The president of El Salvador poured millions of dollars of public money into bitcoin and announced plans to build a $1.4 billion bitcoin city — and then the market crashed.
El Salvador’s president, Neb Bukele, has been criticized for investing hundreds of millions of public funds in bitcoin.
Last year, the global leader made the decision to launch a legal tender for cryptocurrencies. He bought nearly $100 million ($145 million) in digital currency and announced plans to build a Bitcoin City.
The head of state hopes to raise funds for the new city by selling $1 billion ($1.4 billion) in bitcoin-backed bonds. The community will be built at the base of a volcano that will provide geothermal energy and strengthen the bitcoin mining industry.
However, the country’s 2,300 bitcoins have not appreciated in value since their purchase and none have been sold anywhere to make a profit.
President Bukele has pumped an additional $200 million ($290 million) into a backed bitcoin wallet app, called Chivo. Rolling out and running the app was expensive.
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Local economist Tatiana Maruki is concerned about the money being spent and said the project is too risky.
“We don’t know exactly when or with their bitcoins,” Marocchi said in the documentary. Big Bitcoin Gambling in El SalvadorAvailable to stream on flash.
“There are a lot of questions about how this money will be spent.
I know very well the finances of the country, and there is not even the smallest margin for publicly funded projects that are risky. The needs of the population are huge.
“Building Bitcoin City is one of the most backward areas in the country like creating a billionaire’s oasis in the middle of a desert of poverty.
“If he builds it, it will be at the cost of huge sacrifices by the Salvadoran people.”
In January, the International Monetary Fund (IMF) urged El Salvador to remove bitcoin as a legal tender, highlighting the “significant risks associated with bitcoin use to financial stability, financial safety and consumer protection,” according to the BBC.
Despite criticism and a drop in bitcoin’s value, the government’s Tourism Minister Morena Valdez said that citizens trust President Bukele’s decisions.
“We know that every decision of the president is made at the right moment,” Valdez said.
“People trust a lot in his decisions and in how the country’s economy will run.”
Other countries are also reported to be considering the El Salvador move.
The Central African Republic submitted a legal tender for Bitcoin earlier this year.
The country’s president, Faustin Arching Touadera, announced the news on Twitterdescribing the digital currency as a “global money”.
Bitcoin and other digital tokens suffered a stunning crash this year that wiped out trillions of dollars in value from the cryptocurrency market.
On Sunday, the price of bitcoin fell to $17,601.58 ($25,300), a massive 74 percent drop in value since its all-time high in November when it nearly reached $69,000 ($99,000) per coin.
The original and most traded cryptocurrency was just under $20,500 ($29,800) at the time of writing.
Over the weekend, President Bukele sought to reassure his countrymen.
“I see some people are worried or worried about the price of the Bitcoin market,” he wrote on Twitter.
My advice: stop looking at the graph and enjoy life. If you invest in #BTC, your investment is safe and its value will grow exponentially after the bear market. Patience is the key.”