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El Salvador expected to default as Bitcoin plummets

ernirulez 4y ago
I can't really understand how a post by El País can make it to hacker news. El país is a disinformation newspaper full of manipulation and indoctrination controlled by governments. At least this is the case in Spain, do reading this newspaper is just killing your brain
jinpa_zangpo 4y ago
The real reason for the risk of default is that El Salvador was counting on a loan from the IMF and the IMF refused to make a loan to El Salvador while Bitcoin is legal currency. Despite his misadventures with Bitcoin, President Bukele is wildly popular in El Salvador.
- RobertDeNiro 4y ago
  The IMF is anti cryptocurrency ?
  - xvector 4y ago
    Most definitely - it takes away from their power.
  - Bubble_Pop_22 4y ago
  - pibechorro 4y ago
    Ofcourse. they muscled Argentina to prevent banks from dealing in it, despite popular support and the banks announcing it.
  - webinvest 4y ago
    Yes.
  - IAmEveryone 4y ago
    The IMF is anti-idiocy. So yes.
  - collyw 4y ago
    That would depend on whether they control the cryptocurrency I imagine.
  - toomuchtodo 4y ago
    The IMF is anti-gambling-with-soverign/borrowed-funds.
  - neonihil 4y ago
    They are happy with their monopoly as it is.
  - csomar 4y ago
    From the papers they released, I don't think they are. But this is an institution that works with SDR [https://en.wikipedia.org/wiki/Special_drawing_rights]; https://en.wikipedia.org/wiki/Special_drawing_rights]; so they are not going to "understand" Bitcoin. In a sense, they have their own Bitcoin. And I put understand in quotes because the IMF does get Bitcoin, Crypto and finance better than most countries. They understand that crypto is mostly bad news for weak countries because they are already having trouble with capital outflow as is.
  - splix 4y ago
    IMF, as well as World bank and co, are anti-anything that could help a country to be less dependent on Wall Street. See https://en.wikipedia.org/wiki/Structural_adjustment#Criticisms https://en.wikipedia.org/wiki/Structural_adjustment#Criticis... and https://en.wikipedia.org/wiki/Enough_Is_Enough_(letter) https://en.wikipedia.org/wiki/Enough_Is_Enough_(letter) for examples.
- manimino 4y ago
  This is inaccurate. The IMF and other entities do not give aid or loans to dictatorships, because anything given to a dictatorship goes straight to the cronies at the top. El Salvador started having this problem as Bukele eliminated other branches of government. That's why he pushed Bitcoin adoption in the first place - to work around the problems caused by his desired form of government.
  - Bubble_Pop_22 4y ago
  - jrvarela56 4y ago
    LOL they lend to democracies in third world countries like mine where the money goes straight to the cronies at the top (Panama; I know the term is outdated but us third-worlders call our countries third-world). My wife worked for a Ministry here and saw how the world bank shoved loans on non-functioning institutions and charged my country interest ON THE AVAILABLE FUNDS (like a credit line but it doesn't matter if you use it or not) despite them being executed or not. I dont know wtf these people are doing, but benevolent they are not.
    - leviathan235 4y ago
      Yes, the IMF exemplifies the folly of global institutions. How long have they propped up kleptocracies like Argentina? "Democracy" is just a nice coat of paint over unbelievably corrupt countries where citizens will never see a dime of those loans yet will have to bear the burden of paying them back.
    - lottin 4y ago
      So why did your country take the loan if it was so terrible?
      - saint_fiasco 4y ago
        I think the point is that the cronies at the top took the loan on behalf of the country. They don't care that the terms of the loan are bad because they will personally get rich either way and paying back the loan is somebody else's problem.
- JumpCrisscross 4y ago
  > real reason for the risk of default is that El Salvador was counting on a loan from the IMF and the IMF refused to make a loan to El Salvador while Bitcoin is legal currency El Salvador's dollar bonds started crashing right after the Bitcoin announcement, before the IMF bailed; Bukele had already snubbed the IMF six months before when he "fired five top judges and the attorney general" [1]. > Bukele is wildly popular in El Salvador This is correct [2]. I'm not certain how this makes me feel about supporting them when this inevitably fails. [1] https://www.bloomberg.com/news/articles/2021-11-22/bitcoin-bond-on-horizon-sends-el-salvador-s-dollar-debt-diving https://www.bloomberg.com/news/articles/2021-11-22/bitcoin-b... [2] https://www.reuters.com/markets/currencies/majority-salvadorans-approve-bukeles-leadership-poll-shows-2021-12-15/ https://www.reuters.com/markets/currencies/majority-salvador...
- csomar 4y ago
  > Despite his misadventures with Bitcoin, President Bukele is wildly popular in El Salvador. He seems to have successfully controlled crime in El Salvador. Usually, there is something behind these strong men if they are still popular. Homicide is down from 103 in 2015 to 17.6 last year. People will stick with such figure; it's not clear why previous rulers have failed. 103 is scary as shit number. Bitcoin will look like a blip in his mishaps from the citizenry point of view.
Barrera 4y ago
> In a statement, Fitch explained: “The downgrade reflects heightened financing risks stemming from increased reliance on short-term debt, a $800 million Eurobond repayment due in January 2023, a still-high fiscal deficit, limited scope for additional local market financing, uncertain access to additional multilateral funding and external market financing given high borrowing costs.” Following through to the linked statement: > In Fitch's view, weakening of institutions and concentration of power in the presidency have increased policy unpredictability, and the adoption of bitcoin as legal tender has added uncertainty about the potential for an IMF program that would unlock financing for 2022-2023. https://www.fitchratings.com/research/sovereigns/fitch-downgrades-el-salvador-long-term-idr-to-ccc-from-b-09-02-2022 https://www.fitchratings.com/research/sovereigns/fitch-downg... So it's not just the exchange rate volatility that's at issue, but the possibility that the IMF will make good on its warnings and not backstop the country until its bitcoin venture ends. That, and the other political stuff, combine to make the country look more risky to creditors. Later in the Fitch article: > The recently published IMF Article IV recommends a fiscal adjustment of 4pp of GDP to put the debt burden on a steady downward path, strengthening the medium-term fiscal framework, improvements in governance in reporting and audits, implementing revised anti- money laundering laws, and removing bitcoin as legal tender while improving regulation and oversight of the virtual currency system.
