El Salvador, One Year After Adopting Bitcoin as Legal Tender: "More Than Half of Investment Lost"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] El Salvador, the first country in the world to adopt Bitcoin as legal tender, is facing increasing economic instability as Bitcoin investment losses have exceeded 50% just one year after adoption. Concerns are growing that fiscal soundness will continue to deteriorate as economic growth forecasts fall below those of neighboring countries.

According to AFP on the 7th (local time), El Salvador marked one year since adopting Bitcoin as legal tender. However, due to the sharp decline in Bitcoin prices, investment losses have reached $61.36 million (approximately 85 billion KRW), representing more than 57% of the total investment. Bitcoin prices have dropped from around $47,000 at the time El Salvador adopted it as legal tender to about $19,000, less than half of the previous value.

Earlier, the IMF urged El Salvador to revoke Bitcoin's status as legal tender, stating that "Bitcoin poses significant risks to fiscal stability, fiscal soundness, consumer protection, and fiscal contingent liabilities." The perception of Bitcoin as a speculative and highly volatile financial asset is widespread among Salvadorans, resulting in low usage rates as a means of payment.

Amid this turmoil, El Salvador's economic growth rate is also declining sharply. According to data from the United Nations Economic Commission for Latin America and the Caribbean, El Salvador's economic growth forecast for this year was revised down from 3.8% at the beginning of the year to 3.0% in April, and further adjusted to 2.5% on the 23rd of last month. This is the lowest among Central American countries in the region, including Panama (7%), Guatemala (4%), Honduras (3.8%), Costa Rica (3.3%), and Nicaragua (3%). Analyses from major institutions such as the Central Bank of El Salvador (2.6%), the World Bank (2.7%), and the International Monetary Fund (IMF, 3%) show similar figures.

Nevertheless, Nayib Bukele, the President of El Salvador who has led Bitcoin investments so far, responded to the sharp decline in Bitcoin prices by making additional purchases, even saying, "Thank you for selling it cheaply."

This content was produced with the assistance of AI translation services.