El Salvador redoubles its commitment to bitcoin in the midst of the collapse of cryptocurrencies

The government of The Savior presented to Congress a bill that, among other things, proposes the creation of a bitcoin fund management agency, with which the Executive “seems to redouble the bet” for said cryptoactive at a time when its price has registered falls.

With this law, the guarantee for the issuance of debt would also be given through bonds backed by bitcoin -known as volcano bonds-, according to an analysis by economist Ricardo Castaneda, from the Central American Institute of Fiscal Studies (Icefi).

According to a document shared by the Presidency on November 23, on November 17 the Legislative Assembly, dominated by the ruling party, received the Digital Assets Issuance Lawwhich aims to “establish the legal framework that grants legal certainty to transfer operations to any title of digital assets that are used in the issuance of public offerings carried out in El Salvador.”

However, neither the Government nor Congress have provided more details about the regulations, and it is not known if it has already been analyzed and discussed in the Economic Commission of the Legislative body and if it will be approved before the end of 2022.

According to the magazine Bitcointhe law is “paving the way for the issuance of bitcoin-backed bonds.”

The adoption of bitcoin as legal tender in El Salvador, which became the president’s main economic bet, Nayib Bukeleturned one year old last September without the majority of expectations generated and with complaints of opacity having materialized.

“A player who does not fold and bets more”

The Icefi economist, specializing in public management and media policy, pointed out that “it is important to highlight that at a time when crypto assets, particularly bitcoin, have had a loss of value, there is a lot of distrust, there is bankruptcy, there are issues associated to scams, etc., from the Government of El Salvador what seems to be redoubling the commitment to cryptocurrency”.

“The Government is like this person who is betting and is losing and, far from retiring, portraying himself or changing, what he does is still bet more,” he exemplified.

Castaneda pointed out that opening the space to “an entire bitcoin ecosystem”, “worries that all the profits obtained through the operation of this market would be tax exemptwhich would basically turn El Salvador into a kind of tax haven.”

“As we have warned before, if someone does not pay taxes, someone else has to, and in this case it would be the population of El Salvador,” he said.

Bitcoin Fund Manager

The regulations establish the creation of the Bitcoin Funds Administration Agency, as “a public law institution with legal personality and its own patrimony, of a technical nature, with economic, financial and administrative autonomy for the exercise of powers and duties stipulated by law and in the rest of the common applicable legislation”.

Said Agency will be related to the Executive body through the Ministry of Economy and will be in charge of “the investment, protection and investment of the funds coming from the public offerings of digital assets carried out by the State of El Salvador and its autonomous institutions and the returns from such public offerings.

For the economist, “it seems that entities, such as the Ministry of Economy, would more or less have a greater role in managing the bitcoin that the State buys, although everything would always be linked to decisions from the Presidency, with which the power and would not settle transparency mechanismswhich has been one of the great limitations in the entire management and implementation of bitcoin in the country”.

The Government of El Salvador has supposedly bought 2,381 bitcoins for more than 100 million dollars, the value of which has been reduced by the falls that the cryptocurrency has had.

The EFE Agency asked a government spokesperson in mid-November, through an instant messaging application, how many bitcoins the country has bought and its price, but no response was received.

“It would seem that it will continue as an experiment, as up to now, always with a lot of improvisation and always with a lot of opacity (…), the question arises again: who do you want to benefit? Clearly the population does not benefit from this,” he added .

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