pluc 4y ago
A wildly speculative digital currency is fluctuating, story at 11
- mywittyname 4y ago
  The story is only tangentially related to BTC. The article could eliminate all mention of crypto without any information loss. It's only included for the clicks.
stncls 4y ago
What was the impetus behind El Salvador's adoption of bitcoin? The bill seems to have been introduced by President Nayib Bukele, whose background is law. This recent story [1] about bitcoin being pushed by fishy operatives in Catalonia is what got me curious. [1] https://www.occrp.org/en/investigations/fueling-secession-promising-bitcoins-how-a-russian-operator-urged-catalonian-leaders-to-break-with-madrid https://www.occrp.org/en/investigations/fueling-secession-pr... / https://news.ycombinator.com/item?id=31317907 https://news.ycombinator.com/item?id=31317907
- qgin 4y ago
  Bukele has often outlined his economic thesis around Bitcoin on Twitter: > El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670 #Bitcoin https://twitter.com/nayibbukele/status/1467000621354135555 https://twitter.com/nayibbukele/status/1467000621354135555 > Missed the f**ing bottom by 7 minutes https://twitter.com/nayibbukele/status/1467003967133687809 https://twitter.com/nayibbukele/status/1467003967133687809
kumarvvr 4y ago
Bitcoin is the biggest troll on the planet. A nerdy idea that took hold because druggies found it convenient to use and then it became "mainstream" and an "asset" and an "investment", with people putting their life savings because they "believe it is going to go up". Its actually a reflection on the current state of society, all the materialism and irrationality personified. The greed, the "hustle", a modern incarnation of snake oil.
- cmrdporcupine 4y ago
  If it was only druggies, that'd be great, cuz it'd be relatively confined, really. But I don't think that can explain the ridiculous valuations on its own. It's clear there are far larger parties than just drug trafficking and hobbyists and crypto-promoters and "retail investors". My guess is large movements of capital out of places like Iran, China, and Russia.
  - kumarvvr 4y ago
    Perhaps players are using it as a "exchange", as in a book / record. Ultimately, its just numbers on a piece of hard-disk.
  - nradov 4y ago
    Yes you're exactly right. Wealthy Chinese can purchase mining hardware and electricity using the local funny money, then sell the resulting Bitcoins for actual hard currency. The Chinese authorities have been cracking down but it's hard to stop completely.
    - cmrdporcupine 4y ago
      I think it's more than they're leaving it in bitcoin. For now this is more secure than leaving it in local accounts where the predatory State has access to it, or where it can be confined by sanctions, etc. Later... someday or sooner... throw it through few a mixers, pass it around a few times, and, sure, it could become capital again, or convert to another currency, or stick it in real estate. But there's no need for that at this point. In some places the risk of losing 80% of it to the fluctuations of kleptocoins is actually better than the political risk, or the potential taxation burden.
Giorgi 4y ago
Another bullshit article. They purchased more bitcoin just several days ago and they debt is due... wait for it... NEXT YEAR. They will be fine.
deleted 4y ago
[deleted]
nikanj 4y ago
They'll just buy the dip. Line goes up, I hear.
- z9znz 4y ago
  I fear your amusing sarcasm may be lost on some readers.
  - dong_ 4y ago
  - mmoya 4y ago
    Me one of them.
    - LightG 4y ago
      You should have hedged ... you'd be less sour.
- skocznymroczny 4y ago
  To be honest, every time I heard about Bitcoin plummeting, buying the dip would still net you 3x, 4x gains in a year. We'll see how it goes here, but I wouldn't be surprised if after a series of "Is Bitcoin dying?" articles we'll see it bounce back again.
fbn79 4y ago
> ...the government had purchased nearly $25 million worth of bitcoin... > ...a $800 million Eurobond repayment due in January 2023... Dont think the losing of bitcoin value can be blamed in case of default
- JohnJamesRambo 4y ago
  Bukele showed up in the latter stages of a bull market and thought he was a genius that had discovered a money making machine. Just like Saylor and Elon. It happens every cycle. They will all be tested. No one gets through the door easily. The genius was ignoring recency bias and buying BTC at the bottom at 3k in 2018 and selling your coins to Elon last year. The amount Bukele bought is tiny. Bitcoin and crypto are a threat to the IMF system. They aren’t going to like it when you do that. To survive without the IMF, you would have to go all in at a generational bottom. That did not happen.
  - el-salvador 4y ago
    > Bitcoin and crypto are a threat to the IMF system. They aren’t going to like it when you do that. To survive without the IMF, you would have to go all in at a generational bottom. That did not happen. In the large scale, El Salvador's BTC fund is not that big. I mean, El Salvador has more IMF shares than Bitcoins in their fund. - El Salvador Bitcoin: 74 million USD [2] - El Salvador IMF shares: 402 million USD (207 million SDRs) [1] [1] https://www.imf.org/en/About/executive-board/members-quotas https://www.imf.org/en/About/executive-board/members-quotas [2] https://nayibtracker.com/ https://nayibtracker.com/
  - matheusmoreira 4y ago
    > Bitcoin and crypto are a threat to the IMF system. Can you elaborate on this?
  - arinlen 4y ago
    > Bitcoin and crypto are a threat to the IMF system. They aren’t going to like it when you do that. To survive without the IMF, you would have to go all in at a generational bottom. That did not happen. I see this conspiracy theory thrown somewhat often, but it has the same substance than any qanon-type "they" story. Meanwhile, supporters of this conspiracy theory fail to explain why adopting a highly volatile and manipulation-prone asset as a nation's legal tender is not a completely brain-dead belief, as it fails any of the basic properties of money. Another detail that btc conspiracy theorists fail to mention is how every single concern expressed by the IMF regarding El Salvador's Bitcoin push was already proven right. But crypto-bros hand-wave around the subject and it never ceases to be fool-proof.
rib3ye 4y ago
So where are the BTC addresses? Something I always find annoying about articles reporting huge coffers: site the source, link the wallets!
- el-salvador 4y ago
  Another question: Which government's institution's balance sheet shows the Bitcoin assets? Who sits in the board of directors? What is their experience? Who audited their financial statements? Where can that public information be found?
- davidgerard 4y ago
  Nobody knows, and that's a big issue. There's a lot of secrecy around the whole project that there shouldn't be. Apparently the BTC is in custody at BitGo? But that's the word of one blogger.
  - blitzar 4y ago
    So there is a decent chance that they havent even been buying the dip!
