Corruption Watchdog Criticizes El Salvador’s Bitcoin Spending Secrecy

El Salvador’s development bank has refused to reveal any details about the country’s purchase of bitcoins for an estimated $107 million.

According to a Sunday (Oct. 30) tweet by the country’s Anti-Corruption Legal Advisory Center (ALAC), development bank BANDESAL has said that the information is “confidential,” backing up earlier refusals by President Nayib Bukele.

BANDESAL oversees the country’s bitcoin purchases from a $150 million fund.

“That confidentiality limits the possibility for citizens to access and receive information on the operations carried out with public funds” by the agency, ALAC said, criticizing the decision.

ALAC is not alone in its condemnation. In their various downgrades of El Salvador’s sovereign bond ratings, Fitch and Moody’s have cited the refusal of Bukele to release any hard data about the country’s bitcoin purchases, noting that they have had to rely on his Twitter announcements for information.

The numbers they’ve come up with are 2,381 BTC at a cost of about $107 million. At current prices of about $21,000, that’s now worth $50 million — a $57 million paper loss.

The president has kept a tight grip on the project, tweeting out screenshots that support comments suggesting that he buys the bitcoins directly from his smartphone — sometimes “naked” he has said.

Between those purchases, the cost of the Chivo digital wallet and $30 worth of bitcoin given to every citizen who opened one, as well as other expenses, the cost of the bitcoin law making the cryptocurrency a legal tender alongside the U.S. dollar has been as much as $300 million.

Despite that spending and Bukele’s popularity — the president’s approval polls hover near 90% — the bitcoin endeavor he has challenged is wildly unpopular, with few merchants accepting it and fewer citizens using it. Despite eliminating the transaction fees, less than 2% of all remittances are sent via the Chivo wallet.

Crypto Industry Loves El Salvador

El Salvador’s experiment is highly popular in the bitcoin and wider crypto community, despite opposition of two-thirds of the population.

Stablecoin-issuer Tether announced Oct. 28 an agreement between El Salvador and the Swiss city of Lugano — the heart of Switzerland’s Crypto Valley — at a trade show it hosted in the city.

The Memorandum of Understanding on Economic Cooperation is aimed at “enhancing cooperation in education and research between El Salvador and Lugano, [and] supporting initiatives to drive the adoption of Bitcoin and other cryptocurrencies,” according to a press release.

“This initiative will be a game-changer in the exchange of ideas and best practices in economic freedom,” said El Salvador Ambassador to the U.S. Milena Mayorga in the release. “My fellow Salvadorans and I are very excited by the promise of bitcoin, and I look forward to seeing how this initiative will help increase access to economic security and economic freedom for all, one of the main goals of President Nayib Bukele’s government.”

An October survey by the country’s University Institute of Public Opinion of the Jesuit Central American University found that fewer than 17% of Salvadorans support the bitcoin experiment.

The use of bitcoin as legal tender has caused the International Monetary Fund to hold back a loan considered vital to helping El Salvador prevent a bond default early next year.

However, Brian Armstrong, CEO of top U.S. cryptocurrency exchange Coinbase, cited El Salvador’s law in his Nov. 3 third-quarter 2022 earnings report, saying that he believes that in the next five years, more countries would follow its example and make bitcoin or other cryptocurrencies legal tender.

For all PYMNTS crypto coverage, subscribe to the daily Crypto Newsletter.