Bitcoin Popularity Fading Further in El Salvador

Two-thirds of Salvadoran citizens consider President Nayib Bukele’s bitcoin policy a failure and more than three-quarters have never used it, German public news outlet Deutsche Welle reported this week.

Less than 17% consider it a success, according to the University Institute of Public Opinion of the Jesuit Central American University. That makes it “the most unpopular measure of the Nayib Bukele government,” University Rector Andreu Oliva said.

And yet Bukele remains the most popular leader in Latin America, with an 86% approval rating, CID Gallup said.

How long that will remain the case is another matter, as the country continues to cruise toward a debt default at the beginning on 2023.

The International Monetary Fund (IMF) again rebuffed the Bukele administration’s attempts to restart negotiations for a $1.3 billion loan that would allow it to pay off a bond coming due at the beginning of 2023, according to Infobae.

“In meetings throughout the year … the IMF has privately warned Bukele officials about the difficulty of bringing the negotiations to a successful conclusion without the Salvadoran government reforming the Bitcoin Law to remove the cryptocurrency from its status,” as a legal tender, it said.

Last month, the IMF “reiterated to the Salvadorans that without this reform the negotiations would not advance,” Infobae added.

Last month, ratings agency Fitch again downgraded El Salvador’s sovereign debt, saying that repurchasing $565 million in debt for just $275 million does not change its likelihood of default.

El Salvador’s bonds are currently down more than 57% since Jan. 1, 2019 — despite having risen steadily since July, when they bottomed out at 27.7% of their price since that time.

That said, the bond issuance plans haven’t been abandoned according to Bitfinex CTO Paolo Ardoino, whose exchange is planning to tokenize and issue the bonds. The company was awaiting issuance of the necessary licenses, he said earlier this year.

A costly dream

As for the country’s investment in 2,381 bitcoins, it has lost more than $60 million of the $107 million it spent buying them.

As for remittances, pitched as a primary use case for bitcoin as it would allow instant and very inexpensive transfers sent via the government’s Chivo digital wallet, the country is seeing very little use. Just less than 2% of the $5.7 billion received through September came via Chivo.

Another pain point is Bukele’s Bitcoin City project, which was supposed to use proceeds from a long-delayed, bitcoin-backed bond issue to begin building a geothermally powered bitcoin mining facility. An entire bitcoin-centric city was to follow.

But the government has not given up on that dream, a Salvadoran official of its Dutch embassy told Cointelegraph on Oct. 14.

“El Salvador’s dream is to have a Bitcoin City and from there make our society bigger, stronger,” deputy ambassador Celarié Landaverde said. “We are trying to attract more and more investment to this area so that we can develop these communities.”

She added that the country is accepting investments on a first-come, first-served basis, with early entrants getting better returns, Cointelegraph noted.

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