fruitenjoyer 4y ago
firstSpeaker 4y ago
Probably a group of government officials earned significantly from these and if the country goes default most of the pain will be on the ordinary citizens, sadly.
xiphias2 4y ago
,, The firm added that debt to gross domestic product (GDP) is expected to rise to 86.9% in 2022, “increasing concerns around debt sustainability over the medium term.” As a comparision US debt to GDP ratio is 133% Also forex reserves is 3.4B, I don’t see why it would be impossible to pay $800M
- stephen_g 4y ago
  The US only issues bonds in its own currency, which makes a massive difference. Foreign-denominated debt is a huge trap for developing countries. Some more conspiratorial folk would say that’s intentional (to take their natural resources by making them indebted, buying their resource exports and then they have to pay much of that revenue back to you as interest).
- ceejayoz 4y ago
  $800M is just the payment due in six months. There’s lots more behind it. Hence, they said medium term, not short. There are significant differences between the US and El Salvador that raw debt to GDP does not capture.
- toyg 4y ago
  Probably because it would be just a sticky plaster. You want to hold on that liquidity for survival, particularly in a situation where you can't borrow anymore - so at least you can keep the lights on by paying cash for the essential transactions (petrol, food, etc). > As a comparision US debt to GDP ratio is 133% The bigger and wealthier the country is, the more markets are willing to cut them some slack. Japan is at 263%, France 112%, etc etc. It's something of a fraud but that's how it is. Capital markets are often very bigoted, to be charitable.
  - CPLX 4y ago
    It’s not a fraud it’s a reaction to the total level of assets the sovereign holds and their ability to get more. Needless to say the countries you mention considerably outpace El Salvador in this department.
  - 4y ago
usrusr 4y ago
But is it plummeting? I'd be the first to cheer, but I only see some of the usual fluctuation that's the closest thing BTC has to stability. Is that's enough to send them into default, the entire thing has been nothing but a last ditch hail mary pass of the kind that, below state level, is usually countered by bankruptcy laws that are written precisely to keep stuff like that from happening.
- viraptor 4y ago
  It's plummeting every time :) As much as I don't like the "don't look at this (this week's chart), look at this (last 2 years chart)" meme, it really applies each time there's a crypto crash reported by every news site. Still, we recovered every time. Let's see how the price is going in 3 months.
  - Aachen 4y ago
    > we recovered every time You say that as if it's a net positive and the people involved did more than literally nothing
    - viraptor 4y ago
      Pure observation, no judgement about whether that's positive or not.
    - usrusr 4y ago
      Literally nothing? Every time there's a hiccup I see plenty of people frantically engaging in a propaganda effort as if their life savings depended on it.
  - rchaud 4y ago
    You 'recover' only if you have the luxury of not needing to sell during the downturn. By that metric, no major stock index has ever gone down except for Japan's Nikkei, which never again reached its 1990 peaks. El Salvador has an $800m bond repayment due in Jan 2023. You can't make repayments in crypto, so some of their securities holdings will need to be sold in order to make payments. You might not feel the market downturn, but they certainly will.
gregwebs 4y ago
Almost 1/4 of El Salvador GDP is remittances. The point of Bitcoin for them is that there is now a Bitcoin-based money transfer system they can use with no fees. The reduction in fees to the countries citizens should dwarf the country's losses from holding bitcoin. All of which is a minor amount compared to their actual bond repayment amount (which has nothing to do with Bitcoin). A better title might be: the IMF demands El Salvador gets rid of Bitcoin before refinancing its loans. Edit: Adding this addendum to reply to commenters themes. These Bitcoin-based transfers are not on the Bitcoin blockchain but instead actually happening on the Lightning network- the transfer fee is close to zero. In addition to the fees of traditional remittances, there are sometimes additional significant inconveniences- for example some have to travel by bus to the city where the Western Union is located. The current extended Bitcoin drawdown probably doesn't effect things much. Users generally convert their BTC to dollars in the Chivo wallet app the country uses to avoid the volatility. Despite all the theoretical advantage for remittances, adoption for remittances is still very low, with 11% ever using the app for this. It may be in part because using the government app means the remittances are known to the government and can be taxed as income, whereas cash goes unreported. https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-el-salvador-heres-how-its-going/ https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-...
- el-salvador 4y ago
  > Despite all the theoretical advantage for remittances, adoption for remittances is still very low, with 11% ever using the app for this. An issue that Salvadorans in the U.S. face when they want to fund their Chivo Wallets to send to their family is that they charged a Foreign Transaction Fee by their U.S. banks. This happens because the Chivo card transaction is processed in El Salvador and most Salvadorans in the U.S. don't have debit/credit cards that refund Foreign Transaction fees. Depending on the bank they may be about 3% and they add up for larger transactions. Btw Salvadoran banks don't charge foreign transaction for purchases abroad. So these fees are something we rarely think about, and came as a surprise to many :D Or they would have to take a bus or drive to a Salvadoran consulate in the U.S. to use a US Chivo ATM. The time that would take plus transportation costs wouldnt make it a cheap option either. > It may be in part because using the government app means the remittances are known to the government This seems incorrect. El Salvador has very strict transaction reporting laws. 1. Every remittance is reported in El Salvador. Every one of them. In a very detailed way. To at least three government institutions. Central Bank, Financial Investigation Unit and Tax Office. > and can be taxed as income, 2. Transfers between family members are not considered taxable income according to the Tax Code. It's on the first pages of the Income Tax Law: Article 3, Paragraph 3. > whereas cash goes unreported. El Salvador tracks cash transactions. Even paying the $2.29 water bill in coins requires an ID. Other commerces have a higher reporting thresholds, like +$100/$200 in supermarkets and clothing stores. Many cashiers are trained to ask for an ID even for lower purchases to activate product warranty and loyalty programs.
