El Salvador’s Bitcoin Transition Turns Fiasco

Today, not only has the bitcoin revolution promised by its president, Naib Bukele, not taken place, but the country is on the brink of an abyss.

A year later, it’s time to take stock for El Salvador. Indeed, analysts are starting to talk about a default. The public debt of this small poor country now exceeds 80% of GDP, and without the help of the IMF, bankruptcy threatens in a few months.

To date, the IMF is blocking a vital aid to the country, a $1.3 billion loan that could breathe new life into El Salvador’s finances. This aid is also blocked by the same IMF at the moment because the bitcoin experience has further exacerbated the situation in the country and caused a $375 million hole in already in very bad shape government accounts. The IMF and the World Bank have warned El Salvador that they can only help it if the finances are in order and the country’s financial profile is at a safe minimum, which of course will not be the case in this “bitcoin revolution” that the president wants. . Naib Bukele.

Only 2% of transactions

Because on paper it is a fiasco: Bitcoin lost 50% of its value in one year. This Wednesday, the cryptocurrency queen is still trading below $20,000, which is starting to seriously worry investors. Eventually, most dollar exchanges were to be replaced by bitcoin transactions on the well-known official Chivo e-wallet, and despite 4 million downloads, out of a population of 6.5 million, only 2% of transactions are made through this system. according to former central bank president Carlos Acevedo.

With a population that has never been so wary of this transition to all cryptocurrencies. Thus, we can say that the bitcoin revolution hastened the fall of the country’s finances, even if it is certainly not the main reason. From now on, the country will have to review its debt with a serious hole in the accounts, directly because of this forced march and a very poorly controlled transformation.

Antoine Larigaudri edited by PA

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