After weeks of silence, the Salvadoran President Nayib Bukele went on Twitter to announce that his government had purchased approximately $15.4 million worth of BTC and to present the plans for Bitcoin City. However, opposition voices continue to issue warnings, and a former senior central bank official has criticized Bukele’s plan to fund the city’s construction through a bitcoin bond issue.
As previously reported, many observers claimed that the bond issuance would not take place as the government failed to meet the mid-March deadline. The government, however, refuted these claims but Mr. Bukele – usually very active and very vocal on all things BTC – remained silent on the subject, preferring to focus on his government’s war with street gangs.
All that changed in the last few hours, when Bukele announced that his government had taken advantage of lower prices (buy the dip) – by buying 500 BTC for an “average price of 30,744 USD”. Bitcoin price continues to stagnate near the $30,000 mark, with only slight recoveries since this acquisition.
The purchase means El Salvador has over 2,300 BTC ($73.8 million) in reserve, although no official government documentation detailing the purchases has been made – and Bukele’s tweets on the subject are the only official government communication.
Bukele also posted a number of images of a gold-colored 3D model of Bitcoin city, which is being built at the base of a volcano currently used to mine BTC using geothermal energy.
He then posted two images showing what a completed Bitcoin City would look like at night, as well as what appears to be a viewing platform or walkway near the top of the volcano.
Francis PouliotCEO of bull bitcoindid not look favorably upon the development of the situation, declaring that it was “absolutely unthinkable that some people would actually believe” that the project would go ahead.
Meanwhile, Carlos Acevedoformer governor of the central bank, the Central Reserve Bank of El Salvadortold a Salvadoran television channel that the government’s “hope” to issue bonds is “already extinguished”.
According to ElSalvador.com, Mr. Acevedo referred to an $800 million debt maturity that the government will face in January next year when a (conventional) bond expires. Mr. Acevedo said that an aid program from the International Monetary Fund (IMF) was no longer relevant and that “the door was closed” to such support.
And the thorny question of balancing the budget could, according to the former director of the central bank, leave the government no choice but to “reorganize” public finances – and nationalize Salvadoran pension funds.
Economists and jurists have warned of this possibility for some time, especially when institutions such as Moody’s downgraded their credit ratings for El Salvador.
Last week, Moody’s downgraded the country’s credit rating from Caa1 to Caa3, and also warned that the state could use public savings “to obtain liquidity”, and decried “the lack of ‘information’ regarding Bukele’s plans.
Mr Acevedo also criticized the “lack of transparency in public spending” by Mr Bukele and his government, saying it had alienated international bodies. He also claimed that BTC has lost up to 50% of its value since hitting highs, saying this will further hurt the Salvadoran economy.
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