ak_111 4y ago
This guy seriously wanted to sell El Salvador's remaining gold reserve to buy bitcoin with it only a few months ago. Not sure how his population put up with him. https://news.bitcoin.com/el-salvadors-president-tells-peter-schiff-benefit-switching-gold-reserves-to-bitcoin/ https://news.bitcoin.com/el-salvadors-president-tells-peter-...
- qgin 4y ago
  He’s extremely popular
  - ak_111 4y ago
    Seriously, is this the case? Source?
- akhmatova 4y ago
  The rulers in that country have a long history of making the population put up with whatever the hell they want to do.
throw0101a 4y ago
"Bitcoin Is Legal Tender in El Salvador, Here’s How It’s Going": * https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-el-salvador-heres-how-its-going/ https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-... * https://news.ycombinator.com/item?id=31294460 https://news.ycombinator.com/item?id=31294460 Which talks about this paper: > This paper studies the potential of a cryptocurrency to become a medium of exchange. We use evidence from a natural experiment: In September 2021, El Salvador became the first country in the world to make bitcoin legal tender, and all economic agents were required to accept bitcoin for all payments. The Salvadorean government also launched an app, “Chivo Wallet,” which allowed users to digitally trade both bitcoin and dollars, and gave major incentives to download it. We conduct a representative national face-to-face survey to obtain information on bitcoin’s usage and effects. Leveraging this data, we document how, despite the government’s “big push” and a large fraction of people downloading Chivo Wallet, usage of bitcoin for everyday transactions is low and is concentrated among the banked, educated, young, and male population. We also estimate the fixed cost of adopting the new payment technology, the importance of strategic complementarities for users, and the elasticity of substitution between mobile payments and other payment methods. * https://www.nber.org/papers/w29968 https://www.nber.org/papers/w29968
paradite 4y ago
> the price of the most popular cryptocurrency in the world has plummeted more than 50% How does the "price of bitcoin" fall? Is it referring to the exchange rate between USD and bitcoin? Why does that matter when bitcoin is a legal domestic currency?
- Hamuko 4y ago
  Foreign trade?
- simonh 4y ago
  For the same reasons that any collapsing domestic currency matters.
jliptzin 4y ago
- rayiner 4y ago
  What does that have to do with anything? El Salvadorans are entitled to run their country according to their own culture and beliefs. It’s called self determination and it’s a recognized right of free peoples. Last I checked women in El Salvador can vote and could change the rule if that’s what they wanted, but they don’t. The El Salvadoran Constitution recognizes a right to life beginning at conception. Technically, Germany’s Basic Law enshrines the same right according to the interpretation of its high court, although Germany takes a different view of how that right should be balanced against other values of the basic law like individual self determination: https://journals.sagepub.com/doi/pdf/10.1525/ctx.2002.1.2.27 https://journals.sagepub.com/doi/pdf/10.1525/ctx.2002.1.2.27. People being able to make these sorts of trade offs between different values is the core of democracy.
  - jliptzin 4y ago
    And I’m entitled to point out their awful draconian policies
- azangru 4y ago
  The article you linked to says abortion. Is this what you meant by the word "miscarriage"? I got curious, because doctors usually mean by this term spontaneous termination of pregnancy, which would remove any intent from the picture; and can there be a crime without an intent?
  - once_inc 4y ago
    following the link would have shown you the intent of his post clearly.
  - jliptzin 4y ago
    I meant what I said https://amp.theguardian.com/world/2022/may/10/el-salvador-woman-sentenced-prison-after-miscarriage https://amp.theguardian.com/world/2022/may/10/el-salvador-wo...
tejohnso 4y ago
> most popular cryptocurrency in the world has plummeted more than 50% from its all-time highs Which it has done numerous times in its short life. Not a big surprise, and not the real source of the country's problems. What would default mean in this case anyway? The IMF comes in and claims ownership of state resources?
- MomoXenosaga 4y ago
  The IMF will bail them out because Biden doesn't want an immigration crisis on the border. Elections are coming up. The entire government will have to resign and it will be the end of the great cryptocurrency adoption LMAO.
- spupe 4y ago
  >> most popular cryptocurrency in the world has plummeted more than 50% from its all-time highs > Which it has done numerous times in its short life. Perhaps making a highly unstable, speculative cryptocurrency legal tender is a bad move then.
- thr0wawayf00 4y ago
  The problem is that cryptocurrency behaves nothing like a fiat currency. There's a reason putting your entire savings in straight cash is not a good idea: Fiat currency doesn't fluctuate the same way because it's not meant to be an investment vehicle. The main goal of currency is to facilitate value exchange. Crypto is the opposite, by prioritizing value gains over value exchange functionality. Using crypto to buy goods works OK when the price is relatively stable, but as soon as it makes big movement, lots of vendors stop accepting it. Crypto acts more like (and increasingly moves like) stocks, where investors buy in hoping to profit by converting crypto back into cash the same way stocks are sold.
kirsebaer 4y ago
An El Salvador court just sentenced a woman to 30 years in prison for having a miscarriage. She has been jailed for two years awaiting trial and has a 7 year old daughter. https://m.dw.com/en/el-salvador-jails-woman-accused-of-abortion-for-30-years/a-61753704 https://m.dw.com/en/el-salvador-jails-woman-accused-of-abort...
- jl6 4y ago
  > The sentence, which was delivered Monday, could not be immediately confirmed, since courts were closed on Tuesday for Mother's Day. Dark.
- 4ad 4y ago
  I think this happened 10 years ago and she was just recently released after serving 10 years of her sentence: https://www.dw.com/en/el-salvador-releases-woman-jailed-after-miscarriage/a-60720610 https://www.dw.com/en/el-salvador-releases-woman-jailed-afte... Not that it makes it any better of course, in fact the article talks about tens of other women in the same circumstance... Truly horrible, evil stuff.
  - InitialLastName 4y ago
    Despite the link in the article, these appear to be two different women -- referred to as "Elsy" and "Esme" -- one who was sentenced 10 years ago, the other who was sentenced last week.
    - 4ad 4y ago
      Yeah... the quality of the reporting is inexcusable. But the fact that there are multiple women makes this even worse!
- wonderwonder 4y ago
  To be fair, this could be Texas or Louisiana in a year or two.
  - 4y ago

