The government of El Salvador added 420 bitcoins on Wednesday, October 27, 2021. President Nayib Bukele made the announcement on social media at a time when the Central American state was flooded with crypto-asset experiments.
Most recent bitcoin purchases have reached $25 million, or the equivalent of IDR 355.1 billion (assuming an exchange rate of IDR 14,207 per US dollar). El Salvador’s move marked the government’s purchase of crypto assets since Monday, September 20, 2021. At that time, President Bukele announced that he had purchased 150 bitcoins.
“Long wait but it’s worth it. We (El Salvador) bought 420 new bitcoins,” Bukele said on Twitter, quoted from Channel News Asia on Thursday, 28/10/2021.
Currently, bitcoin is trading at a price of more than 59 thousand USD, or the equivalent of Rp 838.2 million per bitcoin. Earlier this month, El Salvador became the first country in the world to accept bitcoin as legal tender after the US dollar.
According to Bukele, this practice will reduce the cost of remittances from El Salvadoran immigrants residing abroad.
Traditional banks and similar financial institutions often charge high fees for money transfers. Official data records show that the total treasury of El Salvador holds approximately US$66 million, or 1,120 bitcoins worth Rp 937.6 billion.
El Salvador, including the economic class of poor countries, largely receives about US$6 billion, or Rp 85.2 trillion, sent home each year.
This value is one quarter of the country’s Gross Domestic Product (GDP). One fifth of the households are supported by cash source.
The Risk of Bitcoin Being a Payment Tool in El Salvador
Previously, El Salvador, one of the countries that adopted Bitcoin as a legal tender. Rating agency S&P Global assessed that El Salvador’s move had a negative impact.
El Salvador has to take a lot of risk in the act of adopting bitcoin. S&P Global said the main risk is that it threatens El Salvador’s prospects for program support from the International Monetary Fund and increases financial vulnerabilities to the detriment of banks in the country.
This is because in this case there is a currency mismatch when they provide cash related loans and pay loans in bitcoins.
“The risks of adopting bitcoin as a means of payment in El Salvador appear to outweigh the potential benefits achieved. In addition, there are adverse credit implications,” said an S&P statement quoted on the Chanel News Asia page on Saturday. , 18 September 2021.
Currently the United States (US) gets a B- from S&P, which means it is in a stable position. At the end of July, El Salvador earned an equivalent position one level below Caa1 or B-. This put El Salvador on a bearish warning.
