Bukele against the world

Bitcoin development in El Salvador

El Salvador became the first country in the world to adopt Bitcoin as legal tender as it was officialized on September 2021, following the announcement made by President Bukele during the Bitcoin Miami event months before. The move was both criticized and celebrated within El Salvador’s borders and across the world. Since then, Bukele has continued to preach his newfound Bitcoin maximalism, announcing plans to launch a $1 billion Bitcoin Bond to fund the construction of Bitcoin City in the Gulf of Fonseca. The newly built Bitcoin city will be partially powered by a volcano nearby. 

While the wider crypto market has traded downwards in the last few months, Bukele has been a consistent dip-buyer, a sign of confidence in the cryptocurrency’s long-term prospects. “Most people go in when the price is up, but the safest and most profitable moment to buy is when the price is down. It’s not rocket science. So invest a piece of your McDonald’s paycheck in #Bitcoin. Now go back to flip more burgers you lazy fvçk!” he tweeted gracefully in January 2022. 

By now, whenever there is blood on the crypto market, you can expect at least two prolific dip-buyers to announce their increased positions on Twitter: Michael Saylor from Microstrategy and President Bukele. This usually coincides with Bitcoin skeptic Peter Schiff declaring the mainstream cryptocurrency as dead.

With a positive long-term outlook on the crypto markets, President Bukele has forecasted that BTC will reach $100K in 2022 and that two more countries will be adopting the digital asset as legal tender. With that in mind, El Salvador now confidently holds at least 1,800 BTC.

The Resistance

Adopting a decentralized digital asset – of which the supply, price, and distribution is beyond the control of any single entity – as legal tender is not the best way to make geopolitical friends. The Bitcoin Law has faced mass opposition within the country, with one of the fiercest opponents being the most prominent leftist party FMLN. The political party filed a lawsuit againast the Bitcoin Law before the Supreme Court of Justice, but that has largely gone unanswered due to a lack of support. Besides animosity in the hallways of the National Palace, Bukele’s Bitcoin affair has also stirred unrest in the streets as several small-scale protests took place around the time BTC became legal tender. 

At a global level, perhaps the biggest most vocal opponent of the Bitcoin Law is the International Monetary Fund (IMF). The financial agency issued statements as early as June 2021, claiming that the “adoption of a cryptocurrency as legal tender entails large risks for financial and market integrity, financial stability and consumer protection.” The IMF has since followed that up with repeated warnings, saying it was “following developments closely and will continue consultation with authorities.” The financial institution has urged El Salvador to reconsider its course of action. 

Like a true heavyweight, Bukele dipped and jabbed, landing a tweet right in the face of the IMF: “Thanks for the dip IMF, we saved a million in printed paper.” El Salvador then proceeded to buy an additional 150 BTC around this time.

Support

In the cryptosphere, President Bukele has unsurprisingly mostly been met with praise for his bold move to adopt BTC as legal tender. One of his supporters is Jack Mallers, the CEO of payments platform Stripe, who was working with Bukele to implement the plan. Michael Saylor said in June 2021 that what is happening in El Salvador “is the future model of the 21st century digital economy.”

The Central American Bank for Economic Integration (CABEI) based in Honduras began working with El Salvador to assist it in the implementation of Bitcoin as a legal tender. CABEI’s President has stated that El Salvador’s Bitcoin Law was something “innovative that creates many spaces and opportunities.” 

The initiative is only a few months into its journey. While that is half a lifetime in crypto, we still need more time to see how this actually plays out for the government of El Salvador, its citizens, and BTC – both in terms of market cap and national endorsements that may occur later this year.

There have already been some hiccups with getting Chivo Wallet, the government’s approved wallet, up and running. This is due to confusion and hesitation felt by the public during the rollout of the app. Many citizens have even had their $30-in-BTC welcome gift stolen as thieves used ill-obtained ID numbers.

However, El Salvador has recently tightened its partnerships with more companies in the crypto industry to improve the infrastructure and Bitcoin experience. Koibanx, a Latin American asset tokenization provider, announced its collaboration with the government of El Salvador to develop its blockchain infrastructure on top of Algorand’s technology. In a press release, Koibanx stated that it chose to build on Algorand’s blockchain for several national public and private initiatives across Latin America. This seems promising as the Algorand protocol provides the performance, scalability, security, and functionality required to implement large-scale projects around the world.

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