#274: El Salvador Declares Bitcoin Legal Tender, & More

El Salvador has become the first country in the world to adopt bitcoin as legal tender. On Wednesday, the Salvadoran Congress approved a bill drafted by President Nayib Bukele to make bitcoin legal tender. The bill passed with 62 out of 84 possible votes, a supermajority.

Now that the bill has passed into law, in El Salvador prices can be denominated in bitcoin, tax contributions can be paid in bitcoin, exchanges in bitcoin will not be subject to the capital gains tax, and merchants must accept bitcoin as payment. The entire bill can be read in full here.

According to Coindesk columnist Frances Coppola, by adopting bitcoin El Salvador is committing to a hard-currency peg and more monetary discipline, breaking with its monetary and fiscal policy dependence on the US.

As we highlighted in a whitepaper published last year, bitcoin could become an important savings vehicle in emerging markets, so much so that businesses might demand payment in bitcoin instead of fiat. If so, the velocity of their fiat currencies would accelerate, causing currency devaluation and exacerbating inflation as measured by their sovereign currencies. In the unfortunate event of hyperinflation, fiat-denominated debt would become worthless and dollar-denominated bonds unpayable.

While the Bitcoin network has not evolved enough to service an entire economy, in our view the demand for bitcoin in emerging markets could increase as its infrastructure scales and reaches critical mass. We believe iif bitcoin were to capture just 5% of the global monetary base outside of the four largest fiat currencies – US dollar, yen, yuan, euro – its market cap could increase by roughly $2 trillion.

This week, Apple’s World Wide Developer Conference kicked off with a jam-packed keynote featuring a host of software and services updates. A common thread throughout the event was an emphasis on enabling Apple users to share data and experiences seamlessly throughout its ecosystem, all with privacy in mind.

• SharePlay, an open API for synchronous content streaming, will enable users to listen to Apple Music or watch a show from HBO Max together with family and friends on a FaceTime call. Combined with Spatial Audio call scheduling and enhanced sharing features in iMessage, the new service will make communication on an Apple device more immersive and convenient.
• In a push to address the digital identity problem and eliminate the need for physical wallets, Apple announced Digital ID, a digital copy of a user’s driver’s license or state ID, which the TSA intends to adopt. Apple could leverage this digital identity to reduce the friction in the authentication for apps and services.
• Apple Health users will be able to share data like activity levels, sleep quality, and heart rates with their physicians and loved ones. This data could inform treatment decisions and alert family members to changes in health associated with irregular heartbeats and accidental falls, among many others.

Combined with new privacy features like on-device voice recognition and IP Address hiding, we believe each of these new services is likely to increase the Apple’s ecosystem stickiness as the social economy’s privacy-first player.

This week, the U.S. Food and Drug Administration (FDA) approved Biogen’s Aducanumab, a drug targeting amyloid plaque buildup in the brains of Alzheimer’s patients. As many families know all too well, Alzheimer’s is a devastating disease during which patients can lose both their memories and their abilities to perform daily tasks. According to the Center for Disease Control and Prevention (CDC), the number of people aged 65+ suffering from Alzheimer’s disease in the US will nearly triple during the next 50 years, from an estimated 5.8 million people today to 14 million in 2060.

The approval of Aducanumab was surprising for several reasons:

• Broad Label: Doctors will be able to prescribe Aducanumab for any Alzheimer’s patients whether they suffer from mild or severe forms of the disease. This broad label was a surprise because the clinical trial included only patients suffering from a mild form of Alzheimer’s.
• Cost: Aducanumab will cost $56,000 annually, a high sticker price given its low efficacy.
• Toxicity: In its approval, the FDA seemed to place little to no emphasis on toxicity, which is puzzling because Alzheimer’s patients will have difficulty communicating ill effects to their families and care givers.
• Clinical Benefit: Biogen will have nine years to complete the trial and demonstrate that Aducanumab delivers clinical benefit.
• Imaging Requirements: By the end of their first year on Aducanumab, patients will have to undergo an MRI instead of a positron emission tomography (PET) scan to confirm beta-amyloid, the drug’s target.
• Advisors: Three of the nine advisors on the Peripheral and Central Nervous System Drugs Advisory Committee – Aaron Kesselheim, Joel Perlmutter, and David Knopman – stepped down following the approval.

If the FDA seems to be approving therapeutic agents targeted at diseases with high unmet needs before confirmatory trials end, we believe the value of other such therapies showing little clinical efficacy could be much higher than most investors expect.

This week Facebook announced that it will launch a smartwatch next summer. According to several reports, the $400 smartwatch will feature two cameras and LTE connectivity.

So, why is the world’s largest social media company entering the highly competitive smartwatch space? In our view, the answer lies in Facebook’s ambitions to lower its dependence on Apple and control the next mobile computing platform – augmented reality (AR). Apparently, Facebook believes a wrist device will be the interface for AR.

Why the wrist? Well, according to Facebook, “It’s located right next to the primary instruments you use to interact with the world — your hands.”

With a device at the wrist, electromyography sensors first will intercept the motor nerve signals that travel from the brain to the hand and then translate and relay that data to AR glasses, giving users the ability to control their new augmented reality with simple hand gestures. This demo shows how this tech works – watch!

While we do not expect the first few iterations of Facebook’s smartwatch to include this tech, the two projects probably will merge over time. If so, the future of mobile computing could be a pair of glasses and a watch, not a mobile phone.