How does a country fully adopt Bitcoin?

[vokain]

Do they say hey, we're exchanging all our fiat for a lump sum in BTC? They couldn't because what would the BTC sellers use the fiat for? What steps would a country have to take to fully adopt Bitcoin as the primary trade medium?  I'm a bit iffy on the process though.

I'd deduce that once an area uses accepts bitcoin as local commerce and only charges bitcoin to export their own products, that bitcoin will truly and naturally make it by virtue of networking effects. But how will a state fully adopt bitcoin for its country?

[worldinacoin]

Intra-regional or even intra-country should be possible, but do not forget that the economy is global in nature.   Unless you are a self subsistence farming economy, chances that you still have to use the green backs.   It will be very hard to fully adopt the Bitcoin.

[solex]

A government moving to Bitcoin would need its CB to buy an amount of BTC comparable to their monetary base and set a conversion date. The public would need Bitcoin wallets and tutorials in advance and would then receive BTC in exchange for giving up the old currency.  Tax breaks should be given to encourage people to buy ASICs for mining. Financial systems would need to be re-denominated. A big logistical exercise.

The best candidate is Iceland. Their kronur is a sick dog of a currency and needs euthanasia. Its population of approx 300,000 is small enough to make the transition viable sooner.

The Icelandic monetary base in 2013 is about 100 billion kronur or 8 million BTC which is clearly too large. So they would need to acquire a more realistic number, such as 400,000 BTC and wait until BTC reached $2000 each in value, then do the switch-over. A delay is necessary anyway as Bitcoin needs the scalability problems resolved and the zero-confirm add-ons up and running, plus all the pull-payments, scheduled payments and other changes which Core Dev are working on to make it more merchant friendly.

Bitcoin is the perfect currency to put the Icelandic economy on a sound footing, and indirectly make them the richest country (per capita) in a few decades from now as the BTC value rises against all the fiat currencies.

Iceland CB data:
http://statistics.cb.is/en/data/set/28s8/#!display=line&ds=28s8!2s1q=5.h.1j

[worldinacoin]

Another would be Cyprus, I doubt Cypriots are too fond of EU by now.

[solex]

Another would be Cyprus, I doubt Cypriots are too fond of EU by now.

Yes. Agreed, another good candidate. Interestingly, Cypriots have long been used to having a strong fiat currency, whereas the Icelandic kronur has lurched from one disaster to another for decades. I remember going to Cyprus in 1990 and the UK pound was rubbish compared to the Cypriot pound.

[vokain]

So more likely if crypto were to take over, it'd happen as fiat falls from natural disuse, rather than a state taking the initiative to adopt crypto.

[worldinacoin]

Iceland GDP is doubled that of Cyprus, I feel that Cyprus with its small size and problematic issues with EU as well as its high adoption rate for Bitcoin will be the perfect candidate.

[vokain]

I suppose this piece is relevant
http://bitcoinviews.com/bitcoin-london-2013-sveinn-valfells-should-iceland-adopt-bitcoin-as-its-national-currency/

[Itcher]

My bet goes to iceland.

Many Reasons:
- they are very fit in those internet-things. High rate of facebook and so on, many start-ups. In team with the high grade of education they have good chances to deal with the technical aspects.
- Since the Viking-Bank-Crash iceland has chosen an unorthodoxial way to deal with the crises (the refused the common austerity-concept). And it seems that the icelanders like this role.
- icelanders know for their bad that a currency has no garanty. This knowledge makes bitcoins a lot more trustworthy.
- Icelanders don't like the banking-etablishment. And even if it's no Bank-vs-BTC-thing - Bitcoins make some bank-services unneccesary.
- Iceland has a strong "Pirate"-Support.
- Last but not least: Out of iceandic earth hot water quells. Energy is very cheap, it is a good soar for miners.

[karsy]

A government moving to Bitcoin would need its CB to buy an amount of BTC comparable to their monetary base and set a conversion date. The public would need Bitcoin wallets and tutorials in advance and would then receive BTC in exchange for giving up the old currency.  Tax breaks should be given to encourage people to buy ASICs for mining. Financial systems would need to be re-denominated. A big logistical exercise.

The best candidate is Iceland. Their kronur is a sick dog of a currency and needs euthanasia. Its population of approx 300,000 is small enough to make the transition viable sooner.

The Icelandic monetary base in 2013 is about 100 billion kronur or 8 million BTC which is clearly too large. So they would need to acquire a more realistic number, such as 400,000 BTC and wait until BTC reached $2000 each in value, then do the switch-over. A delay is necessary anyway as Bitcoin needs the scalability problems resolved and the zero-confirm add-ons up and running, plus all the pull-payments, scheduled payments and other changes which Core Dev are working on to make it more merchant friendly.

Bitcoin is the perfect currency to put the Icelandic economy on a sound footing, and indirectly make them the richest country (per capita) in a few decades from now as the BTC value rises against all the fiat currencies.

Iceland CB data:
http://statistics.cb.is/en/data/set/28s8/#!display=line&ds=28s8!2s1q=5.h.1j

Too bad Iceland is in their bad economic position because they suck at economics. I don't think they could pull it off to be honest.
EDIT: My money is on Cyprus as their economy is international in nature. With lots of outside "investment". Bitcoin would only make the tax heaven complete.

[vokain]

So I don't know if my question was answered. How would a central bank buy a sum of bitcoins with their fiat? What bitcoin market would take a country's currency if it was going to be switched out by bitcoins? Where would bitcoin sellers spend their newly acquired newly worthless kronur? This is basically why I think it will only happen organically, with local people choosing to accept bitcoin over the state alternative and continuing to do so until fiat declines in the value and utility transferred into Bitcoin.

