WBD368 Audio Transcription
Bringing Bitcoin to Tonga with Lord Fusitu’a
Interview date: Monday 5th July
Note: the following is a transcription of my interview with Lord Fusitu’a. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
In this episode, I talk to Tongan Politician and Noble of the Realm, Lord Fusituʻa. We discuss the history of Tonga, why the country relies so heavily on remittance payments and the steps he is taking to bring Bitcoin to the Tongan people.
“The economy will first benefit by every customer having a disposable income increase by 30% and... simultaneously with that extra 30%, there are some who are going to be saving it rather than putting it into the economy and stacking sats.”
— Lord Fusitu’a
Interview Transcription
Peter McCormack: Lord Fusitu'a, how are you?
Lord Fusitu'a: I'm very well thank you, Peter, considering. Still in hospital but not too long to go now, so it's all good.
Peter McCormack: You look like the guy in Moana from here with your impressive --
Lord Fusitu'a: Yeah, I always have to apologise with each of these. I've got medical cream all over my back which makes wearing shirts or a gown a little bit sticky all day. So, everyone's being very kind and politely accepted my very informal attire.
Peter McCormack: I don't mind it. I think you're the only person I've interviewed with more tattoos than me.
Lord Fusitu'a: That's probably true.
Peter McCormack: I feel I should just get mine off. Should we do it together?
Lord Fusitu'a: Yeah, yeah. Absolutely.
Peter McCormack: Let's do it together.
Lord Fusitu'a: Absolutely.
Peter McCormack: Right, here we go. Hold on. Fuck it! It'll be the most tattooed show I've ever done.
Lord Fusitu'a: Absolutely.
Peter McCormack: All right, man. Well listen, every time I seem to go on Twitter, you're in Twitter Spaces.
Lord Fusitu'a: Yeah, that's right.
Peter McCormack: Waxing lyrical, getting in there with the plebs, talking Bitcoin.
Lord Fusitu'a: Absolutely, absolutely. It's a great community to be part of.
Peter McCormack: Well, listen. There's a lot I want to talk to you about but I think we should educate people a little bit about Tonga. I mean, I know where it is.
Lord Fusitu'a: Yeah.
Peter McCormack: Yeah. I know you're a feeder island for the New Zealand rugby international team.
Lord Fusitu'a: Sure.
Peter McCormack: They steal your men from you.
Lord Fusitu'a: And the Australian rugby team.
Peter McCormack: Yeah, we'll talk about that as well, because I think that's bullshit. But anyway, tell people about Tonga. Tell me. All I know of the area is you're all huge, I wouldn't want to fight any of you; but tell me about it.
Lord Fusitu'a: Yes, so Tonga is a small island kingdom in the South Pacific, northeast of Australia/New Zealand, southwest of Samoa and Fiji. It's, as I said, a small island kingdom, so along with Ethiopia, the only BIPOC nation that hasn't been colonised in its history. So, it's something we're very fortunate and then very proud of. The royal family that rule us now, His Majesty the King is a direct descendent of our first king in 850 AD.
Peter McCormack: Wow.
Lord Fusitu'a: For over a millennium, they're ruled peacefully over us. We're a population of about 100,000. We are an extremely migratory race, so we've got close to double and a bit over that in our diaspora, which as you know is significant for remittance reasons. Our traditional economy is agriculture and fisheries, a little bit of tourism. Because we were never colonised, it's kept us owning our own country, but also never had the colonial money that came in and built up infrastructure that most of the islands do. So, we're probably slightly behind Fiji and Samoa in infrastructure roll-out; but fortunately the important infrastructure, which is internet connectivity, we're extremely far ahead on, so that's good.
For myself personally, I am a barrister by training and by vocation, but a politician by career choice and by fate also. My father was the Lord Member who held my seat. When he passed, I received, as per our constitution in our succession laws, the title along with the estates and took his position. I was voted in, elected by my fellow Lords in my island group to replace him in the legislative assembly.
So, when we took on a Westminster constitutional monarchy model and were Christianised by the first King in the current dynasty, in the early 1800s, he promulgated a constitution in 1875 and formalised by our ancient Tongan traditions, combined with the new Christian faith that we had and a British-style Westminster constitutional monarchy. So, we've got one unicameral House which sort of has a House of Lords and a House of Commons all wrapped up in one legislative assembly. That's where I work. There are nine Lord Members and 17 People's Representatives.
In 2010, when we became a full democracy and His Majesty the King at the time divested himself of all his executive authority, the new remodelling made sure that there were 17 People's Reps so the Members elected by universal suffrage could always form a government. In a House of 26, 14 is a majority. So, they could also always form a government if they decide or form one with the Lords in a government of national unity. That is the case at the moment.
So, yeah, we're15 months into COVID and we've had locked borders since March 2020, which fortunately has kept us on the list of five nations that are still COVID-free but has kept a lot of us locked out of the country.
Peter McCormack: And obviously, probably harmed the tourism money that you make.
Lord Fusitu'a: Very much so. No tourists, therefore no customers for restaurants, resorts; no extra disposable income being spent at the ancillary economy in stores, etc. So, yes, unfortunately COVID hit; therefore, this economic downturn. And just for good measure, we got hit with a category 5 cyclone within two weeks of when the COVID lockdown began; ourselves, Vanuatu and Fiji. So, it was a double whammy for us and I must say the Tongan Government, the Fijian Government and the Vanuatu Government and people have shown some great resilience to pull through those two things in the past year, yes.
