El Salvador Has Lost Around $60 Million on Its Bitcoin Bet

Since El Salvador became the first government to recognize Bitcoin as a legal tender more than a year ago, citizen Edgardo Acevedo, 37, has found the national cryptocurrency experiment quite underwhelming. The world’s most popular cryptocurrency, bitcoin, still doesn’t have wide use, according to Acevedo, who also goes by the alias, Ishi Kawa. He has also discovered that few establishments in El Salvador accept bitcoin, and even fewer Salvadorans want to pay with virtual money.

Given that the currency has lost almost 60% of its value since the experiment began and that El Salvador continues to experience weak economic development and a large budget deficit, the use of bitcoin there appears to be minimal. El Salvador’s debt-to-GDP ratio, which measures how much a country owes compared to how much it produces, is expected to reach about 87% this year, raising concerns that the country won’t be able to pay off its debts. The country’s domestic and multilateral debt obligations represent a serious threat, partly because the biggest lenders in the world are reluctant to lend money to a nation that is staking its future on one of the world’s most unpredictable assets.

High Hopes for BTC Law

Jaime Garcia had high hopes that El Salvador’s Bitcoin Law, which went into force on September 7, 2021, would address some significant issues with how Salvadorans transmit, receive, and spend money.

The Law also allows for the payment of tax contributions in Bitcoin, listing pricing in bitcoin occasionally, and excluding bitcoin exchanges from capital gains tax. But more importantly, Bukele emphasized the Law’s potential to increase financial inclusion, which is no minor feat in a nation where over 70% of the populace lacks access to conventional financial services.

7 out of 10 Salvadorans don’t believe that the Bitcoin Law has improved their family’s economic situation, according to a public opinion research organization survey.