Understanding the logic of why El Salvador’s move on making BTC legal tender is risky for the country’s financial stability and solvency

Image source

Many people don’t think El Salvador’s move on making Bitcoin legal tender is good

Let’s evaluate why some of us from the crypto and finance community are skeptical of El Salvador’s approach of making Bitcoin legal tender. First, this whole move was initiated by El Salvador’s president Nayib Bukele and there are news articles that say he does not have the support of many Salvadorans on this.

There have been protests against El Salvador’s Bitcoin law, and critics were arrested for criticizing El Salvador’s Bitcoin law. Now, let’s evaluate practical aspects of what’s worrying many of us with El Salvador’s Bitcoin approach.

El Salvador’s purchased Bitcoin all controlled by president Nayib Bukele - So Centralised!!

Image Source

There are reports that say that there is no transparency on how much Bitcoin, Nayib Bukele has purchased on behalf of the El Salvador Government and at what price. Plus, no details on important aspects like who holds the private keys of all the Bitcoins purchased by the El Salvador’s Government.

It’s completely fine, if Nayib Bukele is purchasing all the Bitcoin using his own money that he does not disclose these details, but Nayib Bukele has purchased Bitcoin representing the government of El Salvador using public funds, so every Salvadoran has the right to know complete details of all Bitcoins that the El Salvador Government owns.

In all appearances it may seem like that Nayib Bukele is actually buying Bitcoin for himself using public funds, because all the Bitcoins he purchased are supposedly done by him throughhis phone. Ouch!!

source

Can you believe this?. Nayib Bukele is supposed to be buying Bitcoins for the entire country of El Salvador. Those Bitcoins are part of El Salvador's treasury as Bitcoin is made legal tender, it's bought using public money, so it is every Salvadorans Bitcoin. And Nayib gets BTCs for El Salvador through his mobile phone, really?

El Salvador government recommended Chivo wallet is not open source

In my previous article, I mentioned that the Chivo wallet that El Salvador’s government propagates its Citizens to use is not open source. This means Chivo’s code is not available for the public in Github to verify its security.

This by itself is not proper as there is no guarantee that the Chivo wallet is a secure wallet to hold one’s precious earnings/savings on Bitcoin.

Even if Bukele gave 30$ in BTC to adult Salvadorans who downloaded this Chivo wallet, there is no reason for us to trust the Chivo wallet is secure.

The possibility that Bitcoin’s price fall can collapse the economy of El Salvador

Now brace up for the scariest thing of all. It is hard to get used to the volatility of Bitcoin even for us Bitcoin enthusiasts. After all, the BTCs we bought are from our hard earned money and we obviously won’t enjoy it’s value falling below the price at which we purchased Bitcoin. Human psychology!!.

Now, news source says that Nayib Bukele’s Bitcoin purchases has for now on paper lost El Salvador about $12 million dollars.

This is because it is estimated that Bukele purchased most of the Bitcoins at the price range of $51,056 and the price of Bitcoin is about $41,000 now. This data estimate is assuming the information that Bukele tweeted is correct, because Bukele is not transparent on all these Bitcoin dealings as explained earlier.

As a crypto investor, we may not fear this, knowing that in the long term we Hodl Bitcoin, it will give us appreciated earnings, but what about the short term?. If you're borrowing using your bitcoin as collateral won’t you be scared about these things(yes, DeFI folks you understand this!! And those of you having burned your hands trading on leverage also know this)

Now, if the price of the 1391 BTCs that El Salvador owns in its treasury falls, it can be a threat to the economic stability of El Salvador indeed!! It can lead to an economic collapse!! This is why making BTC a legal tender is not viewed as a sane move by many of the crypto and finance folks. It’s rash and extreme.

Does Bukele care about El Salvador’s complete financial collapse should BTC’s price tumble down terribly?

And the way Bukele has tweeted that he has brought the dip, as if those BTCs that he brought on behalf of El Salvador Government is his own investments, looks just careless, like he does not care about the consequences of BTC’s price fall on El Salvador’s economy.

Now, since Bukele has made BTC legal tender in El Salvador, the treasury of El Salvador will be all in Bitcoins, so El Salvador’s economy, fiscal solvency all depend on BTC’s price action.

So, if BTC’s price falls, then it’s indeed a big risk for the economy and financial stability of El Salvador.

Bukele’s Bitcoin embrace is revolting those of us who know he’s not valuing Bitcoins’ core principles

Image source
The World leader who dares to buy more BTC for El Salvador’s treasury on his phone without panicking that further price falls of BTC can deprive El Salvador’s treasury value

I don’t see how Bukele values Bitcoin principles with this Bitcoin legal tender move, if under him the El Salvador Government is not transparent about the Bitcoin purchases and reserves maintained.

There is so much centralization here, with no details on which entity owns the private key of purchased Bitcoin of the El Salvador’s Government. So, much for all that excitement about El Salvador’s endeavour of making BTC a legal tender during September, it looks like a disappointment when I read more articles on the matter!! … Sad!!