El Salvador Takes Bitcoin Victory Lap, Plans Transfer to ‘Piggy Bank’ Physical Vault

Salvadoran President Nayib Bukele announced on Thursday evening that the Central American country has moved some $400 million worth of Bitcoin cryptocurrency assets to a “cold wallet” secured in a physical vault in the country’s territory.

A “cold wallet” is a way of securing cryptocurrency assets by storing the security keys required to access them on a physical hardware device completely disconnected from the Internet, thereby preventing any possible hacking attacks or intrusions that would lead to a loss of assets.

The cold wallet itself does not hold the assets; rather, it holds the means to access that account’s assets, as Bitcoin exists within the online blockchain.

On social media, Bukele described the cold wallet as El Salvador’s first “bitcoin piggy bank,” attaching a picture of a transfer of 5,689.68 bitcoins at an estimated value of $406.6 million as of the time of the transfer:

We've decided to transfer a big chunk of our #Bitcoin to a cold wallet, and store that cold wallet in a physical vault within our national territory.

You can call it our first #Bitcoin piggy bank 🇸🇻

It's not much, but it's honest work 😂 pic.twitter.com/dqzedykxT1

— Nayib Bukele (@nayibbukele) March 14, 2024

In addition to the unprecedented crackdown on El Salvador’s violent gangs, the adoption of the Bitcoin cryptocurrency is one of Bukele’s flagship policies. El Salvador adopted Bitcoin as a legal tender in 2021. Since then, both the cryptocurrency and the United States dollar have been the nation’s official currencies.

El Salvador officially dropped its national currency, the Salvadoran colón, in 2001, embracing the United States dollar to help stave off the nation’s huge inflation problems. The process, more commonly referred to as “dollarization,” has been adopted by other countries in the region, such as Ecuador and Panama. In Argentina, President Javier Milei has promised to dollarize the South American nation’s economy eventually.

In recent years, Bitcoin has experienced dramatic volatility in its value, with Bukele “buying the dip” in 2022, purchasing more of the asset after it dropped in price.

Bukele has repeatedly dismissed concerns when Bitcoin’s value continued to drop – which, at the time, translated to losses for the Central American nation. In recent weeks, Bitcoin experienced a price surge, reaching a record high of more than $72,000 per unit.

Bukele’s announcement occurred weeks before the next “halving” effect, expected to occur in late April. By design, Bitcoin experiences a “halving” effect every four years, which reduces the rate at which new units are created on the blockchain.

Currently, some 19 million bitcoin units have been “mined” out of its maximum 21 million cap. Every halving effect effectively makes the asset scarcer and thus, increases its demand, having potential effects on its value under the concept of supply and demand. At the current rate, all 21 million bitcoins are expected to be mined and in circulation sometime during the year 2140.

While neither Bukele nor the Salvadoran government have publicly revealed the total amount of Bitcoin held by the country, Thursday’s announcement reportedly places El Salvador’s estimated Bitcoin holdings at an amount far higher than previously believed by cryptocurrency-specialized media outlets. A public tracker known as the “Nayib Bukele Portfolio Tracker” had estimated the total holdings at roughly $205 million prior to Bukele’s cold wallet announcement.

Bukele, in reference to the public tracker, asserted through his social media account this week that the value published by the website did not include Bitcoin the government earned from its passport program, cryptocurrency mining projects, and Bitcoin-United States dollar conversions for local businesses.

The Salvadoran Congress approved a law in December that allows for an expedited path to citizenship for foreign Bitcoin investors who make “donations” to government social and economic development programs. The law does not establish a minimum amount required to be eligible.

A separate program, called the “Freedom Visa,” was launched by the Salvadoran government in December, offering citizenship and residence visas to up to 1,000 individuals per year willing to invest $1 million worth of Bitcoin or Tether (USDT), another cryptocurrency that has its value tied to that of the United States dollar.

Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here.