June 10, 2022 Friday, 1:30 p.m.
El Salvador has made efforts to make bitcoin a legal tender, but interest rate and inflation volatility have not promoted a lasting effect.
As Bitcoin becomes more institutionally accepted, large price fluctuations will have far greater effects globally than ever before.
This has already happened in El Salvador this year. In March, sales of a large bitcoin were wiped out by more than $ 300 billion, he said News.
Panic was fueled by the massive withdrawal of risky assets as a result of rising interest rates, inflation and the economic consequences of Russia’s invasion of Ukraine. While this is bad news for many investors around the world, El Salvador has encouraged the government to invest even more.
Although the country suffered losses of about $ 36 million, the government bought the shares at a low price – more than $ 15 million worth of bitcoin – further increasing its national debt.
This controversial strategy is being spearheaded by El Salvador’s president and popular crypto activist Naib Bukele; His account Twitter It’s all about his interest in bitcoin.
Elected in early 2019, the young Bukele was voted on by a wave of hope that he would be the new alternative to the classic political parties in the country. Although he began as a self-described populist on the left, he gradually leaned toward dictatorship, consolidating his power, and even jokingly calling himself the “best dictator in the world.”
One of his most controversial policies was the adoption of Bitcoin as a legal means of payment, with the US dollar being its currency for 20 years.
El Salvador is one of the few countries that does not have its own currency. This is also an important factor here because the government cannot print much money in the event of a crisis: it depends on investment.
The government has introduced a processor called Chivo Wallet, which works like many crypto wallets: the seller or buyer generates an index with the price, and the other scans it and buys it. The government has based its roadmap on the coastal village of El Jonde, also known as “Bitcoin Beach”, which has already linked Bitcoin wallets and ATMs to its residents as a trial period.
Some of Buhlin’s plans include the creation of a new municipality, which he calls the “Bitcoin City” – the first city to be fully operated and managed by Crypto. The government has already begun efforts to harness energy from the country’s volcanic heat to extract bitcoin in support of the project.
Bukhel believes that as the value of bitcoin increases, so will the country. It is a way for global investors to buy government securities and borrow from the government of Buhel. Currently, multinational banks, such as the International Monetary Fund, are reluctant to lend to the country due to the risk of non-repayment.
How did Buhl’s major bitcoin test go so far? The results were mixed, the better.
The adoption rate of Chivo application is low. Many people do not find it useful to buy and use it for everyday needs, and some of the existing problems are not solved by Bitcoin.
Only a third of the population uses the Internet – about a quarter live below the poverty line – and smartphones are not widely available in rural communities. According to a survey conducted by the newspaper La Prensa Gráfica, nearly three-quarters of those surveyed said they would not accept bitcoin as a fee.
The default threat is approaching as President Buckell continues his unpopular mission to make the digital currency more trustworthy. The government may not be able to pay its bonds by the January 2023 deadline, and it looks like residents of El Salvador could feel the effects of the next bitcoin crash.
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