El Salvador President Nayib Bukele cheered fans on stage at the end of “Bitcoin Week” last weekend, making his Central American country the first country to adopt the cryptocurrency as legal tender alongside the US dollar. Gaya.
bukele, 40, wearing his signature backwards baseball cap, refers to himself as a “savior” unveiling plans to manufacture “Bitcoin City” overlooking the Pacific at the base of the Conchagua Volcano. bitcoin price in india stood at Rs. 45.11 lakhs on November 25 at 5 pm IST.
Funded by bitcoin-backed bonds and powered by geothermal energy, the city will provide a tax-free haven. “Invest here and earn as much money as you want,” he told the excited crowd.
Supporters hailed Bukele’s plans – which include making bitcoin legal tender in September – saying they would bring jobs, financial inclusion and foreign investment to one of the poorest countries in the Western Hemisphere.
Before Bukele reads “Feel the Bit” the giant screen – who brands himself as “El Salvador’s CEO” Twitter – Come on stage.
But some in El Salvador and beyond expressed outrage at the glaring incident in a country grappling with inequality, violence and poor public services.
Twitter user @_lamismadeayer, Marcy said, “This video makes me sick, angry and sad all at the same time.”
The government says the issuance of $1 billion (about Rs 7,450 crore) in “volcano bonds” in partnership with Blockstream – a digital asset infrastructure company – will provide development funding. According to credit rating agency Fitch, El Salvador is currently facing a budget gap of $500 million (about Rs 3,725 crore) for the next year.
But bitcoin bonds are not designed to cover that gap.
Half of the bond money will go to infrastructure, including the construction of Bitcoin City, with the remainder used to buy bitcoin and locked in for five years. According to the plan, after the lock-up, bitcoin could be sold, which would be split 50-50 between the government and investors, only after the initial $500 million (about Rs 3,725 crore) was recovered.
The 10-year bitcoin bond offers a 6.5% coupon payable annually, but another Salvadoran bond maturing in 2032 is currently closer to 13.9 percent.
Financial markets have reacted sharply. The spread of Salvadoran produce to the safe-haven US Treasuries has risen sharply since late April. It added an additional 79 basis points this week and sits above 1,200 bps, the highest mark ever.
Critics say investors sold El Salvador bonds in May after Bukele-controlled Congress sacked the attorney general and five Supreme Court justices, who were replaced with loyalists.
According to data from Refinitiv, the 2025 bond yield is over 18 per cent. With costs so high, the country is effectively excluded from borrowing from the market.
Graham Stock, senior sovereign analyst at Blue Bait Asset Management, said government funding through bitcoin could discourage El Salvador from adopting sustainable spending policies, leaving the country with the support of the International Monetary Fund.
“Building the Economy” cryptocurrency Attracting mining and crypto businesses is an untested strategy to put it mildly,” he said, adding Bukele has no plans to increase growth and tax revenue.
Bukele stalled talks with the IMF for a $1 billion (about Rs 7,450 crore) loan amid fears of a democratic backsliding as well as a lack of transparency and volatility in the price of cryptocurrencies as well as consolidating power. has given. But many in the crypto community are upbeat, saying the bond will take advantage of strong retail demand.
“Bitcoin bonds are a game-changer in fixed income markets,” said Moritz Witersheim, founder of Specter Solutions, a bitcoin security and products company.
Although bitcoin has fallen nearly 16% from its record high of $68,990.90 this month, it has remained up over 90 percent this year.
“Bitcoin Week” marked the first time digital currency experimentation was stress-tested by international crypto campaigners.
As vendors wore “Jesus likes bitcoin” shirts, panel discussions grouped crypto currency leaders and Salvadoran ministers. Excitement over having a ‘Petri dish’ was widespread, as many attendees called the experiment of El Salvador.
Several attendees expressed concern about the government’s Chivo wallet, where Salvadorians could send and receive bitcoins – highlighting the tension over a state tool for a currency created as an alternative to government financial systems.
Pre-loaded with $30 (approximately Rs 2,230) for users and backed by a $150 million (approximately Rs 1,120 crore) fund, chivo Allows users to make fee-free transactions for other Chivo users, but registration requires Salvadorans to enter their ID numbers and other personal information, while transactions are kept on a ledger .
Some attendees described Chivo as a gateway to independent bitcoin wallets, such as MUN or BlueWallet, that offer privacy.
“When I pay, in the Notes section, I write ‘Use Munn, don’t use Chivo,'” said Witersheim on Twitter, using the hashtag #FixChivo.
Since its rollout, Chivo has been criticized for thousands of cases of fraud and money missing from wallets.
Many programmers said that for the speed of implementation – less than four months after Bukele announced it at a June conference – these technical problems were common.
Bukele attributed the high demand to the issues. Spokespersons for the presidential office and Chivo could not be reached for comment.
© Thomson Reuters 2021
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