world. Not least from politicians from countries that want to follow suit. If it were up to Tongan MP Lord Fusitu'a, the Polynesian island state of Tonga would be the next country to embrace Bitcoin.
Tonga is a kingdom in the Pacific Ocean consisting of 169 islands, 36 of which are inhabited, with a total population of just over 100,000. Lord Fusitu'a is a member of parliament, belongs to the nobility, and governs one of the districts. He is working hard to make Tonga the second Bitcoin country.
In doing so, Lord Fusitu'a hopes to improve the living standards of the local population and even increase Tonga's Gross National Product (GNP). He has four plans: to encourage bitcoin adoption in Tonga, to introduce a bill similar to the one in El Salvador, to explore bitcoin mining and ideally, he would also like to see Tonga convert 30% of their reserves to bitcoin.
Wishful thinking? Lord Fusitu'a doesn't think so: he expects a lot of political support. In an interview with Bitcoinmagazine.com, he explained his plans.
Better living standards, higher GDP
Bitcoin, according to Lord Fusitu'a, can improve people's living standards and increase Tonga's GDP. Many people from developing countries work abroad and send money back home (international remittances), but pay very high transaction fees. Developing countries lose $700 billion a year as a result, Lord Fusitu'a says in the interview.
Tonga depends more than other countries on those kinds of remittances. "We survive on international remittances," Lord Fusitu'a explains. "My country is one of the highest in the world in that: 40.7%, almost half of our GDP, is made up of international remittances. So without international remittances, our economy collapses. The problem with international money transfers is that the companies that do it, Western Union, MoneyGram, and telephone companies, they cost us at least or on average 30%."
That has a significant effect on the economy. "So of that 40.7% of our GDP, we actually only receive about 21%, because Western Union gets the other half," Lord Fusitu'a explained.
They could save those transaction costs almost entirely with the help of Bitcoin and the Lightning Network. Transactions through Strike, the bitcoin payment app with which the El Salvadoran government partners, cost virtually nothing and are virtually instantaneous.
"For places like this, exposure to 'Bitcoin the network' can instantly change our lives," Lord Fusitu'a explains. "Put 'bitcoin as a possession' aside for a moment, just the exposure to 'Bitcoin the network' with Strike: before, if $100 dollars were sent by our cousin in Los Angeles, we would have received $70 because Western Union took $30 off it."
"Now we receive $100 and we don't have to travel five hours from the village to Western Union both ways. That costs another $10 dollars to go both ways, which is another $20 dollars away."
Lord Fusitu'a finds it remarkable that people in the West usually think of bitcoin first as a hoarding tool and only later as a medium of exchange. In developing countries, he says, this works the other way around. There, he says, people start by using bitcoin as a medium of exchange first, only to use it as a hoarding tool as they become more able to save.
"Even at the first layer, Bitcoin is four times cheaper than Western Union," says Lord Fusitu'a. "And everyone talks about how the first layer is too slow, it costs too much. But no: for us in developing countries, it's still a fourfold cost reduction."
Lord Fusitu'a, therefore, wants to encourage the use of Bitcoin in Tonga as much as possible, initially without government interference. He wants to focus on public education, rolling out the Strike payment app, and he wants to make people and merchants aware that they can install the app on the smartphones they already have, or get them started with BTCPay Server.
'Bitcoin Law'
The second step is to introduce a bill similar to El Salvador's "Bitcoin Law. This seems to imply that he is pushing for the recognition of bitcoin as legal tender.
"The El Salvador team has been generous enough to give me a copy of their bill, so I've been able to go through that," Lord Fusitu'a says. He expects to finish his own bill perhaps as early as this week. This will be followed by an official process, however. In order for the bill to pass, 14 of the 26 seats in parliament must vote in favor.
Lord Fusitu'a, however, expects there to be strong support for it. Nine of the seats in parliament belong to the 'Lords', who always vote as a single voting block. They will all rally behind him, he says in the interview. Three other MPs are said to have already become interested in Bitcoin on their own initiative. "Those are already-orangepilled," Lord Fusitu'a says.
He, therefore, thinks he only needs two more votes, but he expects the arguments in favor to be convincing enough. Few politicians are against increasing the income of the population, he thinks.
Bitcoin Reserves
Third, Lord Fusitu'a also wants to push for the creation of bitcoin reserves. Tonga has about $700 million dollars in foreign currency reserves for importing goods from abroad. Lord Fusitu'a is concerned that the reserves are losing value because of monetary depreciation.
"It's actually kind of the same situation Michael Saylor faced," he explains. "Do I keep it in U.S. dollars, which lose five percent in value every year? Do I invest it in bonds with a negative return of two percent a year? Do I buy gold that has an inflation rate of between 2.2% and 2.4% per year? Or do I invest it in an asset that has increased in value by 200% every year for the past decade?"
"For or against bitcoin, impartially and unemotionally objective - it is the most sensible decision," Lord Fusitu'a believes. He would like to see Tonga hold at least 30% of its cash reserves in bitcoin. He says he is aware that the United States may perceive it as an attack on the dollar. "That will take some negotiation," Lord Fusitu'a said.
Bitcoin mining
It was actually going to stop there. However, when the Bitcoin community got wind of the plans, several bitcoin companies dove in. After all, Bitcoin doesn't just offer opportunities for Tonga; Tonga also offers opportunities for Bitcoin.
"When this became public, I was inundated with generous geothermal energy companies and wave energy companies offering their technology for bitcoin mining," Lord Fusitu'a says in the interview.
On Lord Fusitu'a's island is Tonga's only volcano, a dormant one. He didn't think he could generate power with it, but the companies that approached him to appear to be able to do so. According to Lord Fusitu'a, they offered their technology for free because they like the idea of a small bitcoin country getting it.
"Other companies are newer and offering their technology for free because it's like a pilot program for them, showing at the nation-state level that their technology works," he says.
"So it's now a four-track plan," Lord Fusitu'a concluded.