Peter McCormack: That's a lot. To put the population in perspective, the town I live in, Bedford, is 172,000 and we're considered a small town.
Lord Fusitu'a: That's more than our population.
Peter McCormack: Yeah.
Lord Fusitu'a: Yes, we could probably fit us all in Wembley.
Peter McCormack: Yeah, well you could, yeah, if you go on the pitch as well. How big is the island?
Lord Fusitu'a: It's about 738 square kilometres of total land mass, 169 islands, 36 of which are populated; so, all those aggregated islands and the archipelagos, about 700, 750 square kilometres. But as with all archipelago nations, an EEZ, which is 200 kilometres around your outer borders, puts us within a 700,000-kilometre EEZ. So, that makes up the borders of the nation.
Peter McCormack: Right, okay. Is there a capital island?
Lord Fusitu'a: Yes, there's a main island which is called Tongatapu. That's the main island and on it is the capital city of Nuku'alofa which literally means the City of Love.
Peter McCormack: Nice. I'm going to have visit then once you're allowing people in.
Lord Fusitu'a: Yeah, and as you can see they don't frown on people with lots of tattoos, so you'll be most welcome!
Peter McCormack: I'll have to get one there. You'll have to take me and get a local, traditional one.
Lord Fusitu'a: Exactly.
Peter McCormack: Yeah. So, the economy is mainly based on tourism and fisheries. During this COVID period, have you been able to continue exports okay?
Lord Fusitu'a: I'll put that in context for you.
Peter McCormack: Okay.
Lord Fusitu'a: The part of our economy that's generated by local industry is dominated by agriculture, fisheries and tourism but the economy as a whole is dependent, to a large extent, on our foreign remittances by our diaspora abroad and by a lot of foreign aid, as with most developing nations. But yeah, absolutely, the part that's generated domestically is agriculture, fisheries and tourism. Yes and no really; the exports haven't been too flash also because with the borders shut at the airport, that means borders shut at the War Horse.
Peter McCormack: Quite. How has the country survived economically through this because if I compare to the UK, we have a fairly strong economy, we have a fairly strong currency and we have borrowed significant amounts of money from our central banks. That's a lever we're able to pull and whilst we might see some increased inflation, it is something we can do. We have that tendency to dig in. How has Tonga survived with this?
Lord Fusitu'a: We've survived with a large amount of foreign aid and the remittances from our citizens overseas. Those two have been the lifeblood of the economy since COVID. We're very fortunate to have some great bilateral and multilateral partners who, over the years, have had a great relationship with Tonga. As with most of the Pacific, if you do not already know you will likely learn that infrastructurally the infrastructure rollout continues, largely financed by grants or loans from China.
Ourselves, you can go down the whole Samoan border front and every building from end to end is built by China. We're not quite at that stage yet but in the world of foreign aid, the Five Eyes traditionally have not done infrastructure for quite a while. So, China and Japan are the only two countries, and the EU, to a lesser extent, that do infrastructure still. So, when you're in need of hospital, schools and roads, those are the ones you pretty much have to lean on in our part of the world.
Peter McCormack: People who tend to leave Tonga, is there any pattern with maybe younger people who want to maybe move to Australia or New Zealand or somewhere else to go to college or to work? I imagine there's a limit to the range of careers available in Tonga.
Lord Fusitu'a: Right, right. Tongans are a migratory race. As I said, our diaspora far exceeds the people on island. Polynesians are all migratory; that's how we get there in the first place. We went sailing, exploring from Southeast Asia and South America. So, our birth rate has been equivalent to our death and migration rate since about 1940, so our population has stayed completely stable.
Yeah, there's a great migration rate for people who may not have upskilled themselves in Tonga but are looking for employment overseas and an opportunity for a better life for their families, educational opportunities overseas, employment overseas. There's definitely a "brain drain". Our students, we have a national university which is a very recent occurrence and isn't a comprehensive university. So, yeah, historically going to university has meant going overseas.
We have an average wage that in early 2000s was between $70 and $100 a week; it hasn't improved greatly. That has meant very few private students. The majority of students who study abroad go through government scholarships. The father of our current King, when he was Prime Minister and Minister of Education -- the current King is Tupou VI in this current dynasty. Tupou I is considered the Father of Modern Science. The current King's father, Tupou IV, is considered the Father of Tonga as we see it today. So, he instituted a Commodities Board that built an export industry for us.
Most importantly for our country, he instituted a high-quality public education system and a great focus which has become integral in our culture on education, so education locally; and every child will be told, as they grow, that you've got get a good education; matriculate and get a scholarship overseas, become university-trained and therefore, be able to access the job market from a better position.
That impetus has been so strong that if you check the Guinness Book of Records, Tongans have the highest number of PhDs per capita on the planet because of the fact that education became engrained in our culture. So absolutely, as you said, a large influx of students into Auckland, Sydney, San Francisco, Los Angeles and Salt Lake City. There are a lot of Tongan Mormons.
Peter McCormack: A lot of Tongan Mormons. That's funny. Is that what drives a lot of the remittance; people go abroad, they study abroad?
