El Salvador’s Bitcoin stash is now worth less than 50 percent of the price it acquired following the recent crypto market crash.
The losses, which total more than $50 million, pose an “extremely minimal” fiscal risk to the Central American country, according to Finance Minister Alejandro Zelaya.
El Salvador has made 10 bitcoin investments since becoming the world’s first country to adopt cryptocurrency as a legal tender in September, most recently last month when it bought 500 coins at an average price of $30,744.
This brought the total reserves to 2,301 BTC, which El Salvador calculated was paying $103,674,830 for LatestPageNewswhich puts the average purchase price at around $45,000.
At today’s prices of $22,400 per bitcoin, El Salvador’s holdings are worth just over $50 million.
At a news conference on Monday, as losses were closer to $40 million, Mr Zelaya downplayed the impact of the recent bitcoin price plunge on the country’s finances.
“When they tell me that the fiscal risk for El Salvador is really high because of Bitcoin, I can only smile,” he said, according to Reuters.
“The fiscal risk is extremely low. $40 million is less than 0.5 percent of our total national budget.”
El Salvador’s bitcoin experiment drew criticism from the International Monetary Fund, which in January urged the country to scrap the cryptocurrency as its official currency.
The IMF “emphasized that there are major risks to financial stability, financial integrity and consumer protection and associated tax contingencies associated with the use of bitcoin.”
Despite these warnings, the Central African Republic (CAR) voted in April to become the second country in the world to legalize bitcoin.
El Salvador President Nayib Bukele has been an outspoken supporter of cryptocurrency, claiming it is “game over for fiat.” [currency]“.
Bitcoin offers Salvadorans a way to avoid high transfer fees, which are expected to top half a billion dollars this quarter.
It also reduces the country’s dependence on the US dollar, which is El Salvador’s only other official currency.
President Bukele plans to build a bitcoin town on the Gulf of Fonseca in the south-east of the country, drawing power from the nearby Conchagua volcano.
The volcano’s geothermal energy will also be used to power a bitcoin mine that will generate new units of the cryptocurrency, similar to what is done in Iceland.