How the world’s first crypto nation’s big effort stabilizes its economy proves critics wrong and pays back its debt
When El Salvador’s President Nayib Bukele made the controversial decision to make Bitcoin legal tender in his country, many people were skeptical and worried about the potential risks.
Bukele announced on Twitter that the country would buy one Bitcoin (CRYPTO: BTC) every day starting November 18, 2022. How is 2023 going? The latest news from El Salvador suggests that the government’s cryptocurrency efforts are paying off.
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According to Finance Minister Alejandro Zelaya, the government has repaid one of two outstanding $800 million bonds. The move is likely to quell concerns about a potential default, which had been growing amid the country’s adoption of Bitcoin.
Zalaya announced the news via Twitter 23 January, highlighting the government’s commitment to meeting its debt obligations and proving the skeptics wrong. Bukele tweeted: “Well we just paid $800 million plus interest. But of course almost no one is covering the story.”
The government still owes $367 million plus interest on an additional bond due in January 2025, but the successful repayment of the 2023 bond is a positive sign for the country’s financial stability.
What initially started out as largely controversial may be paying off as Bitcoin and many aspects of the blockchain-based asset market have begun to pick up again. Gamestop Corp.The NFT marketplace has seen a significant boom. Some of the top NFT projects on the platform have seen volume increases as high as 21,446%.
Correspondingly leading NFT marketplace startup Gameflip recently crossed $900,000 raised from private investors in their active crowdfunding fundraising. This comes after their announcement of reaching $160 million in lifetime volume on the platform earlier this month and a number of other milestones.
Bitcoin as legal tender
The small Central American country made headlines in 2021. Legislation required all businesses in the country to accept Bitcoin as a form of payment for goods and services, giving it the same status as traditional fiat currencies.
Chivo Wallet, the wallet created by the government of El Salvador, said 2.2 million Salvadorans were on board just one month after Bitcoin became the country’s legal tender. To encourage adoption, each user who downloaded the app immediately received $30 in Bitcoin. By early 2022, about half of Salvadorans had downloaded the app.
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The “Bitcoin bet” has been met with mixed reactions from international organizations and governments, with many expressing their concerns about the potential risks that could arise from using cryptocurrency. The International Monetary Fund (IMF) recently issued a statement on El Salvador’s decision to accept Bitcoin as legal tender, warning of potential risks associated with such adoption.
Although there have been no significant risks so far after El Salvador adopted Bitcoin, they noted that it is important for governments to be vigilant when providing public exposure to digital assets. According to the statement, crypto markets are still largely speculative and unpredictable in nature and should be approached with caution in order to safeguard El Salvador’s economy against potential losses.
The IMF also highlighted the importance of transparency when dealing with cryptocurrency transactions and stressed that it is crucial for regulators to ensure they remain compliant with anti-money laundering laws and regulations. It advised El Salvador to develop effective regulatory frameworks to reduce financial stability risks associated with the use of cryptocurrency.
El Salvador does not seem deterred by the IMF’s recommendations. In January, Congress approved a digital securities law, paving the way for the country to raise funds through the issuance of the world’s first sovereign blockchain bond. The act allows for the use of blockchain technology in the issuance, trading and clearing of securities, which enables greater efficiency and transparency in the process. The extra step forward for the country could potentially attract investment from tech-savvy investors looking for new opportunities in the cryptocurrency market.
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El Salvadorian prosperity in a time of uncertainty
While the U.S. market faces banking uncertainty and a general decline in U.S. stocks, El Salvador’s efforts appear to be paying off. While El Salvador started buying Bitcoin at a significant premium to today’s price, they also announced a purchase of 80 Bitcoin at a price around $19,000 in July 2022. They have also committed to buying one Bitcoin per day, every day since November of 2022. At that time, the price of Bitcoin was below $16,000. Roughly 126 days have passed since then, meaning the company is still pouring millions into the digital currency despite the controversy, much of which has been at a steep discount to today’s price of over $28,000.
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This article El Salvador’s Bitcoin Boom: How the World’s First Crypto Nation’s Big Bet Stabilizing Its Economy, Proving Critics Wrong, and Paying Back Its Debt originally appeared on Benzinga.com
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