According to reports, bitcoin (BTC) adoption in El Salvador has been a failure thus far — and the government's lack of explanation on how it spent the money it shelled out for token purchases has been criticized.
The government's lack of transparency in the management of state funds for the purchase of bitcoin was highlighted in an EFE report (published by El Diario de Hoy) to mark the three-month anniversary of BTC becoming legal currency in El Salvador.
Aside from President Bukele's tweets on the issue, the government has provided few details about what platform it used to acquire coins and what if any charge fees it paid out of state coffers.Bukele has said that he would invest at least $168.9 million of Salvadoran state money in BTC, according to EFE.
The public has not been informed how the funds are being managed, who exactly has access to them, or how they are being allocated.
In addition, the series of negative developments related to Bukele's even more ambitious bitcoin-based metropolis project, which would have no taxes other than a single VAT charge on transactions – all paid for with soon-to-be-issued bitcoin bonds.
According to the news agency, Ricardo Castaneda, the country coordinator for El Salvador and Honduras at the Central American Institute for Fiscal Studies (Icefi), called the project "risky" and a "desperate measure."
The document was released just as the United States accused the Bukele regime of parleying with criminal organizations, a charge that has dogged him for several years and which has plagued his presidency. The allegation is likely to exacerbate the nation's ties with the International Monetary Fund (IMF), on which it has depended largely for years for monetary aid.
Bukele has been determined to break this cycle, and some believe his pro-BTC turn is part of a larger strategy to de-dollarize the Salvadoran economy, though he claims it isn't.
“If [the BTC bonds and Bitcoin City projects] go well, President Bukele will be an example and will be able to tell multilateral organizations and the international community that we don’t need them. But if this goes wrong, the whole population is going to lose out.”
The project was dubbed an experiment by the economist, and he cautioned that El Salvador should establish a complete institutional structure before attempting it.
However, he stated that it would be fascinating to see how the current financial system would respond to the initiative.
EFE went on to note that Salvadorans had been lukewarm towards the Chivo app and bitcoin adoption, claiming that reports of identity theft by scammers attempting to collect the golden hello fee of USD 30 in BTC given out to all Salvadorans who activated the app.
The economist published that the bonds' low payouts were part of a deliberate wager on the President's behalf, stating:
“[Bukele is hoping that] the people who buy this type of [financial] instrument are people who are so in love with bitcoin that they will not mind taking into account that in El Salvador there is a lot of risk and that the financial situation is very complicated. The challenge is very great.”
Meanwhile, a survey conducted by the Francisco Gavidia University Center for Citizen Studies found that 91 percent of addressed Salvadorans prefer the USD to BTC, with less than 5 percent preferring bitcoin above the dollar.
When the same respondents were asked whether they supported bitcoin's legalization as a legal tender, there was a more even split: 35% were in favor, 40% were against, and the remainder undecided.
More than half of the respondents were opposed to the move in prior studies.