The Salvadoran president splashed millions of public dollars on bitcoin and announced plans to build a $1.4 billion bitcoin city – then the market crashed.
Salvadoran 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 cryptocurrency legal tender. He purchased nearly US$100 million ($145 million) in the digital currency and announced his intention to build a bitcoin city.
The head of state hoped to raise 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 they were purchased, and none have been sold anywhere for a profit.
President Bukele has poured another $200 million ($290 million) into a subsidized bitcoin wallet app called Chivo. The application was expensive to deploy and run.
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Local economist Tatiana Marroqui worries about the money spent and said the project was risky.
“We don’t know exactly when or with what money they bought bitcoins,” Ms. Marroqui said in the documentary. The big bitcoin bet in El Salvadoravailable to stream on Glow.
“There are a lot of questions about how this money is being spent.
“I know the country’s finances quite well, and there’s not even the slightest margin for state-funded projects that are risky. The needs of the population are immense.
“Building a Bitcoin City is one of the most underdeveloped areas in the country, it would be like creating a billionaire’s oasis in the middle of a desert of poverty.
“If he builds it, it will be at the cost of enormous sacrifices on the part of the Salvadoran people.”
In January, the International Monetary Fund (IMF) urged El Salvador to remove bitcoin as legal tender, noting the “great risks associated with the use of bitcoin on financial stability, financial integrity and consumer protection,” according to BBC.
Despite the criticism and the decline in bitcoin’s value, the government’s tourism minister, Morena Valdez, said citizens trust President Bukele’s decisions.
“We know that each of the president’s decisions is made at the right time,” Ms. Valdez said.
“People have great confidence in his decisions and the development of the country’s economy.”
Other countries would consider El Salvador’s decision.
The Central African Republic made bitcoin its legal tender earlier this year.
The country’s president, Faustin-Archange Touadéra, announced the news on Twittercalling digital currency a “universal currency”.
Bitcoin and other digital tokens suffered a jaw-dropping crash this year that wiped billions of dollars off the value of the cryptocurrency market.
On Sunday, bitcoin fell as low as $US17,601.58 (A$25,300), a drop of 74% since its all-time high in November, when it nearly reached US$69,000 ($99,000) per coin.
The original and most widely traded cryptocurrency was trading at just under US$20,500 ($29,800) at the time of writing.
Over the weekend, President Bukele sought to reassure his fellow citizens.
“I see some people worrying or worried about the market price of bitcoin,” he wrote on Twitter.
“My advice: stop staring at the graph and enjoy life. If you have invested in #BTC, your investment is safe and its value will increase tremendously after the bear market. Patience is the key.
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