Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Monday, January 16, 2023

Bukele's government continues to bet on bitcoin despite a bleak outlook

The recent enactment of the Law of Issuance of Digital Assets gives a new impetus to this policy, which turns a deaf ear to the criticism of the non-transparent management of cryptoassets, whose fall in value has already caused an estimated loss of US$ 100 million to the Salvadoran coffers.

Even with the bankruptcy of the largest Bitcoin miner, Core Scientific, the bankruptcy declaration of FTX, unfavorable numbers in the country and criticism from economists, the president of El Salvador, Nayib Bukele, continues to demonstrate blind confidence in cryptocurrency.

In the second week of the year, the Legislative Assembly approved, with 62 votes in favor and 16 against, the Law of Issuance of Digital Assets, a norm promoted by Bukele that allows the Executive to issue debt with cryptocurrencies, the creation of a regulatory framework for transactions in these assets and the generation of incentives for investors.

Through this new legislation, the government of El Salvador will be able to issue digital assets through public offers in order to trade them in an exchange. At the same time, a National Commission of Digital Assets will be created, which will be responsible for the registers of suppliers, issuers and certifiers of digital assets. They will also open a Bitcoin Fund Management Agency, which will manage funds from public offers and their returns.

Opponents to the law showed their concern about the possibility of the State generating debt without authorization from the Legislative Assembly and the opening of a door to possible money laundering due to lax controls.

Congresswoman Anabel Belloso, of the FMLN, declared that the law creates a scheme to obtain public financing with digital assets "to continue indebting the country without clearly stating so". Belloso had already been critical of the Government's cryptoassets policy when in November she labeled the decisions regarding bitcoin as capricious and irresponsible, since, according to the congresswoman, it did not bring any benefit to the country.

In turn, in the last days of 2022, the former president of the Central Reserve Bank, Carlos Acevedo, made harsh statements in an interview about bitcoin policies, which he described as a "failed experiment". One of the reasons, according to Acevedo, is because of the economic slowdown in the United States, causing "a meltdown in the cryptoasset market bubble". He also blamed the increase in interest rates, which hit the bitcoin market, revealing that it is not just the "safe haven everyone said it was."

To this was added the bankruptcy of the largest bitcoin miner, Core Scientific, which joined the fate of FTX, declared bankrupt in mid-November. The truth is that two days after that news was released and the Salvadoran Congress approved the search for loans or bonds for more than US$ 436 million to close the fiscal hole for the year, Bukele demonstrated his stubbornness in cryptocurrency by announcing that El Salvador would buy one bitcoin per day. That decision was also harshly criticized. The human rights organization Cristosal filed three legal actions before the Constitutional Chamber for the lack of transparency in the use of public funds to buy cryptocurrencies by the national government.

The truth is that one year after the first purchase, in September 2021, more than half of the money invested had been lost. The figure would be approximately US$ 100 million.

On the other hand, the Bitcoin Law was not as well received as expected, since only 20% accepted the cryptocurrency as an exchange currency, and the Chivo Wallet, the digital wallet launched by the Government, brought complications due to its low acceptance and the instability of its connection. It should be noted that half of the Salvadoran population suffers from food insecurity, and in rural areas the Internet connection is limited, so many critics of the Bitcoin Law argue that the country has other priorities to address.

However, Bukele continues holding on to his project against all criticism and discouraging forecasts. The approval of the Law of Issuance of Digital Assets will give new life to a policy that so far has not yielded results.

Last news and analysis

América Latina · Convergence

28/03/2024

Convergencialatina returns on Wednesday, April 3

Puerto Rico · Fixed Broadband

28/03/2024

Puerto Rico must deploy fiber optics in more than half of the island's homes

The data came from a Fiber Broadband Association webinar that revealed the island's situation in FTTH services. There is a plan for the footprint to reach one hundred percent of homes in 2027 financed by federal funds and privately executed.

Puerto Rico · Fixed Broadband

28/03/2024

Puerto Rico must deploy fiber optics in more than half of the island's homes

The data came from a Fiber Broadband Association webinar that revealed the island's situation in FTTH services. There is a plan for the footprint to reach one hundred percent of homes in 2027 financed by federal funds and privately executed.

Uruguay · Pay TV · Internet & OTT · Operators

27/03/2024

Through agreements with Claro and Movistar, cable operators expand their Internet offer

These are agreements of different types, which include leaving the last mile for the cable operator or contracts for available bandwidth. Antel could join with infrastructure leasing. Some cable operators are already building their own networks.

Paraguay · Operators

26/03/2024

Government analyzes partial privatization of Copaco

The state operator is going through a delicate moment. Its income does not cover operating expenses and it must fulfil a debt obligation of US$110 million. Furthermore, the lack of investments led to the obsolescence of its infrastructure. Oscar Stark, president of the firm, states that alternatives are being evaluated to obtain the necessary funds, including the possibility of adding private partners. And he believes that in 18 months "the situation will be resolved."

Search news