When the president of El Salvador, Nayib Bukele, made the controversial decision of making bitcoin a legal currency in his country, many were skeptical and worried about potential risks. Bukele announced via Twitter that from 18 November 2022, the country will buy one bitcoin every day.
“The intrinsic value of #Bitcoin is now in full display on the whole world,” tweeted Bukele.
The latest from El Salvador suggests the government’s bet on Bitcoin is paying off. According to Finance Minister Alejandro Zelaya, the government has managed to repay one of its two outstanding bonds worth $800 million.
The move is likely to quell fears about potential default pushed by mainstream media over the country’s embrace of bitcoin.
Zalaya announced the news on January 23, highlighting the government’s commitment to honoring debt obligations and prove the doubters wrong.
The government still owes $367 million, plus interest, on a further bond that will expire in January 2025, but successfully repaying its bonds for 2023 is a positive sign for the country’s fiscal stability.
Legislation made Bitcoin legal tender, giving them equal status with traditional fiat currencies. The government-created Chivo wallet in El Salvador claims that, only one month after Bitcoin became legal tender in the country, 2.2 million Salvadorans had signed up.
To spur adoption, each user who downloaded the app successfully received $30 worth of bitcoins right away. By the beginning of 2022, approximately half of all Salvadorans had downloaded the app.
International organizations and governments aren’t happy with Bukele. The International Monetary Fund (IMF) issued a statement regarding El Salvador’s decision to adopt bitcoin as legal tender, cautioning about the potential risks associated with such an adoption.
Bukele tweeted: “What has been called by international organizations as “The Bitcoin Experiment”, is nothing more than the world watching how mass adoption changes a country’s economy. If it’s for the good, it’s game over for fiat,” adding that, “El Salvador is the spark that ignites the real revolution.”
No major risks have emerged so far from El Salvador’s adoption of Bitcoin.
In January, its Congress approved a Digital Security Law, clearing the way for the country to raise money by issuing the world’s first sovereign bond on Bitcoin. The law allows for bitcoin technology in securities issuance, trading, and settlement, providing greater efficiency and transparency to the process.
The incremental steps taken by the country may potentially draw investments from technology-savvy investors looking for new opportunities in the Bitcoin market.
“In 500 years from now, President Bukele’s transformation of this society will be taught alongside those of the Renaissance, the Enlightenment, Ancient Rome and Ancient Greece,” Bitcoin proponent and head of El Salvador’s National Bitcoin Office Stacy Herbert wrote on Twitter. She nor her beaux, Max Keiser, are compensated for advising the nation.
“We don’t get remunerated in any way,” Mr. Keiser told an interviewer on a Salvadoran YouTube channel last week. “I would say it’s just really an act of love.”