El Salvador has made headlines once again by purchasing 21 Bitcoin (BTC) on September 7, commemorating the fourth anniversary of its controversial Bitcoin Law. This acquisition signifies a notable addition to the nation’s growing cryptocurrency reserve, which now totals 6,313.18 BTC, valued at approximately $701 million.
This latest purchase highlights the country’s ongoing commitment to Bitcoin, despite existing tensions with international financial institutions, particularly the International Monetary Fund (IMF). In December last year, El Salvador entered into a $1.4 billion loan agreement with the IMF that explicitly requires the government to cease the voluntary accumulation of Bitcoin by public entities. According to IMF officials, El Salvador had pledged to halt such acquisitions under the Extended Fund Facility agreement.
El Salvador’s Bitcoin Law, established in 2021, made the nation the first in the world to adopt Bitcoin as legal tender alongside the U.S. dollar. The government’s intention was to enhance financial inclusion and lower remittance costs. However, this leap into cryptocurrency was met with skepticism from various critics who pointed to the volatility of Bitcoin and potential macroeconomic risks. They also argued that the execution of the law contradicted the decentralized ethos of cryptocurrency, given that it was imposed by state authority.
In a consistent strategy since March of the previous year, El Salvador has been acquiring Bitcoin on a daily basis, with reports indicating the purchase of approximately one BTC per day. The government has adhered to this plan even in the face of IMF stipulations and has made adjustments to its Bitcoin Law, which now allows merchant participation to be voluntary while maintaining Bitcoin’s status as legal tender.
In addition to its recent purchase, the National Bitcoin Office took measures late last month to redistribute its Bitcoin holdings across multiple addresses, assigning a cap of around 500 BTC per address. This decision was justified by officials citing potential threats from quantum computing, and the new addresses have been disclosed on a public dashboard for transparency.
A recent IMF report estimated that El Salvador’s Bitcoin purchases since the inception of the law have totaled roughly $300 million, generating unrealized gains exceeding $400 million at current market prices. However, the fund also highlighted that limited disclosure from the Salvadoran government has hindered a full independent assessment of its Bitcoin portfolio.
Despite the complexities introduced by its relationship with the IMF and the associated conditions of the loan, El Salvador’s Bitcoin holdings position the nation among the largest sovereign reserves of the cryptocurrency. This underscores the government’s willingness to continue its Bitcoin strategy, aiming to navigate both innovative financial practices and external financial scrutiny.
