Almost year ago Sunday (June 5), President Nayib Bukele announced El Salvador would make bitcoin a legal tender, on par with the U.S. dollar.<\/p>\n
With bitcoin at $36,000 on that day, things looked even better on the morning of Sept. 7, when the law went into effect, with the cryptocurrency over $52,600. That evening, not so much. Bitcoin dropped almost $10,000 during the day, rebounding to $46,800, and popping up past $68,000 two months later. On its anniversary, bitcoin was hovering below $30,000.<\/p>\n
That\u2019s the least of El Salvador\u2019s problems with its national cryptocurrency. Plans for a highly touted $1 billion bitcoin-backed bond \u2014 at rates well below traditional sovereign debt and incorporating a mechanism that would pay well if bitcoin blew up \u2014 have fizzled.<\/p>\n
And with it, the country\u2019s chances of making the $800 million eurobond payment coming due in January 2023 without the help of the International Monetary Fund (IMF).<\/p>\n
The IMF had been relatively close to agreeing to a $1 billion loan to cover the bond payment before the decision to make a highly volatile digital asset legal tender. But it immediately made clear it considered the decision foolhardy and that the loan would not happen while bitcoin remains on an equal footing \u2014 legally \u2014 with the U.S. dollar that El Salvador also uses.<\/p>\n
Read more:<\/b> Bitcoin\u2019s Still a Major Sticking Point in Talks With IMF<\/a><\/p>\n Along the way, the floor fell out from under El Salvador\u2019s traditional bonds \u2014 which carried a high rate of interest pre-bitcoin \u2014 as rating agencies Fitch\u2019s and Moody\u2019s slashed the nation\u2019s credit rating far below junk status, citing the bitcoin experiment as a large part of the reason.<\/p>\n The yield on its three-year notes has quintupled in the past 12 months, reaching past 42%. Factoring in the yields on other bonds and financial instruments, which haven\u2019t done quite as badly, means that there has been \u201ca decrease of more than 50%\u201d in the price of its securities, according to El Economista.<\/p>\n Never-enthusiastic citizens, meanwhile, have voted with their feet. The state-issued Chivo digital wallet had virtually no new adopters in the first quarter of 2022, with less than 20% using it after getting the initial $30 incentive, according to the National Bureau of Economic Research (NBER). That group also found that only 20% of merchants accept bitcoin, 5% of sales are in bitcoin, and a dismal 2% of remittances are in bitcoin.<\/p>\n
![\"\"](\"https:\/\/securecdn.pymnts.com\/wp-content\/uploads\/2018\/11\/PYMNTS-Study-May-2022.jpg\")