Since September 2022, BTC works as a valid currency in El Salvador. However, adoption has certainly not been as fast as expected.
On June 5, 2021, El Salvador made waves in the financial space when its bill to make Bitcoin a legal tender in the country was first made public. Since then, the country has fully implemented BTC as legal tender in the country, in addition to investing a significant amount in the digital asset. This is how the country has fared ever since.
El Salvador Downside in its Bitcoin Bet
Shortly after President Nayib Buckle approved the bill and made Bitcoin legal tender in El Salvador, the country would start buying BTC in large quantities. The first purchase saw the country purchase a total of 400 BTC for $18.724 million at an average price of $46,811 on September 6, 2021, one day before BTC officially became legal tender in the country.
In the following months, Bukele would redouble his decision to invest in the cryptocurrency with funds from the country, ignoring warnings from financial institutions such as the International Monetary Fund (IMF) to stop doing so. The next purchase occurred just a day later, on September 7, with a purchase of 150 for approximately $6.9 million.
El Salvador has continued to buy BTC on a semi-consistent basis ever since, bringing its total BTC reserve to 2,381, as of its last purchase on June 30, 2022, of 80 BTC at an average price of $19,000 for a value of $1.52 million.
However, El Salvador’s dollar cost average (DCA) has not helped its position so far. The country has spent a total of $103,233,360 on its BTC purchases since 2021 at an average price of $43,357.
At current prices, El Salvador’s stash of BTC is worth around $61.3 million, which means the country is suffering a $40 million loss on its BTC investment.
BTC adoption in El Salvador
Since September 2022, BTC has operated as legal tender in El Salvador, allowing residents to pay for goods and services using the cryptocurrency. However, the adoption has not been as fast as expected, since the US dollar continues to dominate the country.
Following the official 2021 announcement, there were reports of protests over the use of BTC as legal tender, with many citing the security and economic risks of using a volatile digital asset as legal tender. And even today, those concerns are still at the forefront of lawmakers’ minds.
In May, US Senators James Risch, Bob Menendez, and Bill Cassidy introduced a bill to require El Salvador to report BTC adoption in the country. This bill, called the Cryptocurrency Responsibility Law in El Salvador, proposes to assess “the risks to cybersecurity, economic stability, and democratic governance in El Salvador.”
President Bukele has not yet responded to this bill, which has given a 90-day window for the plan to be presented to the congressional committees involved.
On June 5, Reuters reported that El Salvador signed a public-private partnership to invest $1 billion in creating a large Bitcoin mining farm. Volcano Energy confirmed this, revealing that the country will first invest $250 million in the project, as it seeks to build one of the largest BTC mining farms in the world.
By Audy Castaneda
