El Salvador threatens to lose millions of bitcoins
The small country invested $71 million in Bitcoin. But with lower prices, the experiment can turn into a losing proposition.
El Salvador’s President Nayib Bukele gives a presentation of the “Bitcoin City” project to be built in the east of the country.
Photo: Rodrigo Sora (Keystone)
cane b watch He is a trained advertising specialist. And so it was no coincidence that the president of tiny El Salvador, with an area of 21,000 square kilometers, bought exactly 21 bitcoins – on December 21, 2021 at 9:21 PM. Those were good numbers. But it now looks as if the work could end badly.
So far, the Central American country has bought at least 1,391 bitcoins. An unusual move, after all, Bitcoin is a subject of speculation. The president took up the trade himself: according to his own statements, he bought Bitcoin with his mobile phone.
Bitcoin as a payment method
According to the exchange rates at the time, the investments cost El Salvador a total of $71 million. But if Bukele withheld cryptocurrency, their value might be down to $61 million by now. This is what Bloomberg News accounts suggest.
El Salvador began flirting with cryptocurrencies last September. At that time, the small country was the first country in the world to announce Bitcoin was introduced as a payment method. Since then, citizens have been able to pay their taxes using electronic currency.
“Invest here and earn as much money as you want”
Big chains like Starbucks and McDonald’s also accept the new currency on their account. The country also invested in cryptocurrency and continued to buy bitcoin even at a record high of over $68,000 in November. Meanwhile, the coin has lost about 40 percent of its value.
The crypto community is still celebrating President Bukele as a hero. He even announced the construction of a Bitcoin City in the east of the country. The world’s first city to be funded exclusively with Bitcoin will be built here. El Salvador is planning to issue its own bitcoin bonds for financing, enticing a tax haven: “Invest here and make the money you want,” Bukele promised when he presented his plans.
Only VAT will be charged in the city in the future. The self-proclaimed CEO of El Salvador responded very briefly to an American economist’s criticism of his project and tweeted in nerd language: “ID-10t” – an idiot.
The International Monetary Fund warns
However, the impoverished state of Bukele is not particularly attractive to investors. El Salvador’s government bonds were the worst performing in the world in 2021. The country remains heavily indebted, and rating agency Fitch gave it a bad credit rating of B-. El Salvador is still struggling with the International Monetary Fund to obtain a $1.3 billion loan.
But the lender’s concerns may be too great – in the fall the International Monetary Fund warned in vain about experiments with cryptocurrencies. After all, according to government information, the country converted some of its cryptocurrency into dollars last week. However, the Ministry of Finance has left it open on how many bitcoins it has decoupled. El Salvador could have lost a few million dollars in the process.
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