El Salvador’s President, Neb Bukele, points during his speech at the closing ceremony of the Latin Bitcoin Conference (LaBitConf) in Mezata Beach, El Salvador, where he proclaimed “Bitcoin City”, on November 20, 2021.
Marvin Recinos | Agence France-Presse | Getty Images
El Salvador has just added another $15.5 million worth of bitcoin to its balance sheet, as the world’s most popular cryptocurrency continues to sell off.
In a tweet on MondayPresident Neb Bokhel revealed that the country bought the dip, adding another 500 bitcoins to government coffers.
It’s the largest currency purchase in El Salvador since it began adding digital currency to its balance sheet in September 2021 — the same month it became the first country to adopt bitcoin as a legal tender, along with the US dollar.
Bitcoin is down more than 8% in the past 24 hours, and is down nearly 55% from its November high.
El Salvador has bought bitcoin at an average price of $30.744, according to the president’s tweet.
The country’s total reserves come to 2,301 bitcoin, or about $71.7 million at current prices, based on data tracked by Bloomberg.
This is the latest in a string of purchases over the past nine months as President Bukele – who has linked his political fate to the success of the country’s bitcoin experiment – doubled down on his bet on bitcoin, as the crypto market plummeted.
The country’s decision to rely on bitcoin is not without its skeptics – a case that has gained momentum in recent months.
For months, the IMF has been bemoaning Bukele’s experiment with bitcoin.
In January, the International Monetary Fund pushed El Salvador to abandon bitcoin as a legal tender.
IMF directors emphasized that “there are significant risks associated with the use of bitcoin to financial stability, financial soundness, and consumer protection, as well as the associated contingent financial liabilities.”
The report, which was published after bilateral talks with El Salvador, went on to “urge” the authorities to narrow the scope of their bitcoin law by removing bitcoin’s status as legal money.
The IMF report went on to say that some managers have expressed concern about the risks associated with issuing bonds backed by bitcoin, citing the president’s plan to raise $1 billion via a “Bitcoin Bond” in partnership with Blockstream, a digital asset infrastructure company. However, the bond offering was frozen in March, due to “unfavorable market conditions,” according to Finance Minister Alejandro Zelaya.
Part of the nationwide move to bitcoin in El Salvador has also included the launch of a national virtual wallet called Chivo that offers zero-fee transactions and allows for fast cross-border payments. For a country where 70% of its citizens do not have access to traditional financial services, Chivo aims to provide convenient transportation for those who were not previously part of the banking system.
IMF managers agreed that Chivo’s e-wallet could facilitate digital means of payment and thus help “enhance financial inclusion”, although they stressed the need for “strict regulation and oversight.” Many Salvadorans have reported cases of identity theft, in which hackers use their national identity number to open a Chivo e-wallet, in order to claim $30 worth of free bitcoin offered by the government as an incentive.
A report published by the US National Bureau of Economic Research in April also showed that only 20% of those who downloaded the wallet continued to use it after spending a reward of $30. The research was based on a “national representative survey” of 1,800 households.
El Salvador has been trying since early 2021 to obtain a $1.3 billion loan from the International Monetary Fund – an effort that appears to have been soured by this row over bitcoin.
The country will need to know another type of support to support its financial resources. The International Monetary Fund predicts that under current policies, public debt will rise to 96% of GDP by 2026, putting the country on an “unsustainable path”.