Could a Small Country Adopt Bitcoin Cash as local tender?

Adoption
#1

I have long felt that adoption as native currency is the long-term way forward for Crypto. Once upon a time Bitcoin was the prefered coin, but these days it has to be Bitcoin Cash. A more mature approach, acknowleging problems brings us closer to this important milestone, I hope.

Executive Summary

A small state with chronic inflation, a weak balance of payments and entrenched corruption can replace its currency with Bitcoin Cash (BCH), fund the switch largely through state mining, and collect almost all of its revenue through a single, low-rate transaction tax that is computed from the public blockchain.

The design rests on one idea: at every point, registering is cheaper than hiding. Declared wallets pay no tax on transfers between themselves. Registered traders pay a lower rate. Registered residents receive a tax-free allowance, fee rebates and consumer protection. Declaring wallets is voluntary, but a declared wallet simply pays, like a known customer’s cheque, while an undeclared one must show identity for large purchases. Staying invisible always costs more.

The headline rules:

  • Money. BCH becomes sole legal tender. Existing notes stay legal indefinitely at a slowly decaying rate against BCH. New small notes are likely, so people always have cash in their pockets.
  • Reserves. The state accumulates BCH quietly, mainly by mining, before it announces anything. It switches the currency only after the price has settled.
  • Tax. Every other tax is replaced by one transaction tax: a small floor rate on every transfer plus a full rate on sales to the public. Liability is calculated from the chain, so returns are near-automatic.
  • Enforcement. Certified payment terminals, tax collected by registered businesses, a voluntary declaration of wallets that frees the holder from checks at the till, and a registry that links declared wallets to people, with strict, logged access.
  • Banking. Payments settle on-chain and are fully backed. Savings can be lent out, with every bank’s reserves and liabilities provable in public.
  • Protection. Home, car and other long-term finance is tied to the value of what is bought, not to BCH, so it stays fair to both sides whichever way BCH moves. Payments are capped for a limited period when a household’s income falls. An optional Safe Wallet standard protects against scams and duress.
  • Integrity. Treasury keys are split between five offices of government. Reserves sit in time-locked vaults. Core rules need a two-thirds majority to change. The state never borrows in BCH: it saves in good years and draws on its fund in bad ones.

Moving early adds a further prize. Early adopters buy before the price reflects national adoption, secure mining power cheaply and become hubs of the BCH economy. Later adopters gain less financially but take on a proven model at lower risk. The full paper sets out why, and how. The plan is built to work without any windfall; a windfall is an upside, not the foundation.

The Problem

The state this proposal addresses is small, open and trapped: its money loses value, its borrowing is in dollars, and its tax base leaks through cash and corruption. No real country is named; the pattern is common.

  • Inflation. The local currency loses value year after year. Citizens convert their wages into dollars or goods as soon as they are paid. Savings in local money are a losing bet, so few people save in it.
  • Balance of payments. Imports, especially fuel and food, exceed exports. Foreign-currency reserves are thin. Each devaluation makes imports dearer and feeds the next round of inflation.
  • Foreign debt. Much of the state’s debt is owed in dollars to foreign creditors and multilateral lenders. Servicing it crowds out public spending and ties policy to the lenders’ conditions.
  • A cash economy that escapes tax. Large transactions happen in cash, off the books. Tax falls heavily on the few who cannot avoid it, such as salaried employees and importers at the border.
  • Corruption in collection. Money leaks between the taxpayer and the treasury. Officials pocket cash payments, sell favourable assessments and trade on inside knowledge.
  • Banking that fails its customers. Credit is scarce or captured by insiders. Dishonest lenders and loan sharks fill the gap. Correspondent banks abroad are cutting ties with small, risky jurisdictions.

Conventional fixes have been tried: IMF programmes, currency boards tied to the dollar, tax reform drives. Each depends on institutions that the corruption itself has weakened. This proposal changes the infrastructure instead, so that honest behaviour is the cheapest option and dishonest behaviour leaves a permanent, public trail.

No country is free of corruption; it is a matter of degree. On Transparency International’s Corruption Perceptions Index, more than two-thirds of the 182 countries scored fall below 50 out of 100, and the global average is 42 (Transparency International, 2026). The aim is not perfection but direction: to move the worst-governed countries onto a path where corruption becomes visible, costly and steadily rarer. Progress can be judged by a country’s movement up the index over time.

Contents of the full paper

  • Executive Summary
  • The Problem
  • Why Moving Early Matters
  • Who Should Go First
  • Why Bitcoin Cash
  • Guiding Principles
  • Part 1 — Currency and Transition
  • Part 2 — Building the Reserves
  • Part 3 — Taxation
  • Part 4 — Enforcement and the Address Registry
  • Part 5 — Banking and Credit
  • Part 6 — Payments and Consumer Protection
  • Part 7 — Chain Governance
  • Part 8 — Capture-Proofing
  • Part 9 — Resilience
  • Part 10 — Managing the Economy Without a Printing Press
  • Implementation Timeline
  • Risks and Open Questions
  • References

The full paper is a 36-page PDF. I’m not sure whether Dropbox links are allowed here, but I’m happy to send a Dropbox link by private message, or post it here, if anyone is interested.

I’d welcome criticism of any part of it, especially from anyone with experience in tax, central banking or BCH protocol work.

2 Likes
#2

Any country could theoretically, absolutely adopt BCH as a local tender

But right now it probably does not align with the interest of a country to do that.

#3

I’ve tried to give a reasoned account of why and under what circumstances it would, because I really think that there are circumstances right now where it would align with everybody’s interest.

