By: Real America News Updated 25 Feb 2022, 21: 49 pm EST
Four months after El Salvador became the first and only country in the world to adopt Bitcoin as legal currency, the International Monetary Fund has said that the cryptocurrency poses “great risks” to the nation’s financial stability. and its citizens.
The ambitious plan of the populist Nayib Bukele, self-styled CEO of that country, has produced lukewarm results and it is believed that El Salvador has lost up to $22 millions of dollars in reserves thanks to the dramatic drop in the value of cryptocurrency.
A targeted fraud to the users of the country’s official electronic wallet, known as Chivo, has been extended, with at least 1,000 people who have reported the theft of their identities through the application.
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Despite Bukele’s promise that Bitcoin would make life easier for the millions of Salvadorans who do not have bank accounts, so c Like those who send remittances from abroad, few seem to use it in their daily lives.
None of this has dissuaded Bukele, who in March, in what some experts call his move riskier, it will issue for the first time a “Bitcoin bonus” of $1,000 million dollars.
Half of the money raised from the bond offering will be used to build a tax-free “Bitcoin City” fueled by an extinct volcano whose geothermal energy will be harnessed to mine new bitcoins, according to government. The other 500 million dollars will be used to buy more bitcoins.
The bonus to 10 years offers investors an interest rate of 6.5%, much lower than the country’s traditional bonds, which are listed very low because ratings agencies are very concerned about Bukele’s fixation on Bitcoin.
The president insists that the plan will help boost growth in a poor nation that has long struggled to ignite your economy. Experts are skeptical.
Although the Salvadoran economy grew by 10% in 2021, continues to be heavily indebted. El Salvador owes $1,200 million dollars in foreign debt payments next year, including a Eurobond repayment of $800 million dollars due in January.
El Salvador asked the IMF for a loan of $1,300 million dollars to help cover those payments, but agreement seems unlikely given the nation’s refusal to leave Bitcoin or make other financial adjustments.
The now alarmed international financial community applauded two decades ago when El Salvador renounced its currency and adopted the dollar. Dollarization has helped keep El Salvador’s inflation rates low compared to its neighbors, but that means the government has ceded control of its monetary policy to the United States.
Bukele, who often complains that the United States is too involved in the affairs of his country and has grown closer to China, has embraced Bitcoin as part of his larger plan to remake El Salvador.
A week ago, three US senators introduced a bill asking the Department of State to report on whether El Salvador’s adoption of Bitcoin has opened the door to money laundering and whether the cryptocurrency poses risks to the US financial system.