El Salvador Makes Good on $800M Debt Despite ‘Bitcoin Bet’

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El Salvador’s Pres­i­dent, Nay­ib Bukele, said Mon­day his coun­try has paid back $800 mil­lion on an exter­nal bond despite con­cerns last year the coun­try would default due to its “bit­coin bet.”

Investors hold­ing the Eurobond have been paid out after the coun­try com­plet­ed its trans­fer of funds to inter­na­tion­al cred­i­tors, offer­ing a rebut­tal of sorts to crit­i­cisms levied at the president’s regime. 

“In the past year, almost every lega­cy inter­na­tion­al news out­let said that because of our ‘bit­coin bet,’ El Sal­vador was going to default on its debt by Jan­u­ary 2023,” Bukele tweet­ed Mon­day. “Well, we just paid in full, $800 mil­lion dol­lars plus interest.”

Last year, El Sal­vador offered to buy back some of its debt as part of a repur­chase plan in a bid to counter crit­i­cisms the coun­try would default. Eurobonds assist orga­ni­za­tions and coun­tries in rais­ing cap­i­tal for infra­struc­ture projects, among oth­er uses, and are typ­i­cal­ly issued in anoth­er currency.

Bukele’s gov­ern­ment had ini­tial­ly set a pur­chase price of $910 for its Jan­u­ary 2023 bonds and $540 for bonds matur­ing in 2025 in Sep­tem­ber, both total­ing $800 million.

Bitcoin play

El Sal­vador became the world’s first nation to adopt bit­coin as legal ten­der, along­side the USD, in Sep­tem­ber 2021 amid praise from dig­i­tal asset indus­try par­tic­i­pants and investors.

The project saw the pur­chase of bit­coin using pub­lic funds, as well as the roll­out of a nation­al dig­i­tal wal­let dubbed “Chi­vo.” The wal­let ini­tial­ly saw a large uptick due to an offer­ing for cit­i­zens to claim $30 in BTC for sign­ing up.

Despite its ini­tial uptake, major rat­ing agen­cies and the Inter­na­tion­al Mon­e­tary Fund through­out last year warned against bitcoin’s volatil­i­ty, as con­cerns over the country’s expo­sure to the asset class mount­ed fol­low­ing a severe mar­ket rout in the sec­ond quarter.

By May, bit­coin had fall­en more than 50% cour­tesy of an implo­sion of Terra’s ecosys­tem, send­ing mar­kets reel­ing and prompt­ing calls from the IMF to reverse El Salvador’s decision.

Despite indus­try head­winds, Bukele’s gov­ern­ment has con­tin­ued to buy up the asset, includ­ing pur­chas­ing a fur­ther 80 BTC at $19,000 apiece in July, short­ly after the mar­ket had tanked.

Bukele announced in Novem­ber that he would begin buy­ing 1 bit­coin per day — a dol­lar-cost-aver­ag­ing strat­e­gy that, if pur­sued from the out­set, would have saved the coun­try millions.

Accord­ing to Nay­ib­Track­er, which tracks the country’s total hold­ings as well as the time of its pur­chas­es based on Bukele’s tweets, El Sal­vador holds some 2,516 BTC worth $57.9 mil­lion, down about $51.5 mil­lion at a cost of $109.5 million.

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