I can't really understand how a post by El País can make it to hacker news. El país is a disinformation newspaper full of manipulation and indoctrination controlled by governments. At least this is the case in Spain, do reading this newspaper is just killing your brain

jinpa_zangpo 4y ago

The real reason for the risk of default is that El Salvador was counting on a loan from the IMF and the IMF refused to make a loan to El Salvador while Bitcoin is legal currency. Despite his misadventures with Bitcoin, President Bukele is wildly popular in El Salvador.

RobertDeNiro 4y ago
The IMF is anti cryptocurrency ?
- xvector 4y ago
  Most definitely - it takes away from their power.
- Bubble_Pop_22 4y ago
- pibechorro 4y ago
  Ofcourse. they muscled Argentina to prevent banks from dealing in it, despite popular support and the banks announcing it.
- webinvest 4y ago
  Yes.
- IAmEveryone 4y ago
  The IMF is anti-idiocy. So yes.
- collyw 4y ago
  That would depend on whether they control the cryptocurrency I imagine.
- toomuchtodo 4y ago
  The IMF is anti-gambling-with-soverign/borrowed-funds.
- neonihil 4y ago
  They are happy with their monopoly as it is.
- csomar 4y ago
  From the papers they released, I don't think they are. But this is an institution that works with SDR [https://en.wikipedia.org/wiki/Special_drawing_rights]; https://en.wikipedia.org/wiki/Special_drawing_rights]; so they are not going to "understand" Bitcoin. In a sense, they have their own Bitcoin. And I put understand in quotes because the IMF does get Bitcoin, Crypto and finance better than most countries. They understand that crypto is mostly bad news for weak countries because they are already having trouble with capital outflow as is.
- splix 4y ago
  IMF, as well as World bank and co, are anti-anything that could help a country to be less dependent on Wall Street. See https://en.wikipedia.org/wiki/Structural_adjustment#Criticisms https://en.wikipedia.org/wiki/Structural_adjustment#Criticis... and https://en.wikipedia.org/wiki/Enough_Is_Enough_(letter) https://en.wikipedia.org/wiki/Enough_Is_Enough_(letter) for examples.
manimino 4y ago
This is inaccurate. The IMF and other entities do not give aid or loans to dictatorships, because anything given to a dictatorship goes straight to the cronies at the top. El Salvador started having this problem as Bukele eliminated other branches of government. That's why he pushed Bitcoin adoption in the first place - to work around the problems caused by his desired form of government.
- Bubble_Pop_22 4y ago
- jrvarela56 4y ago
  LOL they lend to democracies in third world countries like mine where the money goes straight to the cronies at the top (Panama; I know the term is outdated but us third-worlders call our countries third-world). My wife worked for a Ministry here and saw how the world bank shoved loans on non-functioning institutions and charged my country interest ON THE AVAILABLE FUNDS (like a credit line but it doesn't matter if you use it or not) despite them being executed or not. I dont know wtf these people are doing, but benevolent they are not.
  - leviathan235 4y ago
    Yes, the IMF exemplifies the folly of global institutions. How long have they propped up kleptocracies like Argentina? "Democracy" is just a nice coat of paint over unbelievably corrupt countries where citizens will never see a dime of those loans yet will have to bear the burden of paying them back.
  - lottin 4y ago
    So why did your country take the loan if it was so terrible?
    - saint_fiasco 4y ago
      I think the point is that the cronies at the top took the loan on behalf of the country. They don't care that the terms of the loan are bad because they will personally get rich either way and paying back the loan is somebody else's problem.
JumpCrisscross 4y ago
> real reason for the risk of default is that El Salvador was counting on a loan from the IMF and the IMF refused to make a loan to El Salvador while Bitcoin is legal currency El Salvador's dollar bonds started crashing right after the Bitcoin announcement, before the IMF bailed; Bukele had already snubbed the IMF six months before when he "fired five top judges and the attorney general" [1]. > Bukele is wildly popular in El Salvador This is correct [2]. I'm not certain how this makes me feel about supporting them when this inevitably fails. [1] https://www.bloomberg.com/news/articles/2021-11-22/bitcoin-bond-on-horizon-sends-el-salvador-s-dollar-debt-diving https://www.bloomberg.com/news/articles/2021-11-22/bitcoin-b... [2] https://www.reuters.com/markets/currencies/majority-salvadorans-approve-bukeles-leadership-poll-shows-2021-12-15/ https://www.reuters.com/markets/currencies/majority-salvador...
csomar 4y ago
> Despite his misadventures with Bitcoin, President Bukele is wildly popular in El Salvador. He seems to have successfully controlled crime in El Salvador. Usually, there is something behind these strong men if they are still popular. Homicide is down from 103 in 2015 to 17.6 last year. People will stick with such figure; it's not clear why previous rulers have failed. 103 is scary as shit number. Bitcoin will look like a blip in his mishaps from the citizenry point of view.

Barrera 4y ago

> In a statement, Fitch explained: “The downgrade reflects heightened financing risks stemming from increased reliance on short-term debt, a $800 million Eurobond repayment due in January 2023, a still-high fiscal deficit, limited scope for additional local market financing, uncertain access to additional multilateral funding and external market financing given high borrowing costs.” Following through to the linked statement: > In Fitch's view, weakening of institutions and concentration of power in the presidency have increased policy unpredictability, and the adoption of bitcoin as legal tender has added uncertainty about the potential for an IMF program that would unlock financing for 2022-2023. https://www.fitchratings.com/research/sovereigns/fitch-downgrades-el-salvador-long-term-idr-to-ccc-from-b-09-02-2022 https://www.fitchratings.com/research/sovereigns/fitch-downg... So it's not just the exchange rate volatility that's at issue, but the possibility that the IMF will make good on its warnings and not backstop the country until its bitcoin venture ends. That, and the other political stuff, combine to make the country look more risky to creditors. Later in the Fitch article: > The recently published IMF Article IV recommends a fiscal adjustment of 4pp of GDP to put the debt burden on a steady downward path, strengthening the medium-term fiscal framework, improvements in governance in reporting and audits, implementing revised anti- money laundering laws, and removing bitcoin as legal tender while improving regulation and oversight of the virtual currency system.