Lord Fusitu'a: Absolutely.
Peter McCormack: They get their careers abroad but they want to support their country, they want to support their family back home.
Lord Fusitu'a: Absolutely. The entire structure of our country is built on the nuclear and the extended family. In our culture, the father is the head of the household and the mother has the social ranking as a female. Then, those nuclear families, your nuclear family and those of your siblings, are grouped into an extended family, which are presided over by what we call Kaumatua or an elder, a male elder, who calls the shots for the extended family. Those extended families are then grouped into a village, a number of extended families into a village, presided over by a Lord whose estate the village will constitute or he may have more villages.
Then those Lords' villages are grouped into clans because the Lords are grouped into clans as they are in the UK and Europe historically. Then all those clans are grouped into a nation under His Majesty who's the figurative Father of the nation. That structure is nearly two millennia on in our country and is the basis for the remittances back. It is considered anathema to our culture to go abroad and not send money back. Yeah, it's frowned upon for someone to sever themselves from those familial ties.
You've got Tongans, three generations in who have never been to Tonga but are raised in our culture overseas and still send money back. It's the lifeblood of our country.
Peter McCormack: Do the clans all get on?
Lord Fusitu'a: They do now.
Peter McCormack: They do now!
Lord Fusitu'a: Yeah. In the old days, that image behind me would have been one of the warriors dressed going into battle for his clan.
Peter McCormack: Wow.
Lord Fusitu'a: Yeah, so now it's on traditional occasions, like a coronation or the installation of a new Lord's title, that the clans gather in their traditional groupings. They each have traditional roles. There's a clan of navigators; there's a clan of artisans; there's a clan of warriors. So, yeah, not too dissimilar from cultures around the world.
Peter McCormack: Is everyone hardcore tatted up like you. Does every guy do it?
Lord Fusitu'a: They are now. You may have seen the Samoan tattoos from the stomach down to the knee. We had those as well; but when our King became a Christian in the 1820s, the missionaries had great influence on the formation of our national structure and particularly our legal system, our constitution and initial laws.
In 1839, the very first Code of Laws for Tonga, at their behest, outlawed tattooing and any of our traditional -- that's the word they used in the section of the statute -- "pagan festivals" of our ancient Gods. So, the Christianity we adopted was Victorian-era, British middle-class Methodism. So, high collars, long sleeves, dresses down to your ankle, modesty, all measure. Anything that showed the sort of robustness of Polynesian culture became reined in and very middle-class Methodists.
Peter McCormack: Ooh!
Lord Fusitu'a: Yeah, precisely. So, to your question, yeah. Now, in the past since the mid-90s, a number of us have taken part in a renaissance of our tattooing culture and reclaimed it and have gone through the archives studying, because now we only have ironically sketches done by foreigners of our tattooing traditions.
Peter McCormack: Okay, right.
Lord Fusitu'a: That's what we've had to go on to reignite it.
Peter McCormack: Politically, how does it work? Do you have parties like we have in the UK which are in different positions?
Lord Fusitu'a: No.
Peter McCormack: So, it doesn't work like that?
Lord Fusitu'a: No. The name for parliament in Tongan is Fale Alea, which means the Discussion House. Polynesian cultures, you'll find, Samoa, Hawaii, New Zealand, Tahiti, are ruled by consensus. It's not a process of two adversarial ideas battling it out for primacy and having then a platform that is shown to the population and they vote accordingly. We, until recently, were a constitutional monarchy, but one in which the monarch held executive authority.
Previously, His Majesty appointed the cabinet ministers, similar to the US, from outside of parliament. The cabinet was made of technocrats, so people who are well-trained in their field. It would basically go, "Who's the best Tongan lawyer on the planet? Go and find him and he'll be the Minister of Justice". "Who's the most qualified economist, Tongan economist on the planet? Find him and we'll make him Minister of Finance".
So, the cabinet was traditionally technocrats and a number of older Chiefs. The nobility has always been there as a sort of steadying cultural influence. To put it mildly, the grunt work was left to the technocrats and they were there to oversee and say, "Yes, that melds well with our long-term cultural policies" or, "That doesn't".
Then in 2010, His Majesty King George V at the time, who is the first person since Charles I -- well, actually Charles I had Cromwell at his heels, so you'll have to go back to the Roman Empire; he was the first absolute monarch to give up executive authority just because he thought it was the right thing to do, basically. Yeah, a bloodless transition into democracy. He decided, "All right, I think it's time to modernise and we'll become a full democracy". So, he divested himself of all authority and the current King is, just as Queen Elizabeth is, a ceremonial monarch with all executive authority now vested in the Prime Minster and cabinet and the executive, and in the legislature from whom cabinet is chosen.
In our House, as I said, there are nine Lords, elected amongst ourselves, and 17 People's Reps, elected by universal suffrage by the rest of the country. Then, when the 26 of us, are elected, we then come into parliament and amongst ourselves will nominate someone for Prime Minister. There can be a number of nominees and it's basically a round-robin knockout. Whoever ends up with the most votes becomes Prime Minister.
