Money

Investors punish El Salvador for adopting bitcoin

This is not the first time that the cost of Salvadoran financial debt has faced pressure from cryptocurrency. Since June 8, when El Salvador became the first country in the world to recognize bitcoin as legal tender, the price of the long-term sovereign bond in the European market, which was around 94 cents on the dollar, fell to touch 75 pennies on the dollar, a level not seen since November 2020.

As of August, things seemed to change and the bonds regained ground, until – in September – the Supreme Court of El Salvador opened the door for President Nayib Bukele to be re-elected in the next presidential elections in 2024. And as of September There, bond prices began their downward streak, accelerating with the implementation of bitcoin.

“In this case, yields have been pushed up (and prices down), due to the uncertainty that El Salvador will not be able to pay its debt as promised,” said Mike Damas, president of Maryland Capital Advisors. .

Since the so-called Bitcoin Law came into force in September, businesses established in El Salvador will have to accept bitcoins as a means of payment, in the same way as dollars, which has been the official currency in this Central American country for 20 years. Through videos on Twitter, users spread the payments made with bitcoin in branches of stores such as Starbucks, Pizza Hut or McDonalds.

For Bukele this bet will help in the short term to “generate jobs and provide financial inclusion” to Salvadorans who receive remittances from their compatriots living outside the country. However, in a dollarized economy, expenses will remain in dollars, which could lead to an asset-liability imbalance, said Paul Donovan, chief economist at Swiss investment bank UBS.

TAMMY SEWELL

Tammy Sewell is our Writer and Social at OICanadian.com. Tammy loves sports, she writes our celebrities news. She spends time browsing through several celebs news sources as well the Instagram. Email: Tammy@oicanadian.com Phone: +1 513-209-1700

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