pluc 4y ago

A wildly speculative digital currency is fluctuating, story at 11

mywittyname 4y ago
The story is only tangentially related to BTC. The article could eliminate all mention of crypto without any information loss. It's only included for the clicks.

stncls 4y ago

What was the impetus behind El Salvador's adoption of bitcoin? The bill seems to have been introduced by President Nayib Bukele, whose background is law. This recent story [1] about bitcoin being pushed by fishy operatives in Catalonia is what got me curious. [1] https://www.occrp.org/en/investigations/fueling-secession-promising-bitcoins-how-a-russian-operator-urged-catalonian-leaders-to-break-with-madrid https://www.occrp.org/en/investigations/fueling-secession-pr... / https://news.ycombinator.com/item?id=31317907 https://news.ycombinator.com/item?id=31317907

qgin 4y ago
Bukele has often outlined his economic thesis around Bitcoin on Twitter: > El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670 #Bitcoin https://twitter.com/nayibbukele/status/1467000621354135555 https://twitter.com/nayibbukele/status/1467000621354135555 > Missed the f**ing bottom by 7 minutes https://twitter.com/nayibbukele/status/1467003967133687809 https://twitter.com/nayibbukele/status/1467003967133687809

kumarvvr 4y ago

Bitcoin is the biggest troll on the planet. A nerdy idea that took hold because druggies found it convenient to use and then it became "mainstream" and an "asset" and an "investment", with people putting their life savings because they "believe it is going to go up". Its actually a reflection on the current state of society, all the materialism and irrationality personified. The greed, the "hustle", a modern incarnation of snake oil.

cmrdporcupine 4y ago
If it was only druggies, that'd be great, cuz it'd be relatively confined, really. But I don't think that can explain the ridiculous valuations on its own. It's clear there are far larger parties than just drug trafficking and hobbyists and crypto-promoters and "retail investors". My guess is large movements of capital out of places like Iran, China, and Russia.
- kumarvvr 4y ago
  Perhaps players are using it as a "exchange", as in a book / record. Ultimately, its just numbers on a piece of hard-disk.
- nradov 4y ago
  Yes you're exactly right. Wealthy Chinese can purchase mining hardware and electricity using the local funny money, then sell the resulting Bitcoins for actual hard currency. The Chinese authorities have been cracking down but it's hard to stop completely.
  - cmrdporcupine 4y ago
    I think it's more than they're leaving it in bitcoin. For now this is more secure than leaving it in local accounts where the predatory State has access to it, or where it can be confined by sanctions, etc. Later... someday or sooner... throw it through few a mixers, pass it around a few times, and, sure, it could become capital again, or convert to another currency, or stick it in real estate. But there's no need for that at this point. In some places the risk of losing 80% of it to the fluctuations of kleptocoins is actually better than the political risk, or the potential taxation burden.

Giorgi 4y ago

Another bullshit article. They purchased more bitcoin just several days ago and they debt is due... wait for it... NEXT YEAR. They will be fine.

deleted 4y ago

[deleted]

nikanj 4y ago

They'll just buy the dip. Line goes up, I hear.

z9znz 4y ago
I fear your amusing sarcasm may be lost on some readers.
- dong_ 4y ago
- mmoya 4y ago
  Me one of them.
  - LightG 4y ago
    You should have hedged ... you'd be less sour.
skocznymroczny 4y ago
To be honest, every time I heard about Bitcoin plummeting, buying the dip would still net you 3x, 4x gains in a year. We'll see how it goes here, but I wouldn't be surprised if after a series of "Is Bitcoin dying?" articles we'll see it bounce back again.

fbn79 4y ago

> ...the government had purchased nearly $25 million worth of bitcoin... > ...a $800 million Eurobond repayment due in January 2023... Dont think the losing of bitcoin value can be blamed in case of default

JohnJamesRambo 4y ago
Bukele showed up in the latter stages of a bull market and thought he was a genius that had discovered a money making machine. Just like Saylor and Elon. It happens every cycle. They will all be tested. No one gets through the door easily. The genius was ignoring recency bias and buying BTC at the bottom at 3k in 2018 and selling your coins to Elon last year. The amount Bukele bought is tiny. Bitcoin and crypto are a threat to the IMF system. They aren’t going to like it when you do that. To survive without the IMF, you would have to go all in at a generational bottom. That did not happen.
- el-salvador 4y ago
  > Bitcoin and crypto are a threat to the IMF system. They aren’t going to like it when you do that. To survive without the IMF, you would have to go all in at a generational bottom. That did not happen. In the large scale, El Salvador's BTC fund is not that big. I mean, El Salvador has more IMF shares than Bitcoins in their fund. - El Salvador Bitcoin: 74 million USD [2] - El Salvador IMF shares: 402 million USD (207 million SDRs) [1] [1] https://www.imf.org/en/About/executive-board/members-quotas https://www.imf.org/en/About/executive-board/members-quotas [2] https://nayibtracker.com/ https://nayibtracker.com/
- matheusmoreira 4y ago
  > Bitcoin and crypto are a threat to the IMF system. Can you elaborate on this?
- arinlen 4y ago
  > Bitcoin and crypto are a threat to the IMF system. They aren’t going to like it when you do that. To survive without the IMF, you would have to go all in at a generational bottom. That did not happen. I see this conspiracy theory thrown somewhat often, but it has the same substance than any qanon-type "they" story. Meanwhile, supporters of this conspiracy theory fail to explain why adopting a highly volatile and manipulation-prone asset as a nation's legal tender is not a completely brain-dead belief, as it fails any of the basic properties of money. Another detail that btc conspiracy theorists fail to mention is how every single concern expressed by the IMF regarding El Salvador's Bitcoin push was already proven right. But crypto-bros hand-wave around the subject and it never ceases to be fool-proof.

rib3ye 4y ago

So where are the BTC addresses? Something I always find annoying about articles reporting huge coffers: site the source, link the wallets!

