El Salvador celebrates two years of bitcoin adoption
San Salvador, Sept 7 (EFE).- El Salvador is celebrating two years of bitcoin as legal tender. The anniversary comes without widespread adoption, with warnings that it is a vehicle for irregular financing of the expensive 2024 election campaign, and without an official accounting of the funds used by the government.
The Central American country became the first nation in the world in September to try the cryptoactive as legal tender – along with the U.S. dollar – in 2021.
More than 250 million dollars (about 233 million euros) have been invested in the project, President Nayib Bukele’s main economic commitment.
TWO YEARS WITHOUT DATA
Bukele’s government allocated $150 million for a trust to exchange dollars, at least $107 million was invested in the purchase of 2,381 bitcoins, and to deliver $30 bonuses to those who downloaded the government’s digital wallet, among other things.
Information about the use of these funds has been kept secret by state institutions. The only official source is Bukele’s publications on X (formerly Twitter).
In mid-November 2022 the president announced on the platform, that his government would start buying one bitcoin a day. 295 days later the purchases are still not confirmed.
Salvadoran bitcoin reserves cost about $107 million, but due to fluctuations in the value of this cryptoactive, they are currently worth about $61.3 million.
By 2022, the government was also expected to issue one billion dollars worth of bitcoin bonds, known as Volcano Bonds, to finance the construction of Bitcoin City in the eastern part of the country, but this never happened.
BITCOIN TO FUND CAMPAIGNS?
In 2024, El Salvador will hold general elections and Bukele, despite allegations of unconstitutionality, will seek his immediate re-election for another 5 years.
According to Eduardo Escobar, director of Acción Ciudadana (Citizens Action), the country is entering an electoral period “with the doors and windows open for organized crime, public funds and foreign governments to finance electoral campaigns.”
“We have pointed out the lack of oversight of the Supreme Electoral Tribunal and the Court of Auditors” and “this generates opportunities for prohibited financing,” he pointed out.
He said that bitcoin “is allowed to finance campaigns”, but “it is a tool that can be used to hide the sources of funding as well”.
He regretted that, in his opinion, the adoption of this cryptocurrency “has only served (the government) to increase the degree of opacity in the management of public affairs.”
“It has also served to publicize an image of a modern El Salvador, but in reality it is only propaganda,” he added.
ECONOMIC CONTEXT
The economy of El Salvador grew by 10.3% in 2021, according to data from the Central Reserve Bank (BCR), but economists attribute this to the reactivation of the economy after the covid-19 pandemic and not to the adoption of bitcoin.
By 2022, the economy of this country grew 2.6%, a figure lower than the expected 2.8, and it is expected that 2023 will close between 2% and 3% of economic expansion, among the lowest in the region.
The number of jobs that the adoption of bitcoin would have generated, in addition to its contribution in foreign and private investment, is unknown, given that there are at least 97 registered service providers, including recognized exchange houses.
