In September 2021, the small Central American country became the first in the world to legally introduce bitcoin on a par with the dollar. A gamble as audacious as it was criticized. And a winning one so far.
As Donald Trump’s election in the U.S. fuels a Bitcoin surge that has exceeded $90,000 on Wednesdaythe President of El Salvador is exultant. “ Told you so “gloated the sultry Nayib Bukele on his X account. Three years after his decision to make the world’s most-valued cryptocurrency an official national currency, the gamble by the leader of the small Central American nation is proving highly lucrative.
With a portfolio of almost 5932 bitcoins, purchased at an average price of $44,325, El Salvador now boasts a capital gain of over $270 million, or more than 100%. According to official data, the value of its crypto-treasure now exceeds $533 million. In September 2021, El Salvador became the first country in the world to legally introduce Bitcoin on a par with the dollar. Nayib Bukele explained that he wanted to bankroll the 70% of the population on the margins of the financial system, and began purchasing these virtual assets on behalf of the state. The decision was also aimed at attracting international investment and reducing the cost of money transfers sent abroad by Salvadorans, which account for 25% of GDP.
National Reserve Fund
The state’s investment strategy has been to gradually accumulate bitcoin, now compared to digital gold. The daily purchase of a token since 2022 has enabled a reserve fund to be built up without having to invest large sums of money all at once. In this way, the country has limited risk by minimizing the impact of price volatility. El Salvador’s president has always been a staunch supporter of Bitcoin’s long-term potential, particularly as a safe haven against traditional currencies and inflation. A gamble that paid off in the end.
To encourage their use, the state created a digital wallet called the “Chivo Wallet and offered $30 to each user as a welcome gift. THE NGO Mi Primer bitcoin (my first bitcoin), which has trained some 35,000 people in the country, was even created in an effort to democratize the system. However, this liberalization has been roundly criticized by international monetary institutions, who fear that it could disrupt the country’s economy. The IMF has always refused to grant El Salvador a loan as requested by the government, partly because cryptocurrency was a sticking point. Until last August, when a preliminary agreement for a $1.3 billion loan was reached (the IMF persisting, however, in pointing out that “ potential risks “ remain).
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Despite all the encouragement, Bitcoin adoption in El Salvador remains very limited. According to a study by the Central American University Institute of Public Opinion (IUDOP), 88% of Salvadorans still don’t use the cryptocurrency. Incentives have not convinced the still-wary public to take the plunge. According to the NGO “ Mi Primer Bitcoin “ low adoption reflects a fear of novelty and technology. Many residents, accustomed to traditional means of payment, are reluctant to adopt a decentralized, entirely digital and volatile asset.