So, the Prime Minister is chosen from one of the 26 elected officials and that Prime Minister will choose another 12 from within parliament to make up his cabinet. So, no political parties. Everyone is an independent in the People's Representatives and the Lords also. As you would expect, there's a bit of what they call horse trading that still has to go on. I will say, "All right, if you guys elect me Prime Minister, I'll make sure you are in charge of construction or you're in charge of finance". That's in real terms how the system, as written, has to play out.
So, currently we have a Prime Minister from the People's Representatives and a deputy Prime Minister from the People's Representatives and a cabinet of 12 made up of a collection of Lords and People's Representatives.
Peter McCormack: Let's talk about the remittance stuff then, because obviously that is a very obvious and easy win for Tonga if you can reduce the fees on that; it's just such an obvious idea. Talk to me about -- well actually, before we do that, how long have you been aware, digging deep into the Bitcoin thing?
Lord Fusitu'a: Digging deep, probably the last three years; aware since 2013. In 2013, my cousin, who's like my brother, we taught each other to code in BASIC. I don't know if you're old enough to remember Sinclair computers, a British computer company?
Peter McCormack: Of course, yeah.
Lord Fusitu'a: We taught each other to code in BASIC on a Sinclair ZX Spectrum in 1980 --
Peter McCormack: I remember. I had a BBC but I remember the ZX Spectrum because my friends had one.
Lord Fusitu'a: Yeah, with a calculator chip.
Peter McCormack: Yeah, and when you wanted to load a game, you had to use a cassette and you would play it to watch.
Lord Fusitu'a: That's right and you had to flick the cassette over halfway through for the rest of the data.
Peter McCormack: Then after 20 minutes it would fail and you're, like, "Shit, I'll have to do it again".
Lord Fusitu'a: Exactly, exactly. So, yeah, my cousin and I were into it. He had moved to America, so, he rang me up in 2013 and said, "There's this great new protocol, this technology that you're going to be into. There's no way you can get it there, but I'll get us some" and he explained to me what it was about. I had a look at the whitepaper. I thought I'd got my head around it; I found out much later that I hadn't got my head around it yet.
Peter McCormack: We all have that.
Lord Fusitu'a: Yeah, and so he got us some. Then eventually, he came to Tonga and I was, "So, the Bitcoin, what's the deal? Give it to me. I want to see how it works". And he was like, "So, about that. The price went up a little bit and I was kind of drunk and a little bit less money than I thought I was going to have at the time and I kind of sold it". I was like, "Well, brilliant, that's of absolutely no use to me whatsoever". So yeah, that was the first dangling in front of my eyes that was ripped away really unceremoniously.
Then about three years later, I was already in parliament. As you're probably aware, I've been through South America a lot. We have a phenomenon of American businessmen, usually in Miami Vice-type suits that fly through the developing world telling us locals, "I've a great idea that's going to make millions for all of us". Yeah, so one of those came through. He actually had some good ideas about agriculture which didn't end up going ahead but that's neither here nor there, and he was a bitcoiner.
He advertised to myself, not just myself but a number of the other Lords, to invest money with him and he'd go back to the States. We didn't realise we could buy it from Tonga or not. Our understanding from him was at that stage, no we couldn't, but he would go to the States with the money that we invested in him and he would get us some. I advised the guys, "I've been exposed to this technology before. It's the real deal", still not really having any idea about Bitcoin, "so, let's invest".
So, we did and we found out much later that the amount we invested, or I found out much later, was nowhere near the market price of the asset at the time. But as these gentlemen often do, he very graciously bade us farewell and disappeared into the sunset never to be seen again. So, that was the second time it was dangled in front of me.
Then two years ago, I got very, very ill. I actually died clinically in Tongatapu hospital.
Peter McCormack: Oh shit.
Lord Fusitu'a: And the surgical resources and staff on island at the time weren't sufficient enough to be able to give me the surgery they needed. So, they kept me alive for 36 hours while they searched the Pacific for an air ambulance. They tried New Zealand but couldn't find one. They tried Sydney, couldn't find one. Then they found one in Brisbane. So, that flew to Tonga and I was just about to really, really cark it. My vitals were about 10% and the air ambulance got there and got me out just in time, straight into Auckland and the OR staff were practically on the tarmac, I'm told.
Peter McCormack: Wow.
Lord Fusitu'a: So, they rushed me into surgery. Three surgeries over a period of two days where I clinically died again and they revived me. So, any disbelief in miracles I had prior to that were dispelled through this experience.
Peter McCormack: Damn.
Lord Fusitu'a: I collapsed in July in Tonga and I woke up in New Zealand in September after two months in a coma. Very fortunately, they gave me life-saving surgery.
Peter McCormack: Amazing.
Lord Fusitu'a: But yeah, then it was a six-month pretty long grind in hospital just to get back to health enough to sit up and stand up and take a step. So, six months on your back, barely being able to lift a mobile phone to at least play a game or something, it was basically just lifting the screen up; yeah, not too much to do. So, ended up reading every printed word I could find that was ever printed about Bitcoin or published online, every moving image or word recorded as a broadcast about Bitcoin and spent the rest of that year just studying it.
Peter McCormack: Right.
Lord Fusitu'a: I got my head around the technology enough, I thought, I hope, to have a good grasp of it and began investing myself; and what that journey taught me was that, as all bitcoiners know, this is the most pristine asset and the soundest money that mankind has ever produced, and that it was for the first world, the developed world, it would be an asset which would appreciate in great value and get great returns for that person, and possibly be the foundation for future wealth.