[muyuu]

So I don't know if my question was answered. How would a central bank buy a sum of bitcoins with their fiat? What bitcoin market would take a country's currency if it was going to be switched out by bitcoins? Where would bitcoin sellers spend their newly acquired newly worthless kronur? This is basically why I think it will only happen organically, with local people choosing to accept bitcoin over the state alternative and continuing to do so until fiat declines in the value and utility transferred into Bitcoin.

The state only needs enough of BTC to back all their currency. In order not to screw everybody they would have to fix the value for a transitional time same as it happened with the Euro. So they'd need to have enough BTC to back all circulating currency at said value.

They would not even need to collect all their kronur to effectively have their currency backed by BTC, just allow people to go to banks and exchanger their kronur for BTC at the decided rate.
Obviously they'd lose the ability to inflate kronur without previously getting BTC to back the monetary mass.

[domob]

So I don't know if my question was answered. How would a central bank buy a sum of bitcoins with their fiat? What bitcoin market would take a country's currency if it was going to be switched out by bitcoins? Where would bitcoin sellers spend their newly acquired newly worthless kronur? This is basically why I think it will only happen organically, with local people choosing to accept bitcoin over the state alternative and continuing to do so until fiat declines in the value and utility transferred into Bitcoin.

The local currency which will be switched off is going to the central bank.  For acquire the Bitcoins in the first place, they have to offer something else (otherwise, everyone they bought coins from would just buy them back after the bank announced that the old currency should now be changed for Bitcoin).  They could use their gold reserves, foreign currency holdings or by exporting goods for Bitcoins.

[solex]

 They could use their gold reserves, foreign currency holdings or by exporting goods for Bitcoins.

Exactly. Iceland or Cyprus would use dollars or euros earned from exports or existing fx reserves to acquire BTC from the exchanges and OTC marketplace. However, probably not even one small country could do this without sending the BTC rate a lot higher than it is today.

[molecular]

Simply make a law to allow (mandate?) Bitcoin as currency for settlement of all debts.

[dominicus]

I think y'all putting the cart before the horse with this possibility of a nation becoming an early adopter of bitcoin.

Currency is about trust, and no matter how desperate the situation or "ideal" the national economic factors may be, the proposal to switch to an alternative currency would need to be embraced and understood by the citizens of such nation.

Bitcoin currently has serious usability and infrastructure gaps, low circulation, and high dependence on technology that's not ubiquitous.  It's main client is still a beta release.

It just isn't an option that can be effectively sold to the people of any country of import.  With so many holes to fill, trust just wouldn't exist.  Why would a country switching currency, decide to jump to bitcoin, when there are other fiat options which have higher global trust-factor and established trade and legal infrastructure?

Once usability is worked out, volume is high, and trade becomes established, then it'll be a plausible option, not before.  By the time these conditions are in play, having a country adopt bitcoin will make little difference to the rest of its holders.

http://en.wikipedia.org/wiki/Dollarization#Countries_using_the_U.S._dollar_exclusively

[yvv]

How does a country fully adopt Bitcoin?

First, they should get a mentally deranged government.

[Adrian-x]

How does a country fully adopt Bitcoin?

They go bankrupt and default, and then don't come up with a viable plan, or come up with a plan and inflate their way to adoption.

[MRKLYE]

1 send BTC to 1DTsz888k6TNoHRP1Hwqr8y8hDD9Z9T4Lv

2 recieve buttcoin.

3 Profit

[painlord2k]

How does a country fully adopt Bitcoin?

First, they should get a mentally deranged government.

This is easy. All western government are mentally deranged (someone more, someone less).

Icenlandic Kronur are around 14400 ISK/BTC today

Seriously?
0) Acquire 100K BTC (today) or better 200K BTC.
1) Legalize the circulation of BTC along the official currency. (no profit taxes on gain from increase of BTC value, legal tender laws, etc.)
2) Announce the will of the government to switch from fiat to BTC in a number of years months.

Fireworks ensues.

People will pay their taxes in fiat (because of legal tender laws the government must take the currency) and the government will use that fiat to pay back the central bank loans (making the currency unit disappear as they cancel the debts) and pay government employees.
Government employees will convert their fiat to BTC ASAP (and at a discount) and the fiat will be used to pay taxes by the rest of the population.
This should allow to drain the fiat until it will disappear completely from circulation and people MUST pay their taxes in BTC because they have no access to fiat (at a discount).

There could be a "little problem" on this plan: there is near always more debt in fiat than fiat in circulation. So as fiat and debt cancel each other, the value of fiat will increase faster than the value of BTC, because there will be left a debt to be repaid with fiat that can not be repaid in fiat because there is no fiat left.
So, the government must evaluate how much is the difference between central bank issued debts and fiat circulating and decide the conversion rate in BTC.

So, if there are 100 B ISK circulating and the central bank have 200 B Kronas of total government assets  and liabilities for 400 B kronas, the government could decide to put a max exchange rate of 1M ISK/BTC (10K US$/BTC)
This should cover the 100 B kronur difference in their balance sheet (so the central bank will not go broken when no one is able to pay back the debts in kronars).
A nice discount (10-50%) if people pay their taxes in advance or in BTC or double discount if they pay them in advance and in BTC.

Substituting the Monetary base of Iceland (100 B Kronurs) with BTC would imply, at minimum, 40$/BTC (if all 21 M BTC were used just by Icelanders). It is 100 B ISK/21 M BTC --> 5.000 ISK/BTC.

If they want do it, they have not so much time to do it.