Altcoins Talks - Cryptocurrency Forum
Cryptocurrency Ecosystem => Bitcoin Forum => Topic started by: atribecallednet on January 11, 2022, 09:54:54 AM
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We keep hearing from the media that El Salvador is buying bitcoin, but with whose money exactly? Governments borrow money from banks which must be paid back at interest by the people through the collection of taxation by the government. So the government doesn't really "have" their own money. So when the media says El Salvador bought bitcoin, who exactly, with what money and how is that bitcoin then distributed to the people or held etc?
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I am assuming it is the government itself buying maybe via its central bank or any financial institution connected on it. I am sure that this is just like buying USA dollar as reserve...or any foreign currency for that matter which is very much normal with many other countries all over the world. I am sure it is not the money of Nayib Bukele otherwise he could not claim it for the government.
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A state always has a reserve in various forms (to make a portfolio), gold, USD, and other foreign currencies (and BTC in the case of El Salvador). It depends on the state, but it either Dept of Treasury or Central Bank manages the reserve. They could buy it with tax revenue, non-tax revenue (e.g. profits from State Owned Enterprise) or debt (bond). Distributing the BTC is also not a problem since it's like any other direct incentive to the people.
The government will create its own Bitcoin wallet called Chivo, which is slang for “cool” in El Salvador, Bukele said during a national address on Thursday night. The funds will be deposited into the account of any citizen who downloads it and registers as a user with their phone number and ID number, he said.
Source (https://www.aljazeera.com/economy/2021/6/25/free-bitcoin-el-salvador-offers-30-of-bitcoin-to-boost-uptake)
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most likely, the government of El Salvador buys bitcoin instead of other world currencies, as a reserve, and I have no idea how the government acts when bitcoin falls...after all, there has been a rather protracted correction recently, can it be averaged?)
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Why we should be worried about the funds used by El Salvador to invest in Bitcoin? You must realize that it is a country, President Nayib Bukele won't use borrowed money to invest in Bitcoin. They are not amateur, a country braves to invest in Bitcoin must have strong reasons such as having crypto experts or knowing well what Bitcoin investment is.