El Salvador’s Finance Minister Says Bitcoin Crash Will Not Affect Country’s Fiscal Health

El Salvador’s Finance Minister Alejandro Zelaya has revealed that the recent crash in Bitcoin and crypto prices has minimal risk to the country’s fiscal health.

El Salvador Records $40M Paper Loss in Bitcoin

On Monday, the leading cryptocurrency tumbled to an 18-month low with over $200 billion wiped off the entire crypto market. At the time of writing, the total crypto market cap has dropped below $1 trillion from an all-time high of $3 trillion in November 2021. BTC is also currently trading at $22,000, a 67% decrease from its ATH price of $68,800. 

During the 2021 bull run, El Salvador became the first nation in the world to adopt Bitcoin as a legal tender alongside the U.S. dollar. Since then, the volcanic country has been bullishly adding bitcoin to its balance sheet, amassing a total of 2,301 BTC, valued at around $70 million at the time of its last purchase

Bitcoin Crash Poses No Risks

With the current market conditions, El Salvador’s Bitcoin portfolio is now worth about $54 million with a paper loss of $40 million, according to Deutsche Welles.

The nearly 50% unrealized loss has called for concern among citizens and speculators, but Zelaya noted that the $40 million paper loss is not even up to 0.5% of the country’s national general budget. This means that the crash does not pose a high risk for El Salvador. 

“When they tell me that the fiscal risk for El Salvador because of Bitcoin is really high, the only thing I can do is smile. The fiscal risk is extremely minimal,” he said.

One Year On

Meanwhile, it’s been a year since El Salvador publicly revealed plans to legalize bitcoin as a legal tender. Over the last year, the country has gone beyond legalizing BTC as a medium of exchange despite criticism from global regulators and lawmakers.  

For instance, the country is planning to construct the world’s first Bitcoin city that will be funded by a $1 billion bitcoin bond. Zelaya noted that the bond which was supposed to be issued between March 15 and 20 is being delayed due to the Russia-Ukraine war.