The other reason for looking at this is because it throws into focus things that might be missing. For example, out of this comes the safe wallet standard (Well as yet there isnt even a proposal…) . Bitcoin affectionados have long poo-pooed the idea of safe wallets, my coins, my keys, I take responsibility for my patyments etc etc, but the truth is the safety embodied in any banking app, where it checks who you are paying, so that you dont accidentally pay the wrong person, and building into the wallet an easy refund method, all at the non-protocol level on an opt-in basis, is a real thing. Ordinary users of banking apps have their money saved on a daily basis becase of such checks, and if we are serious about global money we need and could have such a thing.

Really what I’m saying is I am sure this will come one day, and that thinking about whats needed is a good thing to do now.

2 Likes
#6

There is a “report” button. I have just used it, I suggest you do the same.

#7

Welcome to Bitcoin Cash research! This is an important topic, but a big and very difficult one.

In theory: Could a small country adopt BCH as legal tender? Yes. Nothing is stopping it, anyone who wants to do it can do it at any time.

In practice: Nobody that I’m aware of is currently and seriously focussed on getting national adoption in that way. It’s possible, but it’s a HUGE ask in terms of creating political connections, money required, effort, running a small trial, getting local exchanges on board etc. etc. etc. If YOU would like to start that project, that would be fantastic. But the reason it hasn’t happened yet is very very simple, it’s a titanic task and so far the existing BCH community have been too busy with other priorities.

Final note: Some attempts at this HAVE been made. It was “almost” announced that St Kitts would have legal tender at the BCH conference in November 2022. You can look up the livestream where the prime minister made an announcement. It was expected he would say BCH could be made legal tender, but instead he said they would produce a REPORT about legal tender in March 2023, a report which they never ended up making.

Who knows what kind of politics and deals were made behind the scenes, both for this initial announcement to happen and for it to collapse afterwards. But if you are seriously interested in getting a small nation state adopted, I would suggest you do a lot of research on this previous case study so you can see what actually might be the factors at play and what mistakes you can avoid in your new attempt.

As far as I know, most of the people who WERE involved in that attempt ended up either moving onto other things or were so disappointed by the whole affair they lost interest in continuing to work on it. Take that for what you will. That was just one case in one country. In another country, at another time, with another group of people the result could always be different.

My recommendation: To the extent that you’re interested in this, you probably want to try and make an action based plan and start with that rather than producing a lot of theoretical documents. You will learn far more trying to get it done and writing notes about what happened then writing documents of the theory of how everything would work before actually going out there to do it.

#8

Good advice, thank you. It seems to me that although its a given that existing tax regimes can be more or less hostile to BCH (like the Uk is extremely and unnecessarily hostile right now) the real gain comes with legal tender adoption. Its radical, of course but there could be huge advantages for the government, the country and individuals so it seems to me an important and rare example of a winwin situation for adoptees. But you cant half-do it, because the whole tax regime and credit sector has to change as well. In the Uk adoption by real businesses has plumeted in the last 10 years, and although the solid basis of BCH is wonderful, sadly I see no incentive for normal businesses to do partial adoption. I shall research the St Kits case.

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#9

The “safe wallet” idea is the part that stood out to me most, and it doesn’t need a country to adopt BCH first. Wallets can already do much of it today.

From the wallet support side, the mistakes that are hardest to fix are usually sending to the wrong address or network, pasting an address that was swapped or came from a scammer, or being talked into a payment. A few opt-in checks that could help:

  • a clear warning the first time you send to a new address
  • showing a saved contact name for addresses you’ve paid before
  • a warning when an address looks like it belongs to a different network
  • an extra confirmation step for larger payments

Refunds are harder, because an on-chain payment can’t be reversed without the receiver’s cooperation. That’s why catching problems before sending probably matters most.

#10

So a couple of things I see as features of a future “safe wallet”

  1. An opt-in list of known addresses. So even if you have never paid XX before, it will still know that the correct address of XX is what you put in. This is exactly the opposite of privacy, but people like the council tax or electricity supply company dont need privacy, quite the reverse their addresses or payment codes should be “well known”

  2. Banks in the Uk currently have a scheme where is a payment is reported as fraudulent (and it can be a very loose definition) then the payment can be reversed. The safe wallet should incorporate some way of making this happen on an opt in basis. There are at least 2 parts to this - the payee needs to have an address that could be used for a refund should one be needed, and 2) someone to make a decision about the refunds which would be binding on the party accepting the payment. All this needs to be worked out of course.

  3. Certainly extra confirmation for larger payments, maybe daily payment limits, maybe duress passwords that show a more limited balance. Many of us send a smaller amount to an address when sending larger payments and then check it arrived, perhaps automation of this protocol would be useful.

  4. Direct debits, standing orders of course.

But I think you have made a very good point Anzus_GemWallet, we could do this right now. And we should remember that if BCH ever becomes everyday money, most people using it will have their minds on other things, and we need to make it so even stupid, gullable people can use the wallet without loosing their funds, because they will certainly blame us if they do!!

#11

Thanks, that’s a good list. The test-payment idea stands out to me. Many people already do it by hand, so a wallet offering it for the first payment to a new address would be an easy win.

A verified list for well-known payees like utilities also makes sense, as long as it stays opt-in and it’s clear who maintains it, since that list would become a target for scammers too.

For refunds, choosing who decides is the hard part. It probably works best when both sides agree to it before paying, like escrow, rather than as something added after the payment.

#12

So to make that work the receiver would need to enable the feature, and would be something along the lines of send a message to the stated coin address on receipt. I am not quite sure what the status of messages in bitcoin cash is, but in the early days of bitcoin you could certainly send messages, these days I expect the problem is more a case of spoilt for choice, but the receiver needs to be empowered to respond on receipt of funds and then the sender on receipt of message sends the rest of the funds.

1 Like