El Salvador Weekly: One Year on, Bitcoin-as-Legal-Tender Is on the Ropes

El Salvador’s experiment to make bitcoin a legal tender alongside the dollar is rapidly approaching its one-year anniversary on Sept. 7, and the endeavor has not been one of President Nayib Bukele’s great successes.

While Bukele is clearly passionate about bitcoin, tweeting out news about purchases and “buying the dip” as the price of bitcoin collapsed nine months ago, very few of his fellow Salvadorans share that opinion. Multiple reports have said “bitcoin accepted here” signs have been disappearing from stores, as fewer consumers are using the government’s Chivo digital wallet or using bitcoin for remittances.

That’s to say nothing of the impasse between the Bukele administration and the International Monetary Fund, which has refused to continue discussing a planned $1.3 billion dollar loan that would have allowed the country to pay off a $1 billion Eurobond payment, which is due at the beginning of 2023.

On Aug. 30, La Prensa Grafica said that with bitcoin down 56% since the beginning of the year, the country has lost $48 billion on its $104 million purchase of bitcoins over the last year.

Of course, the country’s finance minister has said more than once that losses aren’t real until the bitcoins are sold.

See also: Peru Embraces Stablecoins amid Political, Economic Instability

No Firm Date

When a close supporter of your $1 billion bond issue says it can succeed because the “memecoin” dogecoin managed to get enough supporters to push the designed-to-fail joke token into a Top 10 cryptocurrency, you’ve got problems.

That’s something Paolo Ardoino, chief technology officer of stablecoin issuer Tether and exchange Bitfinex, told Cointelegraph on Sept. 2 — a few days after saying that his understanding is that the frequently delayed bitcoin-backed Volcano Bond issue will be at least another two or three months past its latest deadline in September.

Ardoino, who has been closely involved with project, said the government has told him it intends to pass the enabling legislation in September, but that the bond sale won’t be before the end of the year. Bitfinex will need a securities license — from a yet-unpassed law — before it can process the transactions for the government as intended.

While there has been widespread speculation that the Volcano bond project — which was supposed to be used in part to build a geothermal-powered Bitcoin City on the slope of a volcano — was delayed from its planned March launch by low demand, Ardoino said he believes the demand is there even though profiting would require a substantial rise in the value of bitcoin.

Read more: El Salvador Weekly: What Disappearing Bitcoin ATMs?

Telling Cointelegraph that he believes that the bond would itself accelerate bitcoin adoption, he said, “When you consider that the memecoin, Dogecoin, was able to obtain a market capitalization of $48 billion [last April, now it’s $8.1 billion], there is clearly enough investor appetite in the digital token economy to support a $1 billion Volcano.”

Ardoino added that the security situation in El Salvador has been a factor in the delay. The government has focused on a massive crackdown on violent gangs in a hugely popular campaign that has seen tens of thousands detained.

“We are confident that the law will obtain approval from Congress in the coming weeks, assuming that the country has the necessary stability for such legislation to pass,” Ardoino said.

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