El Salvador still intends to issue a US$1 billion Bitcoin-backed bond, once market conditions improve.
The post Why El Salvador is doubling down on Bitcoin despite the 2022 price crash appeared first on The Motley Fool Australia. –
One Bitcoin is currently trading for US$23,924 (AU$34,085).
The last weekâs move higher will be welcomed by crypto investors. However, the Bitcoin price remains down 50% year-to-date and down 62% from the record highs reached on 10 November last year.
That timing didnât exactly work out well for El Salvadorâs government.
The Bitcoin price hit its record high two months after El Salvador became the first nation in the world to adopt the crypto as legal tender. President Nayib Bukele made the virtual groundbreaking announcement on 10 June 2021. The legislation took effect in September 2021.
Unswayed by Bitcoin price retreat
According to calculations by Bloomberg â based on Bukeleâs tweets â the 2,381 Bitcoin El Salvador bought with public funds are worth about 50% of what the government paid for them.
Despite the big retrace in the Bitcoin price, El Salvadorâs finance minister, Alejandro Zelaya, stood by the decision.
According to Zelaya (quoted by Bloomberg):
For some, itâs something new and something they donât entirely understand, but itâs a phenomenon that exists and is gaining ground and will continue to be around in the coming years.
Zelaya was also unswayed by surveys indicating the majority of businesses and households continue to preference fiat currency over the crypto:
We arenât going to have results overnight. We canât go to bed poor and wake up millionaires. New technologies have shown how people in previous years were afraid of things like websites and digital business, but itâs been shown through time that reality imposes itself.
Crypto-backed bond still in the pipeline
Not everyone is as enthusiastic about the nation designating Bitcoin as legal tender.
The IMF counts among those critics. Yet El Salvadorâs government intends to move forward with its plans for a US$1 billion Bitcoin-backed bond even as it negotiates a US$1.3 billion extended fund facility with the IMF.
Zelaya said the Bitcoin price crash had only delayed the rollout of the crypto-backed bond, not derailed it.
âI believe in the traditional, international monetary system just as I believe that new technologies are going to help human beings in the future,â he said. Â âSo, I think making that transition is vital and it would be wrong of us to not pursue financial innovation that could benefit El Salvador.â
The post Why El Salvador is doubling down on Bitcoin despite the 2022 price crash appeared first on The Motley Fool Australia.
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.