Vice President Felix Ulloa Stresses El Salvador’s Ongoing Dedication to Bitcoin Following Elections
El Salvador’s Vice President, Felix Ulloa, has announced that the country will continue to recognize Bitcoin as legal tender during President Nayib Bukele’s second term in office. This announcement comes amidst the ongoing elections and reaffirms the government’s commitment to cryptocurrency despite potential challenges, including obstacles to accessing International Monetary Fund (IMF) financing.
Bitcoin to Remain Legal Tender
The Vice President’s announcement was made to assure both the public and the international community of El Salvador’s ongoing support for Bitcoin. This groundbreaking move was initiated by President Bukele in 2021 and has been a topic of international discussion ever since.
According to a recent Reuters report, Bitcoin will remain legal money in El Salvador under President Nayib Bukele’s second term. This announcement comes days before an election that Bukele is projected to easily win due to a brutal gang crackdown. Felix Ulloa, who is temporarily on leave to run for re-election with Bukele, reaffirmed the Central American country’s adoption of Bitcoin as legal tender.
How Did the Adoption of Bitcoin Affect El Salvador
The adoption of Bitcoin was aimed at improving the economy by making banking easier for Salvadorans and encouraging foreign investment. The government of El Salvador announced a series of incentives to encourage Bitcoin investment, including granting permanent residency to foreign investors who invest at least 3 Bitcoins. The adoption of Bitcoin could stimulate economic growth by attracting foreign investment and reducing remittance costs, a significant income source for many Salvadorans.
The adoption of Bitcoin has also brought several challenges and concerns. The most significant issue is the volatility of Bitcoin. The value of Bitcoin can fluctuate significantly over short periods, posing risks to investors and consumers who use it as a means of payment. By January 2022, Bitcoin had lost 70% of its value from November 2021, and the Salvadoran government had spent about US$150 million, roughly 4% of El Salvador’s national reserves, to invest in Bitcoin. The 2,300 bitcoins purchased by the Salvadoran government had lost 50% of their value. This volatility led to a decline in El Salvador’s economic growth rate, and many economists predicted it would likely default on its debt.
IMF Concerns and Bitcoin-Backed Bonds
The announcement follows the International Monetary Fund’s (IMF) urging of El Salvador to “reconsider” the policy while negotiating a billion-dollar loan. Despite this, Ulloa stated that if Bukele and his New Ideas party win Sunday’s election, as most polls anticipate, the Salvadoran government will proceed with plans to issue bitcoin-backed bonds in the first quarter of 2024.
Bitcoin City and Crypto Passports
In addition to the bitcoin-backed bonds, Ulloa confirmed that the development of Bitcoin City, a tax-free crypto haven planned by Bukele in the country’s east, would proceed. Furthermore, the issuing of passports to investors who donate the equivalent of $1 million in crypto will also go ahead.
Despite widespread condemnation for human rights violations, including a suspension of civil liberties and a mass incarceration effort, President Nayib Bukele appears to be on track for re-election. His strong stance on gang crackdowns has garnered him significant support, and his innovative approach to cryptocurrency has placed El Salvador at the forefront of the global crypto conversation.
Angel Marinov is the Managing Editor at Coinlabz. With extensive knowledge of crypto payments and blockchain use cases, Angel is a trusted source of accurate and timely information