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Bitcoin-boosting Salvadoran leader may have second thoughts

SAN SALVADOR, EL SALVADOR (AP) – El Salvador’s Bitcoin-boosting president may be having second thoughts about the crypto-currency, whose value has tanked in recent weeks.

According to the tracking site, El Salvador under President Nayib Bukele’s administration has bought a total of about USD105 million in Bitcoin, starting last September and paying an average of almost USD46,000 per coin.

The value of that investment is now calculated to have fallen by over 50 per cent, or around USD51 million.

So when a Bitcoin publication crowed that El Salvador has lost “only” USD40 million on its investment in the currency also known as “BTC”, Bukele tweeted with apparent incredulity: “You’re telling me we should buy more #BTC?”

Bukele became the first leader in the world to make the crypto-currency legal tender last year and was a devoted booster at least up to May, when he crowed about “buying the dip” in the crypto currency’s price. But the coin has slid further since then.

Finance Minister Alejandro Zelaya sought on Wednesday in an interview with a local television station to put a good face on the situation, saying that because El Salvador hasn’t sold any of its Bitcoins, it hasn’t really suffered any loss.

A bitcoin symbol is presented on an LED screen during the closing ceremony of a congress for cryptocurrency investors in Santa Maria Mizata, El Salvador. PHOTO: AP

“When they tell me that El Salvador’s budgetary risk has increased because of the supposed loss, that loss doesn’t exist,” Zelaya said. “That must be made clear, because we have not sold.”

However, most companies and governments do write down the value of what accountants call an “unrealised loss”, even if they don’t sell the distressed asset.

Zelaya also insisted the Bitcoin slide doesn’t matter very much for El Salvador, saying that “this doesn’t even represent 0.5 per cent of our budget”.

That might prove a hard sell in a country where about one-fifth of the people live on less than USD5.50 per day.

In January, El Salvador rejected a recommendation by the International Monetary Fund (IMF) to drop Bitcoin as legal tender.

Zelaya said at the time that “no international organisation is going to make us do anything, anything at all”, calling it an issue of “sovereignty”.

The IMF recommended that El Salvador dissolve the USD150 million trust fund it created when it made the cryptocurrency legal tender and return any of those unused funds to its treasury.

The IMF cited concerns about the volatility of Bitcoin prices, and the possibility of criminals using the cryptocurrency.

Bukele touted Bitcoin as a way to significantly increase financial inclusion, drawing millions of people who previously lacked bank accounts into the financial system. He has also spoken of the parallel tourism promotion targetting Bitcoin enthusiasts.

Bukele led the push to adopt Bitcoin as legal tender alongside the US dollar. El Salvador’s Legislative Assembly made the country the first to do so in June 2021.

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