But in my part of the world, it would be much more than that and it would be much more than that right now. I wouldn't have to wait five years for the returns of what Bitcoin could do for people in a country like mine right now.
Peter McCormack: Why is that?
Lord Fusitu'a: Because of the remittance industry --
Peter McCormack: Let's talk about that.
Lord Fusitu'a: -- the extent of our dependence on it.
Peter McCormack: I think you were about to say the same thing. I know very well, El Salvador, you know I've been out there, I've been looking at that project.
Lord Fusitu'a: Exactly.
Peter McCormack: And I know it's 15% GPD. I know how much they're losing in terms of remittance, how much of a problem that is. Then you and me were on Spaces and you were something like 41%, is that correct, 42%, can't remember?
Lord Fusitu'a: 41%. So, 40.7%, 41%, yeah.
Peter McCormack: 41% of GDP is remittance.
Lord Fusitu'a: Of GDP, nearly half of the GDP.
Peter McCormack: Does that come in as all different currencies? Does it come in as, like US dollars?
Lord Fusitu'a: Aussie, yeah.
Peter McCormack: Aussie dollars.
Lord Fusitu'a: So, Aussie dollars, US dollars, New Zealand dollars. Those are the three major sources.
Peter McCormack: When you're in Tonga, because you do have a local currency, is it pronounced the pa'anga?
Lord Fusitu'a: Pa'anga, exactly.
Peter McCormack: That's a good read for me, but is it similar to when I went to, say, Cambodia they have the local currency and the dollar, and Venezuela and you can pay in the bolivar and the dollar.
Lord Fusitu'a: Yeah.
Peter McCormack: Will restaurants accept all three?
Lord Fusitu'a: No. Restaurants accept the pa'anga. Most will not accept the dollar but if they do, it's usually a shop, sort of corner store. They will accept the dollar, but they'll accept it dollar for dollar. So, US$1, which is actually worth nearly 3 Tongan pa'anga; they'll only take it face value. So yeah, the country has been encouraged, since the inception of our currency, to transact only in our currency.
Peter McCormack: Right.
Lord Fusitu'a: So, yeah.
Peter McCormack: What is the state of the current currency? Is it inflationary? Is it fairly stable?
Lord Fusitu'a: Well, it's artificially stable. It's pegged to five other currencies.
Peter McCormack: Right, yeah.
Lord Fusitu'a: So, it's pegged to the US dollar. It's artificially pegged to the US dollar, the Australian dollar, the NZ dollar, the euro and the GBP.
Peter McCormack: Right, okay. But is there an underground use of other currencies anyway? Do people tend to hold them to store value under the mattress?
Lord Fusitu'a: Yeah, yeah. But yes and no and particularly more so, because 5% of our population is now ethnically Chinese, naturalised citizens. It first began in 1997 when Hong Kong was going back to China. A number of Hong Kong merchants fled with their money looking for somewhere overseas. Many of them came to Tonga.
Then Tonga had, as New Zealand and Samoa and Fiji, our neighbours in the Pacific, we all have a citizenship path for investments. So, a lot of Chinese from Guangzhou have come to Tonga and become citizens through an investment path. Those ones are therefore followed, so the numeric volume of Chinese are the ones who worked for those people. So, poorer Chinese have followed and they're the ones that make up the bulk from that 5%.
So, in a country of 100,000, 5% is only 5,000. That's a lot in a small country. So, they completely dominate the retail sector, because they can get cheap goods from China. They have connections, obviously ethnic connections to China, so they can get goods cheaper than any Tongan merchant can.
Then what Chinese communities often do is they group together into guilds of sorts and they all order in bulk as one guild, so that even makes it cheaper than separate wholesalers ordering. At that price, no Tongan retailer could survive; they undercut them, beginning in the late 1990s and, by 2010, there wasn't a Tongan corner store anywhere in the country.
Peter McCormack: Did that cause any animosity?
Lord Fusitu'a: Very much so, very much so; that's caused a fair bit of tension. In the only riots our country has ever seen -- we'll get to it later why the riots occurred. It was because of public servants who got pay cuts as World Bank, IMF austerity measures; but we'll get to that, yeah. They were targeted and any petty crime is usually targeted at them. We've got a pretty bad meth problem with the youth at the moment.
Peter McCormack: Right, not good.
Lord Fusitu'a: Yeah, primarily because most of Sinaloa, Cali and Medellin product comes through the Pacific Islands as a transshipment area, both to Australia and to the American West Coast.
The majority of my parliamentary work is done in anti-corruption with an organisation called GOPAC. It's Global Organization of Parliamentarians against Corruption. So, we're the legislative arm and the UNODC, United Nations Office on Drugs and Crime, is the executive arm. So, when you get KYC AML, that data can come to us and we can track the illicit financial flows together with NATO when stuff's headed to the Middle East; and together with Interpol for the product that's coming, the China White that's coming out of China to head towards the US, and the blocks of Bolivian Marching Powder that are coming back the other way.
Peter McCormack: Right.