el-salvador 4y ago
Another question: Which government's institution's balance sheet shows the Bitcoin assets? Who sits in the board of directors? What is their experience? Who audited their financial statements? Where can that public information be found?
davidgerard 4y ago
Nobody knows, and that's a big issue. There's a lot of secrecy around the whole project that there shouldn't be. Apparently the BTC is in custody at BitGo? But that's the word of one blogger.
- blitzar 4y ago
  So there is a decent chance that they havent even been buying the dip!

fruitenjoyer 4y ago

firstSpeaker 4y ago

Probably a group of government officials earned significantly from these and if the country goes default most of the pain will be on the ordinary citizens, sadly.

xiphias2 4y ago

,, The firm added that debt to gross domestic product (GDP) is expected to rise to 86.9% in 2022, “increasing concerns around debt sustainability over the medium term.” As a comparision US debt to GDP ratio is 133% Also forex reserves is 3.4B, I don’t see why it would be impossible to pay $800M

stephen_g 4y ago
The US only issues bonds in its own currency, which makes a massive difference. Foreign-denominated debt is a huge trap for developing countries. Some more conspiratorial folk would say that’s intentional (to take their natural resources by making them indebted, buying their resource exports and then they have to pay much of that revenue back to you as interest).
ceejayoz 4y ago
$800M is just the payment due in six months. There’s lots more behind it. Hence, they said medium term, not short. There are significant differences between the US and El Salvador that raw debt to GDP does not capture.
toyg 4y ago
Probably because it would be just a sticky plaster. You want to hold on that liquidity for survival, particularly in a situation where you can't borrow anymore - so at least you can keep the lights on by paying cash for the essential transactions (petrol, food, etc). > As a comparision US debt to GDP ratio is 133% The bigger and wealthier the country is, the more markets are willing to cut them some slack. Japan is at 263%, France 112%, etc etc. It's something of a fraud but that's how it is. Capital markets are often very bigoted, to be charitable.
- CPLX 4y ago
  It’s not a fraud it’s a reaction to the total level of assets the sovereign holds and their ability to get more. Needless to say the countries you mention considerably outpace El Salvador in this department.
- 4y ago

usrusr 4y ago

But is it plummeting? I'd be the first to cheer, but I only see some of the usual fluctuation that's the closest thing BTC has to stability. Is that's enough to send them into default, the entire thing has been nothing but a last ditch hail mary pass of the kind that, below state level, is usually countered by bankruptcy laws that are written precisely to keep stuff like that from happening.

viraptor 4y ago
It's plummeting every time :) As much as I don't like the "don't look at this (this week's chart), look at this (last 2 years chart)" meme, it really applies each time there's a crypto crash reported by every news site. Still, we recovered every time. Let's see how the price is going in 3 months.
- Aachen 4y ago
  > we recovered every time You say that as if it's a net positive and the people involved did more than literally nothing
  - viraptor 4y ago
    Pure observation, no judgement about whether that's positive or not.
  - usrusr 4y ago
    Literally nothing? Every time there's a hiccup I see plenty of people frantically engaging in a propaganda effort as if their life savings depended on it.
- rchaud 4y ago
  You 'recover' only if you have the luxury of not needing to sell during the downturn. By that metric, no major stock index has ever gone down except for Japan's Nikkei, which never again reached its 1990 peaks. El Salvador has an $800m bond repayment due in Jan 2023. You can't make repayments in crypto, so some of their securities holdings will need to be sold in order to make payments. You might not feel the market downturn, but they certainly will.

gregwebs 4y ago

Almost 1/4 of El Salvador GDP is remittances. The point of Bitcoin for them is that there is now a Bitcoin-based money transfer system they can use with no fees. The reduction in fees to the countries citizens should dwarf the country's losses from holding bitcoin. All of which is a minor amount compared to their actual bond repayment amount (which has nothing to do with Bitcoin). A better title might be: the IMF demands El Salvador gets rid of Bitcoin before refinancing its loans. Edit: Adding this addendum to reply to commenters themes. These Bitcoin-based transfers are not on the Bitcoin blockchain but instead actually happening on the Lightning network- the transfer fee is close to zero. In addition to the fees of traditional remittances, there are sometimes additional significant inconveniences- for example some have to travel by bus to the city where the Western Union is located. The current extended Bitcoin drawdown probably doesn't effect things much. Users generally convert their BTC to dollars in the Chivo wallet app the country uses to avoid the volatility. Despite all the theoretical advantage for remittances, adoption for remittances is still very low, with 11% ever using the app for this. It may be in part because using the government app means the remittances are known to the government and can be taxed as income, whereas cash goes unreported. https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-el-salvador-heres-how-its-going/ https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-...

el-salvador 4y ago
> Despite all the theoretical advantage for remittances, adoption for remittances is still very low, with 11% ever using the app for this. An issue that Salvadorans in the U.S. face when they want to fund their Chivo Wallets to send to their family is that they charged a Foreign Transaction Fee by their U.S. banks. This happens because the Chivo card transaction is processed in El Salvador and most Salvadorans in the U.S. don't have debit/credit cards that refund Foreign Transaction fees. Depending on the bank they may be about 3% and they add up for larger transactions. Btw Salvadoran banks don't charge foreign transaction for purchases abroad. So these fees are something we rarely think about, and came as a surprise to many :D Or they would have to take a bus or drive to a Salvadoran consulate in the U.S. to use a US Chivo ATM. The time that would take plus transportation costs wouldnt make it a cheap option either. > It may be in part because using the government app means the remittances are known to the government This seems incorrect. El Salvador has very strict transaction reporting laws. 1. Every remittance is reported in El Salvador. Every one of them. In a very detailed way. To at least three government institutions. Central Bank, Financial Investigation Unit and Tax Office. > and can be taxed as income, 2. Transfers between family members are not considered taxable income according to the Tax Code. It's on the first pages of the Income Tax Law: Article 3, Paragraph 3. > whereas cash goes unreported. El Salvador tracks cash transactions. Even paying the $2.29 water bill in coins requires an ID. Other commerces have a higher reporting thresholds, like +$100/$200 in supermarkets and clothing stores. Many cashiers are trained to ask for an ID even for lower purchases to activate product warranty and loyalty programs.

