El Salvador’s president poured millions of dollars of government money into bitcoin and announced plans to build a $1.4 billion Bitcoin city — then the market collapsed.
El Salvador’s president Nayib Bukele has been criticized for investing hundreds of millions of public money in bitcoin.
Last year, the world leader made the decision to make the cryptocurrency legal tender. He bought nearly $100 million ($145 million) in the digital currency and announced plans to: build a bitcoin city†
The head of state hoped to raise the money for the new city by selling $1 billion ($1.4 billion) in bitcoin-backed bonds. The community would be built at the base of a volcano that would provide geothermal energy and power a bitcoin mining industry.
However, the country’s 2,300 bitcoins have not increased in value since it was bought and no profit has been made anywhere.
President Bukele has put another $200 million ($290 million) into a subsidized bitcoin wallet app called Chivo. The app was expensive to roll out and use.
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Local economist Tatiana Marroqui is concerned about the money being spent and calls the project risky.
“We don’t know exactly when or with what money they bought bitcoins,” Ms Marroqui said in the documentary. El Salvador’s Big Bitcoin Gambleavailable to stream Flash†
“There are many questions about how that money is being spent.
“I know the country’s finances quite well, and there isn’t even the slightest margin for government-funded projects that are risky. The needs of the population are enormous.
“Building a Bitcoin city is one of the most underdeveloped areas in the country, would be like creating a billionaire oasis in the middle of a desert of poverty.
“If he builds it, it will be at the cost of huge sacrifices by the Salvadoran people.”
In January, the International Monetary Fund (IMF) urged El Salvador to remove bitcoin as legal tender, highlighting the “major risks associated with using bitcoin for financial stability, financial integrity and consumer protection,” the statement said. BBC†
Despite criticism and the declining value of bitcoin, the government’s Tourism Secretary Morena Valdez said citizens trust President Bukele’s decisions.
“We know that all presidential decisions are made at the right time,” said Ms. Valdez.
“People have a lot of confidence in his decisions and in how the country’s economy is going.”
Other countries are reportedly considering El Salvador’s move.
The Central African Republic made Bitcoin legal tender earlier this year.
The country’s president, Faustin-Archange Touadéra, announced the news on Twitterwhich describes the digital currency as “universal money”.
Bitcoin and other digital tokens have suffered a dazzling crash this year that wiped trillions of dollars from the value of the cryptocurrency market.
Bitcoin dropped so low on Sunday as $US17,601.58 (A$25,300), down a whopping 74 percent since its all-time high in November, when it reached nearly $69,000 ($99,000) per coin.
The original and most traded cryptocurrency was at just under $20,500 ($29,800) at the time of writing.
Over the weekend, President Bukele tried to reassure his citizens.
“I see that some people are worried or anxious about the price of the bitcoin market,” he wrote on Twitter.
“My advice: stop looking at the chart and enjoy life. If you have invested in #BTC, your investment is safe and its value will grow tremendously after the bear market. Patience is the key.”
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