In September 2021, the small Central American country became the first in the world to legally introduce bitcoin alongside the dollar. A bet as daring as it is criticized. And winning so far.
While the election of Donald Trump in the United States fuels a surge in Bitcoin which exceeded $90,000 on Wednesday, the president of El Salvador is exultant. « I told you so »the sulphurous Nayib Bukele was jubilant on his X account this Tuesday. Three years after his decision to make the most valuable cryptocurrency in the world an official national currency, the bet of the leader of the small Central American nation is proving very lucrative.
With a portfolio of nearly 5,932 bitcoins, purchased at an average price of $44,325, El Salvador today displays a capital gain of more than $270 million, or more than 100%. The valuation of its crypto-treasure thus exceeds $533 million, according to official data. In September 2021, El Salvador became the first country in the world to legally introduce Bitcoin alongside the dollar. Nayib Bukele explained that he wanted to bank the 70% of the population on the margins of the financial system and began to buy these virtual assets on behalf of the State. The move also aimed to attract international investment and reduce the costs of transferring money sent by Salvadorans abroad, which represents 25% of GDP.
National Reserve Fund
The state's investment strategy has been to gradually accumulate bitcoin, which today is compared to digital gold. The daily purchase of a token since 2022 has made it possible to build up a reserve fund without having to invest large sums of money at once. Thus, the country has limited risks by minimizing the impact of price volatility. The President of El Salvador has always strongly supported the long-term potential of Bitcoin, particularly as a safe haven against traditional currencies and inflation. A challenge that ended up paying off.
To encourage their use, the State had created a digital wallet called the «Chivo Wallet» and offered 30 dollars to each user as a welcome. LONG Mi Primer bitcoin (my first bitcoin), which trained some 35,000 people in the country, even saw the light of day in an effort at democratization. However, this liberalization was sharply criticized by international monetary institutions, fearing that this choice would disrupt the country's economy. The IMF has always refused to grant a loan to El Salvador as requested by the indebted government, in part because cryptocurrency was a sticking point. Until last August, when a preliminary agreement for a loan of 1.3 billion dollars was reached (the IMF nevertheless persisted in emphasizing that « potential risks » remain).
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Despite all the encouragement, Bitcoin adoption in El Salvador remains very limited. According to a study by the University Institute of Public Opinion of the Central American University (IUDOP), 88% of Salvadorans still do not use cryptocurrency. The incentives did not convince citizens, who were still wary, to take the plunge. According to the NGO « Mi Primer Bitcoin » low adoption reflects a fear of newness and technology. Many residents, accustomed to traditional payment methods, are hesitant to adopt a decentralized, entirely digital and volatile asset.