Lord Fusitu'a: That being the case, as a transshipment destination, it was inevitable that the local population would get exposed to it; and because it's coming through us in bulk, it's very cheap. Our annual police ministry budget is $5 million. Our army is largely ceremonial. The police are more policing crime and helping in disaster relief when villages get flooded or things like that, but that's been increased this year to $50 million from $5 million specifically just to combat the meth problem.
Peter McCormack: Wow, shit!
Lord Fusitu'a: So that's an issue for us. Yeah, a lot of the remittance goes for use. We've had international crews come through and interview local dealers anonymously with the voices changed and the faces blacked out, and some of their admissions are, yeah, pretty stark. They say their customers go all the way up to the top and to church ministers who are extremely revered in our community, second only to the Lord in a village. So, yeah, that's a great problem for us.
Peter McCormack: Yeah.
Lord Fusitu'a: Sorry, go on.
Peter McCormack: Well, I was just going to say, I think you were about to do it, let's get into the numbers of the remittance so people understand.
Lord Fusitu'a: Yeah.
Peter McCormack: So, 40.07%. What does that mean in real terms?
Lord Fusitu'a: In real terms, that's about -- in a national GDP this year of $510 million, that's about $200 million.
Peter McCormack: Wow. How much of that is lost to the remittance companies?
Lord Fusitu'a: About 19%. So, the 40%, we get about 21% in real value. When you calculate the on average 30% chunk that they take a bite out of, as Jack Mallers said in your interview in El Salvador, it can be upwards of 50%. It can be 10% also. So, averaged out, we did the numbers, it's about a 30% average. So, at that 30%, that's about --
Peter McCormack: $60 million.
Lord Fusitu'a: Yeah, yeah.
Peter McCormack: That would make a huge difference.
Lord Fusitu'a: Make a huge difference. So, of the 40%, we're actually only receiving 21% because 19% of that is taken out by Western Union.
Peter McCormack: Yeah.
Lord Fusitu'a: 19% is, yeah, that's fairly life-changing.
Peter McCormack: Yeah, because there's a couple of things here that I'm thinking about when I think with regards to what I've seen in El Salvador. There's things like Strike, which allows you to get a more stable currency in; and then there's things like Bitcoin, which allows you to get Bitcoin in. But then there's the issue of it's more volatile and people might need the money there and then. The first thing I'm thinking of, is there any access to a Bitcoin exchange in Tonga? Do you have Bitcoin ATMs? Is there any way to convert Bitcoin into the local currency?
Lord Fusitu'a: No. The only way to convert Bitcoin into local currency is to find Chinese vendors who will accept it. There's no formal exchange but there are Chinese vendors who'll accept it. So, I don't know how much you know about China. The digital yuan is still being rolled out. It's pretty much rolled out.
Before our country had a full embassy in China, my ex-wife and I were the honorary consulate in Beijing for two years. So, even back then -- they use an app called WeChat and they trade digitally in it. When you come out of a bank or a subway station, the beggars sitting there asking for money don't have their hand out; they have a mobile phone out and ask you to hit them with a digital donation. So, that's the case with all our Chinese vendors who dominate 99% of the market.
They will accept Bitcoin, a large number of them. So, we've been able to send money back to warm wallets and then have them accept it at the shop front, basically the way you would use Strike in El Salvador.
Peter McCormack: You can pay with that?
Lord Fusitu'a: Yeah, you turn up at the store and you can either cash out or you transact in it.
Peter McCormack: So, they'll act as a broker and buy it from you?
Lord Fusitu'a: Precisely, precisely.
Peter McCormack: Do you know what kind of percent they're charging on that?
Lord Fusitu'a: No, not exactly because it varies so widely. Because strictly speaking, it's not 100% legal because, as you said, they're acting as a broker technically. But in their eyes, it's the same as accepting USD or AUD; they're just accepting another currency for their goods. So, they're the vendor, they have the right to decide if they accept anything at all in exchange for their goods. It's entirely up to them. So, it's not formally a brokerage because if it were a brokerage, it would require a financial services operator's licence.
Peter McCormack: Yeah.
Lord Fusitu'a: So, yeah.
Peter McCormack: Yeah, it seems like to me it's like Strike solves an initial problem of killing the remittance and not having to worry too much about volatility, but also Bitcoin solves a problem that I've recognised with El Salvador in that, if you can get enough Bitcoin in the country on a long enough timeframe, that Bitcoin raises the net wealth of the country because it appreciates more than traditional currencies.
Lord Fusitu'a: Precisely.
Peter McCormack: Yeah.
Lord Fusitu'a: There's a number of things; initially, exposure to Bitcoin rails. If we were to adopt Strike and adopting Strike would really, in real terms, only involve everyone downloading an app on their phone and at point of sale downloading an app on the iPad or the android tablet and accepting the medium of exchange. It doesn't necessarily require an act of parliament or even endorsement from the central bank.
Strictly speaking, if Strike wanted to make an arrangement with a financial institution so that they could work together for clearance, that's another matter. But just strictly to transact in, that would give us back that 19% of the 40%. So, the 40% is worth $200 million. The 19% is over $200 million, so the 19% is worth close to $100 million. So, we're putting $100 million back in everyone's pockets just from exposing them to the rails without even touching an asset.
