Volcanos, Bitcoin and remittances: A Tongan lord plans for financial security

An ex-member of the Tongan Parliament has proposed making Bitcoin (BTC), legal tender in Tonga’s tiny Pacific nation. This follows El Salvador. It will be up for a vote in Parliament in May, and early signs suggest that it will be successful.

Mataiulua, Lord Fusitu told Cointelegraph that plans have been made to use the state-run volcano mining facilities in Tonga to create wealth.

Tonga has 21 volcanoes. “That’s one volcano per 5,000 people.” His family has hereditary land rights that allow him to own one volcano.

Bitcoin mining would make use of the geothermal energy from the volcanoes to generate electricity.

“It takes 2 megawatts of electricity just to serve 5,000 people. The entire national grid will be served by 40,000 megawatts. “Every volcano produces 95,000 megawatts at any given time, leaving plenty of power,” states Lord Fusitua.

“We will give each family hash huts. This is just 20,000 units as there are only 22,000 families.

He suggested that each volcano could generate $2,000 worth of Bitcoin per day. These bitcoins would be “gifted to” each family by the Tongan government.

An Island with 120,000 inhabitants, economies of scale are important and every person can benefit.

Family Bitcoin hash huts Source: Lord Fusitu

Tonga requires $26 million to construct the network, but the World Bank stated that Tonga did not have the collateral.

Tonga was able to raise the funds through a grant from the Least Developed Countries. It is possible that Lord Fusitua, who claims to be the owner of a volcano, might pull it off.

Lord Fusitu’a claimed that he had negotiated a free offer for the mining tech. However, he has not disclosed the terms. Bitmain and other Chinese companies have a large market share in this sector. It is possible that Tonga could also be home to refugee mining operations following China’s recent ban. That remains an unknown for now.

The math is the same for a nation-state. A state should have its own mining. This is the ideal state.

Related: Former MP says Tonga will copy El Salvador’s bill that makes Bitcoin legal in El Salvador

Who is Lord Fusitu?

Lord Fusitua was once a barrister, before becoming a politician. He is now a member the Tongan nobility.

Tonga is South Pacific’s only country with an indigenous monarchy. It is a Commonwealth member, but this was made by the country in 1970. Despite pressures from imperial countries throughout history, Tonga has not been colonized.

After undergoing operations for serious medical conditions, Lord Fusitu’a decided to retire as MP in November 2021. He had lived in New Zealand for three year and was particularly concerned about Tonga’s closing of its borders due COVID-19. His cousin, however, has been elected to the Tonga Parliament. According to Lord Fusitu’a, his domestic legislative agenda is not being altered.

His ambitious agenda at The Global Organization of Parliamentarians against Corruption has been informed by two clinical deaths from injury. It includes anti-corruption legislation, gender empowerment policies, and climate change policies.

Cointelegraph spoke with him, and as is customary since a series if surgeries, he was shirtless and covered with tattoos (a Tongan term corrupted by Captain Cook), that represent a millennium in his clan’s tattoo history.

Lord Fusitu’a is a Bitcoin only guy since 2013. But, “don’t be fooled by the exterior:” He started coding at eight years of age.

He spent his time in hospital, unable to speak or swallow. He could only read when he was reaffirming his passions. Every word printed about Bitcoin must be re-read.

Online, Lord Fusitua is well-known in Bitcoin circles, where he waxes poetic about why his country, which heavily relies on remittances, should adopt Bitcoin.

It is the most sound money ever created. It is a combination of digital scarcity, distributed ledger decentralization and monetary stability. It is the most democratic and egalitarian money in existence. It is sound money and the best asset ever created. It enjoys a 20% annual appreciation. It is the most valuable asset of a apex creditor.

But, if you are a remittance-dependent nation like El Salvador or Tonga it can make a huge difference in your life. He said that hyperinflation-ravaged countries such as Nigeria and Venezuela are in dire need of a wheelbarrow to purchase bread […]. This could provide a means of survival for four billion people.

The plan

Fusitu’a described his four-part plan to change the way Tonga runs its economy to Cointelegraph.

This plan includes financial education for Tongans on Bitcoin remittances, legalizing Bitcoin, creating Tongan Bitcoin national treasures, and setting up Bitcoin mining operations.

The plan focuses on fiscal education for Tongans, whose economy is heavily dependent upon remittances.

Lord Fusitua said that he was tired of seeing families in developing countries lose so much of their income from middlemen sending remittances home.

According to Lord Fusitu’a, 40% of Tongan’s national economy is built on remittances from the diaspora of nearly 300,000 workers overseas. They send money to the 120,000 island residents. Remittances are vital to the nation’s economy, as more than two-thirds of the Tongan population lives in the Tongan diaspora.

Tonga’s GDP in 2020 was $510million, and 40% of that is just under $200 million. That’s $30 million or $60 million in fees to Western Union.

