El Salvador Holds On to Its Bitcoin Despite Price Surge

El Salvador, the first country to adopt bitcoin as legal tender, has no plans to sell its crypto reserves anytime soon, according to its president Nayib Bukele. The Central American nation has seen its bitcoin holdings increase in value by more than 40% since it started buying the digital currency in September 2021.

Bukele Defends Bitcoin Strategy

President Bukele took to X on Wednesday to respond to critics who had questioned his decision to invest in bitcoin when the price was low. He said that the media and the experts who wrote about El Salvador’s supposed losses were silent now that the price was way up.

“When bitcoin’s market price was low, they wrote literally thousands of articles about our supposed losses,” he tweeted. “Now that bitcoin’s market price is way up, if we were to sell, we would make a profit of over 40% (just from the market purchases), and our main source of BTC is now our citizenship program.”

Bukele also clarified that El Salvador had no intention of selling its bitcoin, as that was never its objective. He said that the country’s long-term strategy was not affected by the price fluctuations of the cryptocurrency. “We won’t sell, of course; at the end 1 BTC = 1 BTC. This was true when the market price was low and it’s true now,” he added.

El Salvador’s Bitcoin Journey

El Salvador made history in June 2021 when it passed a law to make bitcoin legal tender, alongside the US dollar. The law came into effect on September 7, 2021, making El Salvador the first country in the world to officially recognize and use bitcoin as a medium of exchange.

The country also launched a state-backed wallet app called Chivo, which allows users to receive, store, and spend bitcoin. The government offered $30 worth of bitcoin to every citizen who downloaded and verified the app. The app also enables users to convert their bitcoin to US dollars and withdraw cash from ATMs without fees.

To support its bitcoin adoption, El Salvador bought 550 bitcoins in September 2021, worth about $26 million at the time. The country continued to buy more bitcoins in the following months, bringing its total holdings to 2,798 bitcoins as of January 2024, worth about $160 million at the current price of around $57,000.

According to Bukele, the main source of the country’s bitcoin is now its citizenship program, which grants expedited citizenship to foreigners who make bitcoin donations to the government’s social and economic development projects. The program was approved by the Congress in December 2021 and aims to attract more investors and tourists to the country.

Bitcoin’s Future in El Salvador

El Salvador’s bitcoin experiment has been met with mixed reactions from the international community. Some have praised the country for its bold and innovative move, while others have warned of the risks and challenges involved in using a volatile and unregulated asset as legal tender.

The International Monetary Fund (IMF) has expressed its concerns over El Salvador’s bitcoin law, saying that it could pose legal, financial, and macroeconomic issues. The World Bank has also declined to assist the country with its bitcoin implementation, citing environmental and transparency problems.

However, Bukele has dismissed the criticism and said that El Salvador is not seeking approval from anyone to use bitcoin. He has also claimed that the adoption of bitcoin will benefit the country’s economy and its people, especially the unbanked and the remittance recipients.

Bukele has also said that he hopes that other countries will follow El Salvador’s example and embrace bitcoin as a global currency. He has invited other nations to join the Bitcoin Club, a group of countries that support and use bitcoin. So far, only a few small countries, such as Tonga and Panama, have expressed interest in joining the club.

El Salvador’s bitcoin journey is still in its early stages, and it remains to be seen how it will unfold in the future. The country’s president, however, seems confident and optimistic about his vision of making El Salvador a bitcoin nation.