El Salvador Faces Minimal Fiscal Risk, Finance Minister

El Salvador Faces Minimal Fiscal Risk, Finance Minister

El Salvador was the first nation to legalize bitcoin within its borders. Now, the country sits on a substantial, albeit unrealized loss. However, Alejandro Zelaya, Finance Minister, reassured people that El Salvador faces minimal fiscal risk in light of the recent market crash. 

Smooth Sailing for El Salvador?

About a year ago, the country made history when it announced a plan to adopt bitcoin as an official legal tender at the Miami Bitcoin Conference. That plan became official last September despite criticism from locals as well as global financial organizations. 

Since September, leadership in El Salvador has made moves for a number of pro-crypto initiatives. This included the purchase of over 2300 BTC and even plans for a Bitcoin City. The country’s most recent acquisition came in mid-May amidst the pullback. 

The country bought 500 BTC for the price of $15.3 million. 

However, the situation feels a bit different now, as BTC plummets hard to a multi-year low of $20,800. Since then, the country has made no announcement regarding a purchase. However, at a recent press conference, the Finance Minister stated that El Salvador faces minimal fiscal risk. 

“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.”

According to recent estimations, the unrealized loss the country faces from its bitcoin investment sits at around $40 million. Still, Zelaya stated that this represents under 0.5% of the national general budget. 

MicroStrategy Shows a Different Story

While El Salvador faces minimal fiscal risk amidst the crypto plunger, the firm MicroStrategy is in a much more difficult position. As the largest corporate bitcoin holder, the firm sits on an unrealized loss of roughly $1 billion. 

The company spent around 44 billion to acquire its BTC holdings, totaling about 130,000 coins. However, this downtrend now puts their value around $3 billion. Still, Michael Saylor, CEO and founder, remains bullish, asserting that the firm has no plans to sell. 

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