Despite IMF Warning Amid 'Coin Crash'... El Salvador President Buys at Low Prices

Confusion Continues in El Salvador, Which Adopted Bitcoin as Legal Tender
IMF Warns "It May Pose Risks to Consumer Protection"
El Salvador President Makes Additional Purchases Despite Plunge

The tourist attraction 'Bitcoin Beach' in El Salvador. You can pay with Bitcoin to purchase products or services. / Photo by YouTube video capture

[Asia Economy Reporter Lim Juhyung] Concerns are emerging that El Salvador, which last year became the first country in the world to adopt cryptocurrency as an official national currency, may face an economic crisis. Recently, as the prices of cryptocurrencies including Bitcoin have been falling day after day, it could negatively impact the cost of living for the citizens. The International Monetary Fund (IMF) also warned El Salvador's monetary authorities to "exclude Bitcoin from legal tender," but the president still insists on the "buying opportunity at low prices" and maintains his faith in Bitcoin.

Recently, on the Bitcoin subforum of Reddit, the largest online community in the United States, a netizen posted about the local situation in El Salvador, which adopted Bitcoin as legal tender.

According to this netizen, the El Salvador government currently lacks sufficient measures and education to cope with Bitcoin's price volatility, and the government-operated cryptocurrency electronic wallet app called "Chivo" is also experiencing frequent errors.

He said, "My father, who usually had no interest in Bitcoin, tried to download the Chivo app, but suddenly his account was suspended. Even after requesting account reactivation from the service center a month ago, he has only been told to 'wait.'" He added, "There are also crimes where people steal others' personal information to create app accounts and withdraw money from banks."

President Bukele of El Salvador announcing the plan to build a Bitcoin city in November last year / Photo by Yonhap News

He also pointed out that citizens are experiencing inconveniences in their daily lives due to the severe price fluctuations of Bitcoin. He said, "Bitcoin is only used in tourist spots like beaches," explaining, "Because of its high volatility, people face difficulties buying the same product with different amounts of Bitcoin."

Previously, in September last year, El Salvador became the first country in the world to adopt Bitcoin as legal tender, using it alongside the US dollar. President Nayib Bukele, who actively advocates for Bitcoin, announced plans on November 20 (local time), two months later, to mine Bitcoin using geothermal energy from volcanic areas and to issue $1 billion (about 1.2 trillion KRW) worth of 'Bitcoin bonds' to build a 'Bitcoin City.'

However, the cryptocurrency market has recently been sluggish. According to 'CoinMarketCap,' a cryptocurrency market capitalization data aggregation site, Bitcoin reached its all-time high of $69,000 (about 82.93 million KRW) in November last year but has since nearly halved over about two months. As of the 27th, it is trading near $37,000 (about 44.47 million KRW).

If the value of legal tender falls excessively compared to the dollar, it can significantly affect the 'cost of living.' Prices of imported industrial products, grains, and crude oil could sharply rise.

On the 22nd (local time), President Bukele announced the additional purchase of Bitcoin / Photo by President Bukele (Twitter capture)

Because of this, the IMF also recommended that El Salvador's monetary authorities "exclude Bitcoin from legal tender." In a statement released on the 25th, the IMF warned, "Adopting cryptocurrency as legal tender can pose significant risks to market soundness, financial stability, and consumer protection."

However, despite warnings from international organizations and negative public opinion, President Bukele has not abandoned his faith in Bitcoin.

On the 22nd, President Bukele tweeted on his official Twitter account, "El Salvador purchased 410 Bitcoins for only $15 million (about 1.8 billion KRW)," adding, "Some people are really selling (Bitcoin) at a cheap price." On that day, Bitcoin's price had dropped to the $36,000 range (about 43.27 million KRW). President Bukele viewed this price movement as a 'buying opportunity at low prices.'

El Salvador's Bitcoin holdings, which have been increasing with additional purchases whenever Bitcoin's value falls, amount to about 1,800 Bitcoins, close to $66 million (about 79.3 billion KRW).