Bitcoin turns one year old this Wednesday as the current currency of El Salvador, a bet headed by Salvadoran President Nayib Bukele with the aim of attracting foreign investment but which, however, has suffered a correction of more than 50% during the reference period , about the credit quality of the country and the rejection of international organizations such as the International Monetary Fund (IMF).
In addition, bitcoin continues to fall this Wednesday and has lost the reference of 19,000 dollars, an area in which President Bukele announced new purchases of bitcoin, ensuring that he was making a cheap purchase and that bitcoin was the future. Experts believe that the cryptocurrency could continue to correct towards the $11,000 zone.
To argue, Bukele defended the measure to achieve a reduction in the costs of sending remittances for millions of Salvadorans working abroad or, even, an opportunity to protect developing economies from possible impacts on inflation.
The president estimated the savings in commissions for salvadorans for receiving remittances from outside the country at 400 million dollars (340 million euros). Likewise, he estimated the market that revolved around cryptocurrency at 600,000 million dollars, which was synonymous with investment opportunities in the Central American country, as explained by Europa Press.
To promote the digital currency, the Government announced the launch of the ‘Chivo’ digital wallet, synonymous with ‘cool’ in the Central American country. In fact, to encourage the use of cryptocurrency among salvadorans, the Bukele Administration offered $30 in bitcoin to any citizen who opened an account on the platform.
In addition, the Executive installed hundreds of bitcoin ATMs to convert the digital currency into US dollars and be able to withdraw them in cash.
bitcoin city
The measures to promote the cryptocurrency did not remain only in Chivo, since President Bukele announced in November last year the creation of the ‘Bitcoin City’, a city whose only tax would be a 10% VAT to finance the services of this and construction tasks.
The city would work with renewable energy powered by the Conchagua volcano, according to Nayib Bukele, and would initially be financed by bitcoin bonds, which in the president’s opinion represented a clear commitment to technology.
Added to these initiatives were plans to issue the world’s first sovereign bonds in bitcoin by 2022.
The IMF, against Bukele’s decision
Despite the government’s enthusiasm for this measure, the IMF has repeatedly warned of the risks associated with it and its impact on the country’s financial integrity and stability, even recommending eliminating cryptocurrency as an official currency.
The IMF has stressed several times the danger of considering cryptocurrency as an official currency for market integrity and consumer protection, in addition to being able to cause contingent tax liabilities.
Added to this is the downward streak that the cryptocurrency has faced in recent months, which last Tuesday was trading below $20,000, far from the $44,000 it was trading at when the country made the cryptocurrency official.
Agencies besiege El Salvador
Other alerts by credit agencies have been added to the IMF’s warnings. In June, S&P Global Ratings downgraded El Salvador’s short-term sovereign credit rating from ‘B’ to ‘C’, with a ‘negative’ outlook, as a result of the country’s financial and external debt vulnerabilities.
The Government has debt maturities worth about 800 million dollars (807 million euros) in January of next year.
The warnings about the country’s financial situation are added to those of other agencies such as Moody’s, which also lowered the country’s rating to ‘Caa3’, with a ‘negative’ outlook, accusing a greater risk of non-payment or ‘default’ in maturities of early 2023.
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