So, the sender needs their bank account to be connected; but the receiver, as you know, can receive it as an unbanked person and have it, with a participating store front or cashpoint, can have it given to them in fiat or they can load it to a warm wallet. The exposure to the rails immediately gives that $100 million back. That's without even touching Bitcoin, the asset.
Peter McCormack: Yeah.
Lord Fusitu'a: Then after a while -- so, then that $100 million basically means you're going to get $100 in your pocket when $100 is sent instead of $70. So, that extra $30, you're going to immediately spend to increase your standard of living. But after a while, as you said, as time goes, you'll remember that you got by on the 70% and it was hand to mouth but you got by on the 70%. Then you'll realise that the 30% isn't just for raising your standard of living; it's giving you the first chance in your life to have savings. Therefore, they will eventually begin to stack sats, as they say.
Peter McCormack: Yeah.
Lord Fusitu'a: The economy will first benefit by every customer having a disposable income increased by 30% and because our country imposes a 15% VAT, every person is putting an extra 30% into that 15% VAT, because they've got an extra 30% disposable income just from the rails.
Peter McCormack: That's amazing.
Lord Fusitu'a: Simultaneously with that extra 30%, there's some are going to be saving it rather than putting it into the economy and stacking sats which will appreciate. For the first time, someone who's a village fisherman, and has been hand to mouth all his life, has a glimpse at possibly having savings that might be the foundation for financial freedom.
Peter McCormack: Wow.
Lord Fusitu'a: So, we get a double whammy; just the rails and then the asset. Funnily enough, the developed world went store of value first and then working through the medium of exchange with some hope of being a unit of account. The developing world has gone medium of exchange first and then working towards store of value. Back to front, Bitcoin still works seamlessly.
Peter McCormack: You're obviously a connected guy there. You've obviously shown a lot of interest in this. You get it. You understand what's going on. How much have you been discussing this with your colleagues and peers and other people in Tonga?
Lord Fusitu'a: Quite a lot, quite a lot.
Peter McCormack: Do you have any responses?
Lord Fusitu'a: Yeah, very positive response. I just had a session two days ago with our most senior Lord in parliament and yeah, he's very keen. In a House of 26, 14 is a majority but Nobles always vote in a block. So, where one goes, we all go, so that's a nine-block vote. I understand three of my colleagues -- not I understand, I'm pretty sure -- in the People's Reps already have contact with the asset through their own independent gens, and that's 3 plus 9 is 12. To make up 14, you only need 2 extra out of 14 MPs.
Peter McCormack: Sounds like you're lobbying them.
Lord Fusitu'a: Not just -- not lobbying; just gaming it out. The lobbying's already been done. So, that's 3 out of 14.
Peter McCormack: Yeah, I keep thinking of, have you ever watched the Abraham Lincoln film, Lincoln?
Lord Fusitu'a: Yeah.
Peter McCormack: Where they're working out the votes, "What do we need?"
Lord Fusitu'a: Exactly.
Peter McCormack: "Who do we get?" What legislation are you pushing for? Looking at what El Salvador has done, similar; are you pushing for something similar? Can Bitcoin become legal tender; is that something you're considering? How far are you looking to take this?
Lord Fusitu'a: I think initially, Bitcoin rails, because that requires no legislative change and no breaching into the territory that the reserve bank might feel is their purview. This can be done entirely commercially, and just the commercial solution provides an extra 30%. So, that will only require answering Jack Mallers back for his very generous offer of help with some hard data and details of how to roll it out, what vendors you're going to need to talk to. I'm not sure if you're familiar with a company called Digicel?
Peter McCormack: No, I'm not.
Lord Fusitu'a: Digicel is a company out of Ireland. It's a mobile phone company. What they do in the developing world is they give out free handsets, they give out cheap Chinese android handsets, because they're looking for 100% penetration, because they make their money on the credit top-ups, but more so on digital fiat. You can log on to their website in London, in San Francisco, and enter your credit card details or your bank account details and send money directly to a Tongan person's handset.
They've already rolled out the POS hardware through all the vendors to accept that digital fiat. So, you can turn up at a store, present the phone, get cash down in fiat or spend the fiat there. Ironically, they've rolled out the infrastructure to use Strike. That's already there, so the commercial answer is just an extra app on everyone's phone and an extra app on that hardware that Digicel has rolled out, and it's a conversation with the vendors.
The next step is adoption. Now, what does adoption look like? I personally put great value in President Bukele's model and the bill he's come up with. All that would take for presentation in our parliament as a possible bill is what's called a gap analysis; so, just going through our constitution and all our relevant legislation to make sure there are no contradictions and where there are contradictions, you amend the new bill to make sure it aligns with the current legislation.
Usually, you'd send that to the Attorney General's department; that would get done over two or three months. I'm in hospital, I'm not doing too much, so I've done the first half last week and I'll finish the second half this week and have a bill that's ready for presentation to the House.
Peter McCormack: When do you think that's going to happen?
Lord Fusitu'a: Well, that's the question. Our borders are hard-locked until March 2022.
Peter McCormack: Wow.
Lord Fusitu'a: It was initially until September and then unfortunately, Papua New Guinea right next door, Fiji even closer, Fiji's a 40-minute flight, began getting 100 new COVID cases every 24 hours.
Peter McCormack: Is that right?
