The adoption of bitcoin as legal tender has benefited El Salvador, despite the cryptocurrency’s falling price. This was stated by Finance Minister Alejandro Zelaya to Bloomberg.
According to him, the introduction of digital currency expanded access to financial services to the largely unbanked population, attracted tourists and investment.
The minister acknowledged that the use of bitcoin as a medium of exchange in El Salvador is realistically small. However, he continues to believe in the prospects of digital gold:
“It’s something new to some people that they don’t quite understand. But it’s a phenomenon that exists, is gaining strength, and will be with us in the years to come.”
The government of El Salvador began buying bitcoin shortly before its legalization in September 2021 with a specially created fund of $150 million. The country has 2,381 BTC (~$56 million) on its balance sheet. Journalists estimate that the cryptocurrency is worth about 50% less than the purchase price.
In March, the government announced the issue of bitcoin bonds worth $1 billion, but postponed the issue due to deteriorating market conditions. In June, Zelaya acknowledged that favorable conditions for issuance had not yet arrived.
The IMF criticized El Salvador’s decision to recognize bitcoin as legal tender. In January, the institution recommended that the cryptocurrency be stripped of that status. According to former central bank governor Carlos Acevedo, the adoption of digital gold “killed” relations with the fund.
Against this background, the country is negotiating with the IMF for a $1.3 billion loan.
A survey by the U.S.-based National Bureau of Economic Research found that a majority of El Salvador’s population prefers to use fiat currency. About 60% of citizens who downloaded the state’s cryptocurrency wallet simply received a $30 sign-up bonus and returned to the app no more.
However, Zelaya is confident that digital tokens will play a significant role in the future.
“New technologies in previous years demonstrated how people were afraid of things like Web sites and digital businesses, but over time reality has forced itself on them,” the minister said.
Zelaya added that the government has not abandoned plans to sell the announced bonds, is gradually promoting the Bitcoin City project and will soon announce new cryptocurrency initiatives.
As a reminder, El Salvador’s President Nayib Buquele urged not to worry about the bitcoin price fall and said that investments in digital gold will “immensely” grow after the end of the bear cycle.