ak_111 4y ago

This guy seriously wanted to sell El Salvador's remaining gold reserve to buy bitcoin with it only a few months ago. Not sure how his population put up with him. https://news.bitcoin.com/el-salvadors-president-tells-peter-schiff-benefit-switching-gold-reserves-to-bitcoin/ https://news.bitcoin.com/el-salvadors-president-tells-peter-...

qgin 4y ago
He’s extremely popular
- ak_111 4y ago
  Seriously, is this the case? Source?
akhmatova 4y ago
The rulers in that country have a long history of making the population put up with whatever the hell they want to do.

throw0101a 4y ago

"Bitcoin Is Legal Tender in El Salvador, Here’s How It’s Going": * https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-el-salvador-heres-how-its-going/ https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-... * https://news.ycombinator.com/item?id=31294460 https://news.ycombinator.com/item?id=31294460 Which talks about this paper: > This paper studies the potential of a cryptocurrency to become a medium of exchange. We use evidence from a natural experiment: In September 2021, El Salvador became the first country in the world to make bitcoin legal tender, and all economic agents were required to accept bitcoin for all payments. The Salvadorean government also launched an app, “Chivo Wallet,” which allowed users to digitally trade both bitcoin and dollars, and gave major incentives to download it. We conduct a representative national face-to-face survey to obtain information on bitcoin’s usage and effects. Leveraging this data, we document how, despite the government’s “big push” and a large fraction of people downloading Chivo Wallet, usage of bitcoin for everyday transactions is low and is concentrated among the banked, educated, young, and male population. We also estimate the fixed cost of adopting the new payment technology, the importance of strategic complementarities for users, and the elasticity of substitution between mobile payments and other payment methods. * https://www.nber.org/papers/w29968 https://www.nber.org/papers/w29968

paradite 4y ago

> the price of the most popular cryptocurrency in the world has plummeted more than 50% How does the "price of bitcoin" fall? Is it referring to the exchange rate between USD and bitcoin? Why does that matter when bitcoin is a legal domestic currency?

Hamuko 4y ago
Foreign trade?
simonh 4y ago
For the same reasons that any collapsing domestic currency matters.

jliptzin 4y ago

rayiner 4y ago
What does that have to do with anything? El Salvadorans are entitled to run their country according to their own culture and beliefs. It’s called self determination and it’s a recognized right of free peoples. Last I checked women in El Salvador can vote and could change the rule if that’s what they wanted, but they don’t. The El Salvadoran Constitution recognizes a right to life beginning at conception. Technically, Germany’s Basic Law enshrines the same right according to the interpretation of its high court, although Germany takes a different view of how that right should be balanced against other values of the basic law like individual self determination: https://journals.sagepub.com/doi/pdf/10.1525/ctx.2002.1.2.27 https://journals.sagepub.com/doi/pdf/10.1525/ctx.2002.1.2.27. People being able to make these sorts of trade offs between different values is the core of democracy.
- jliptzin 4y ago
  And I’m entitled to point out their awful draconian policies
azangru 4y ago
The article you linked to says abortion. Is this what you meant by the word "miscarriage"? I got curious, because doctors usually mean by this term spontaneous termination of pregnancy, which would remove any intent from the picture; and can there be a crime without an intent?
- once_inc 4y ago
  following the link would have shown you the intent of his post clearly.
- jliptzin 4y ago
  I meant what I said https://amp.theguardian.com/world/2022/may/10/el-salvador-woman-sentenced-prison-after-miscarriage https://amp.theguardian.com/world/2022/may/10/el-salvador-wo...

tejohnso 4y ago

> most popular cryptocurrency in the world has plummeted more than 50% from its all-time highs Which it has done numerous times in its short life. Not a big surprise, and not the real source of the country's problems. What would default mean in this case anyway? The IMF comes in and claims ownership of state resources?

MomoXenosaga 4y ago
The IMF will bail them out because Biden doesn't want an immigration crisis on the border. Elections are coming up. The entire government will have to resign and it will be the end of the great cryptocurrency adoption LMAO.
spupe 4y ago
>> most popular cryptocurrency in the world has plummeted more than 50% from its all-time highs > Which it has done numerous times in its short life. Perhaps making a highly unstable, speculative cryptocurrency legal tender is a bad move then.
thr0wawayf00 4y ago
The problem is that cryptocurrency behaves nothing like a fiat currency. There's a reason putting your entire savings in straight cash is not a good idea: Fiat currency doesn't fluctuate the same way because it's not meant to be an investment vehicle. The main goal of currency is to facilitate value exchange. Crypto is the opposite, by prioritizing value gains over value exchange functionality. Using crypto to buy goods works OK when the price is relatively stable, but as soon as it makes big movement, lots of vendors stop accepting it. Crypto acts more like (and increasingly moves like) stocks, where investors buy in hoping to profit by converting crypto back into cash the same way stocks are sold.

kirsebaer 4y ago

An El Salvador court just sentenced a woman to 30 years in prison for having a miscarriage. She has been jailed for two years awaiting trial and has a 7 year old daughter. https://m.dw.com/en/el-salvador-jails-woman-accused-of-abortion-for-30-years/a-61753704 https://m.dw.com/en/el-salvador-jails-woman-accused-of-abort...

jl6 4y ago
> The sentence, which was delivered Monday, could not be immediately confirmed, since courts were closed on Tuesday for Mother's Day. Dark.
4ad 4y ago
I think this happened 10 years ago and she was just recently released after serving 10 years of her sentence: https://www.dw.com/en/el-salvador-releases-woman-jailed-after-miscarriage/a-60720610 https://www.dw.com/en/el-salvador-releases-woman-jailed-afte... Not that it makes it any better of course, in fact the article talks about tens of other women in the same circumstance... Truly horrible, evil stuff.
- InitialLastName 4y ago
  Despite the link in the article, these appear to be two different women -- referred to as "Elsy" and "Esme" -- one who was sentenced 10 years ago, the other who was sentenced last week.
  - 4ad 4y ago
    Yeah... the quality of the reporting is inexcusable. But the fact that there are multiple women makes this even worse!
wonderwonder 4y ago
To be fair, this could be Texas or Louisiana in a year or two.
- 4y ago