Under the leadership of President Nayib Bukele the Central American nation of El Salvador has very publicly embraced cryptocurrency in general and bitcoin in particular. In September the country became the first to recognize bitcoin as legal tender and completed the first government purchase of 150 bitcoins at that time. Bukele notably tweeted at the time, “They can never beat you if you buy the dips,” According to reports, Bukele and El Salvador just bought the dip again… big time.
The Bitcoin Law was passed by the Legislative Assembly on 9 June 2021, with a majority vote of 62 out of 84, becoming law some ninety days later. Interestingly this law also allows for foreigners to gain permanent residence in El Salvador if they invest 3 Bitcoin into the nation.
According to Business Insider,
“Bitcoin tumbled below $59,000 on Wednesday, its lowest in two weeks, after investors cashed in on the previous week’s rally to a record of almost $69,000, following the successful launch of the ProShares’ bitcoin futures exchange-traded fund.”
Spotting the opportunity, El Salvador increased it’s bitcoin holdings to 1,120 by purchasing some 420 to $2.5 million.
“It was a long wait, but worth it. We just bought the dip!” Bukele said.
The small nation is able to tod this through a trust it holds containing bitcoin and US dollars as President Bukele explained via Twitter.
We have a trust fund accounted in USD, but the trust is funded by both USD and BTC.
When the BTC part revalues in comparison to the accounting currency (USD), we are able to withdraw some USD and leave the trust with the same total.
— Nayib Bukele 🇸🇻 (@nayibbukele) October 27, 2021
Bitcoin As A National Strategy
While other nations such as China have taken an outwardly hostile view of cryptocurrencies as Beijing deliberately made cryptos illegal as a tender, and rendered mining illegal as well, El Salvador has taken the opposite track. Bukele’s government has even gone so far as to set up a government mining operation that uses geothermal energy tapped from the nation’s active volcanoes to power the complex computers needed to mine bitcoin algorithmically.
The Republic of El Salvador is the fifth-poorest country in North America with a per capita GDP of $4,131.according to World Population Review, and has struggled since the end of the Salvadoran Civil War that raged from 1979-1992 to rebuild the small nation’s shattered economy. Multiple natural disasters like Hurricane Mitch and the 2001 earthquake haven’t helped either, but this innovative solution, pivoting from the depressed national currency the colon, to the US Dollar and bitcoin, is a very promising initiative to catapult El Salvador to a place of prominence in the global economy.