Lord Fusitua claims that feeless Bitcoin transactions will provide a 30% increase in remittances. The Western Union charges 30% commissions to villagers. However, a Western Union calculator suggests that a $100 transaction can be transferred for only three Australian dollars.

Lord Fusitua however, says this doesn’t account for the fact:

The website’s $2.90 per $100 fee does not reflect the fact that there is a minimum fee between 10-25% for all remittances. This depends on where you are sending them from. It’s not listed on the website. This is a significant amount of your remittance, considering that the average remittance from El Salvador and Tonga amounts to $50-$100. The forex slippage is the fee you pay for purchasing Australian dollars, their conversion into Tongan Pa’anga, and the TOP.

Tonga already started the financial literacy program and “how money works” education programs in 2021. Teams were also sent out to communities for outreach. How does the “how money works” discussion look? Simple:

“People are able to understand the trip of three hours and the $20 return bus fare. Standing in line at Western Union to pay high remittance fees. They get $70 instead of the $100 they expected to receive. The beggar’s fee is added to the equation, since many beggars are outside. It takes three hours to return to the village. After a nine-hour day you are tired and hungry, and you only get $40-50 of your $100 wire transfer.

Related: Crypto remittances are gaining acceptance, but volatility could be a deal breaker

Tonga has a high adoption rate for mobile-first internet.

Lord Fusitua states that a cell phone connected to the internet can instantly change people’s lives. The first step to any financial system is for the unbanked: a phone and a warm wallet.

Moonwallet, a Non-Know Your Customers wallet, can be used to help people who don’t have IDs. It’s not just about Bitcoin Bros. This is a viable option for billions of poor people worldwide. The average family is affected by the loss of $200 billion in fees for annual remittances worldwide.

Tongan also instituted a 15% consumption tax (GST), in 2005. This is an additional penalty for the poor. The consumption tax will benefit the government if Bitcoin is adopted. This will result in more money for the average Tongan and less for Western Union.

Lord Fusitua also offers weekly Bitcoin fundamentals talks in Tongan.

The bill of legal tender

Lord Fusitua looked at El Salvador’s Bitcoin bill before it was released and sought to pass “pretty nearly a carbon copy.”

Tonga’s bill is ready for action since July 2021. It would legalize Bitcoin alongside Tonga’s currency, the paanga.

The bill, which is similar to article 7 of El Salvador’s controversial Bitcoin Law would make Bitcoin compulsory to accept if it was offered.

The bill will be presented at the May 2022 session of parliament. It will need the approval of at least 14 members of parliament in order to pass.

Nine parliament members are hereditary lords, who “vote as a block” but supposedly “always” follow Fusitua’s lead. Fusitua is the only lawyer and barrister within parliament. Three other members of parliament have been exposed to Bitcoin. A successful majority vote would require only two votes more than the fourteen.

Lord Fusitua anticipates a natural increase in remittances to Tongan diaspora once the bill is passed. He mentions that Bitcoin remittances to Tonga have seen an increase in 2021.

It is tied to five currencies, making it artificially low in order to protect its main exports. However, this makes imports very expensive.

Related: El Salvador: How it began vs. what it turned out with the Bitcoin Law 2021

Bitcoin National Treasuries

The fourth part of Lord Fusitu’a’s four-point Bitcoin strategy is to build Bitcoin’s national Treasury as an inflation hedge. This controversial decision in traditional economic policy is influenced by the lord’s views on Bitcoin’s utility.

“Emerging markets have traditionally held their currency in’melting @ 5% per year’ USD, devaluing at 2-6% annum’ gold, and ‘negative yielding from 2008’ U.S bonds. This is also what we do. We could have made our $700 million national Treasury investments into BTC in March 2020 and they would have been worth $22.5 Billion by February 2021.

He said, “With a 2020 GDP at $510 million, $22.5billion is equivalent to 45 Years of Tongan economic productivity gained in 11 months.”

Bukele has been criticised for his decisions. But, part of the criticism comes from his governance. His participation in multilateral groups shows that Lord Fusitu’a is more open to working with international organizations to ensure his country’s economic future.

What’s ahead?

It’s obvious. But why doesn’t the rest of the world follow his logic? Lord Fusitua states, “They see the logic, but it takes money from legacy finance.”

Palau, another Pacific Island, has launched a stable coin on Ripple’s XRP. Are they insane? Because Ripple and XRP have legacy finance rails, their approach is more palatable.

Tonga still faces risks from international monetary policies. The Internal Monetary Fund published a report in October 2021 acknowledging that crypto-ecosystems could replace traditional currencies in emerging economies that are not banked. However, regulators must ensure financial stability. Perhaps that was a sign that the IMF was paying close attention to Tonga.

Lord Fusitua is positive about both the legal tender issue and Bitcoin mining plans. The “Bitcoin community loves to see the underdog win.”

Lord Fusitua, like many crypto-landers, is either a genius (or a great showman). Or both.

https://cointelegraph.com/news/volcanos-bitcoin-and-remittances-a-tongan-lord-plans-for-financial-security