Salvadoran bitcoin president Nayib Bukele has bet the house on the first cryptocurrency.
First making it legal tender, then staking the country’s reputation in the bond market by announcing a low-interest, high-rise bitcoin bond if the value of the volatile cryptocurrency continues to rise.
Now, about three months after the original and much-delayed launch date, the country “has yet to receive a single penny of the billion dollars it seeks”, Bloomberg News reported April 29.
While the country claimed to have received commitments for half a few months ago, nothing was mentioned about the figure and no date was set due to “market conditions”. Moreover, the country’s not particularly good bond rating has fallen so much that it now demands an interest rate of 24% – just slightly better than Ukraine, which is overrun by a nuclear power.
The bonds are meant to fund the purchase of more bitcoins and build a bitcoin city, but have only succeeded in getting rating agencies to cut its debt well below junk and the International Monetary Fund (IMF ) to forfeit a $1.3 billion loan that would, among other things, pay off an $800 million bond maturing early next year.
See also: El Salvador’s Bitcoin-As-Currency Experiment Is Expensive and Fails
While Finance Minister Alejandro Zelaya said in a May 3 interview on local television that there was “no risk” of default, there are fears that the bitcoin bond could bring down the whole house of cards.
On April 28, Paolo Ardoino, chief technology officer for the Bitfinex exchange that is expected to issue the token bonds, said in interviews that he expects Congress to pass the enabling laws that will legalize bitcoin bonds “in the next two or three weeks.” the newspaper La Prensa Grafica reported.
Meanwhile, Congressman Rene Portillo Cuadra said the bond issue had not been launched due to El Salvador’s low credit rating and loss of credibility in the markets, said local media El Salvador. mentioned. They have “no future”, he added, saying the problem is not the Russian invasion or the faltering global economy, but “more the fact that if the country continues to fail respect human rights, if the country continues not to respect the rule of law, the other countries will not have credibility either in finances or in government management.
A study by US-based think tank National Bureau of Economic Research (NBER) said only 20% of Salvadorans continued to use the nationally-issued, technically flawed digital wallet needed to spend money. bitcoins. In addition to serious functionality issues, a preference for cash – El Salvador’s other official currency is the US dollar – distrust of wallets and cryptocurrency, and for about a third of respondents l absence of a smartphone, were among the main reasons. . Of course, only 20% of businesses accept bitcoin, despite a law saying they have to accept it, doesn’t help.
Perhaps more embarrassingly, El Salvador jumped from ninth place shortly after bitcoin’s adoption to 36and on the list of bitcoin- and crypto-friendly countries compiled by Irish investment analytics firm Coincub, La Prensa Grafica said. The survey cited “a lot of evidence suggests that people are unwilling to put traditional currencies aside and take cryptocurrencies seriously,” the outlet reported.
A love-hate relationship
Meanwhile, the U.S. Congress has been considering bills in the House and Senate requiring the administration to put in place “a plan to protect our financial systems from the risks of this move, which appears to be an unwise gamble. rather than a thoughtful embrace of innovation,” said Rep. Norma J. Torres, D-California, chair of the Central America Caucus.
Read more: El Salvador’s Adoption of Bitcoin as Legal Tender Addressed in Congressional ACES Law
That said, Bukele’s plan got some love in the Central African Republic, which followed his lead on April 27, adopting bitcoin as its official currency with a week’s planning. However, a cryptocurrency is not particularly likely to lift the economy so poor that only 4% of the population has internet access and barely a third a cell phone. Of course, the civil war there won’t help either.
See more: Central African Republic, Like El Salvador, May Soon Regret Adopting Bitcoin