Lord Fusitu'a: Our Prime Minister understandably was a bit shocked and taken aback. They moved the border opening until March. As I said previously, we're one of the five nations that still has zero COVID and that's because of the hard-locked borders. People in the country have written to the papers and said, "What's going on with our borders shut down?" because we also have a national curfew.
So, despite the fact that the borders are already locked, just to be safe the Prime Minister and cabinet have imposed the curfew from 11.00pm until dawn. So, at 11.00pm the army will come out and make sure everyone's off the streets just to be safe. But there's no COVID anyway, so people are like, "What's going on there?" But our Prime Minister is also an evangelical pastor, so his response is, "Nothing good happens between 11.00pm and 6.00am, so you may as well be at home"!
Peter McCormack: Yeah.
Lord Fusitu'a: Yeah, so the current sitting of the House, the House rises the second week of July and we usually do budget in June and then do July and August to do government's package of legislation for the year. We only sit usually about three months. Then, we would usually go until September, maybe October. There's a national general election in November, so we'll finish in August to allow the People's Reps time to campaign.
But were I to get back in before the end of August, the bill's all ready to go and as you heard, we've gamed out the numbers and our Prime Minister was the Auditor General in our country for 30 years and he was the Auditor General in the late 1990s and early 2000s. The King was our Prime Minister in the late 1990s and early 2000s and they oversaw what austerity measures from a particular group of people did to our country. They gutted our economy. It caused the social collapse which resulted in the only riots ever in our history, because of the austerity measures.
So, the Prime Minister and the King, I won't speak for them obviously, but they will not be too displeased to see the back of a couple of those organisations. From an enforced policy standpoint, from a working relationship of course, you remain on good terms and a good working relationship, but no longer with those sorts of deep reach of talons into your domestic policy and your society, which not just we, but many countries in the world have proven hasn't been a great big positive experience for us since the 1990s.
So, that being the case, they won't be terribly upset with a monetary system presented as an option separate to that whole system.
Peter McCormack: Yeah, well I think that's what a lot of countries are now looking at Bitcoin for and realising, I think, what Bukele has done in El Salvador is brave. We don't know how it's going to play out for him.
Lord Fusitu'a: Yeah, I agree.
Peter McCormack: We don't know how it's going to play out for the country. I think, I personally feel it will be positive. But, yeah, not a smooth path.
Lord Fusitu'a: I'm exactly the same.
Peter McCormack: Those international institutions --
Lord Fusitu'a: I've 100% belief in him.
Peter McCormack: We're not sure about --
Lord Fusitu'a: I know how government works, yeah.
Peter McCormack: You'll know better than me. Listen, look it's getting very late here.
Lord Fusitu'a: I know. I'm sorry for keeping you up for so long.
Peter McCormack: No, it's fine. I wanted to talk to you, it's just we're on very different time zones. We're almost the opposite. Either way, it's either going to be my night or your morning or vice versa. No, I was glad to do this. In my head, because I like to travel, I'm just like, "Wow, I want to come to Tonga" but it sounds like I'm not going to be able to.
Lord Fusitu'a: The exciting part is when these plans became public, I suddenly put an offer of all these really generous offers of green energy solutions with a view to Bitcoin mining. So, geothermal energy solutions, wave harnessing technology solutions. They're geared towards Bitcoin mining, but they have a possibility to answer our generation's issues for us nationally absolutely separate from Bitcoin mining. We have generators from the '70s that take diesel fuel the most expensive way to generate electricity. Yeah, there have been some great offers just off the back of the optimism around Bitcoin, so that's been great.
Peter McCormack: It's been great to start to get to know you. Like I say, I hope I can get out there. It's one part of the world I've not -- well, two parts of the world I've not been to is Africa and Australasia.
Lord Fusitu'a: You'll need to come out. You'll love the surf, crystal-clear waters, white sandy beaches, literally the postcard. Or, if you come up north, the furthest north, my estate, my island, the only populated volcano, freshwater lake, choppy seas, pull up a cabana. Anyone in the Bitcoin community's welcome.
Peter McCormack: Listen, if I end up in the region, of course I'm going to come to your estate, I'm going to come to your island. I need to go to Australia; I need to go to New Zealand; I need to go to the whole region, so I think that will be in my plans for 2022.
Well, listen, let's stay in touch, let's keep talking about this. Keep me updated on what's happening. I'm massively interested and if I don't hear from you, I'm going to see you on Twitter Spaces anyway most evenings.
Lord Fusitu'a: I'm going to keep in touch directly now.
Peter McCormack: Cool.
Lord Fusitu'a: Looking forward to more of these chats.
Peter McCormack: Yeah, man, stay in touch. Anything you need, reach out and yeah, I'm sure I'll see you soon, brother.
Lord Fusitu'a: All right. I appreciate it, brother.
Peter McCormack: By the way, this is the second time I've done an interview half naked. I actually did one, but it wasn't videoed, I did one with Junseth and Crystal Rose about two years ago. We were all just in a hotel and we all did it. So, you're not the first.
Lord Fusitu'a: Junseth and the boys are the guys you want to get naked around anyway.
Peter McCormack: Look, good to talk to you. Take care, brother. See you soon.
Lord Fusitu'a: Absolute pleasure.Look after yourself, mate.
