Nayib Bukele’s tune has seemingly changed his stance on the International Monetary Fund (IMF). Bukele once laughed at its bankers causing a dip in bitcoin (BTC) prices, refused to consider repeated requests to revoke the crypto as legal tender, and angered IMF workers with various tweets.

He has also censored the IMF’s views within El Salvador and refused to meet its demands for debt refinancing.

However, yesterday, the president’s staff kowtowed to IMF demands, agreeing to confine his administration’s BTC-related economic activities and transactions, eliminate the acceptance of BTC tax payments, and unwind the government’s involvement with its once-state-backed BTC wallet and ATM network, Chivo.

Bukele made these compromises to get access to a paltry $1.4 billion loan extension to fund his administration’s reform agenda.

“IMF staff thank the Salvadorean authorities for the excellent collaboration and candid dialogue,” press officers wrote, juxtaposing Bukele’s defiant statements with his compliant acquiescence.

Salvadoran authorities also agreed to formalize a policy of voluntary acceptance of BTC as a method of payment for all Salvadoran business owners.

Bitcoin to no longer be accepted as legal tender for tax payments

In the end, it all comes down to dollars and cents at the negotiation table. Going forward, according to an agreement by Raphael Espinoza on behalf of Salvadoran authorities, US dollars would be the only acceptable denomination for tax payments in El Salvador.

Assuming El Salvador keeps the promises it has made to the IMF and implements these reforms by drastically dialing back BTC use in the country, the IMF Board will approve its $1.4 billion loan extension request in February next year.

Read more: Bitcoin makes IMF hesitant to issue new loans to El Salvador

The country’s GDP is approximately $34 billion and grows roughly 3% per year.

Because the country claims to own 6,192 BTC, Tim Draper claimed on October 24 that a rally to $100,000 per coin would allow the country to repay its IMF loans “and never have to talk to them again.”

That obviously didn’t happen. Like much of Bukele’s social media-posturing against the IMF, his debts came due and quickly checked him back to reality.

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Will a rising bitcoin price cure El Salvador’s indebtedness to the International Monetary Fund (IMF)? Earlier this week, Tim Draper claimed a rally to $100,000 per bitcoin would allow the country to repay its IMF loans “and never have to talk to them again.”

The claim sparked a discussion about how much debt El Salvador owns — and how much bitcoin can contribute to easing its burden.

With some generous math, Draper’s claim that $100,000 bitcoin would allow IMF repayment has superficial merit. Specifically, El Salvador owes 107.7 million SDRs to the IMF worth 1.35049 USD apiece.

In other words, the country owes approximately $80 million to the IMF.

Switching to the asset side of the country’s financials, El Salvador claims to own 5,913.76 BTC, each of which currently trades at $67,973.

So if BTC were to rally $32,026 and hit Draper’s $100,000 threshold, El Salvador would gain $189 million from its holdings, which is a larger number than its $80 million of IMF debt.

Read more: This Bukele lobbyist now works for Tether too

Draper’s claim passes an elementary math check. Yes, the literal profits from El Salvador’s bitcoin holdings if bitcoin were to rally to $100,000 would total more than its IMF debt.

However, Draper makes two massive assumptions that undermine his claim.

Why $100K bitcoin is not a cure-all for El Salvador loans

First, this calculation assumes that the country’s bitcoin are unencumbered — i.e. not already committed to other purposes or collateralizing other loan or contractual obligations.

Second, this calculation disregards non-IMF liabilities, which number in the billions of dollars. Draper simplistically assumes that the country will be able to remit profits from its revalued bitcoin holdings directly to the IMF without first paying off more senior creditors.

A quick fact-check reveals that both assumptions are difficult to reconcile with Draper’s claim that $100,000 bitcoin will somehow solve El Salvador’s indebtedness to the IMF, the world’s preeminent lender with $1 trillion in assets, or empower President Nayib Bukele to “never have to talk to them again.”

On the first point, El Salvador’s bitcoin are not unencumbered. Bukele has committed bitcoin to a variety of obligations, including geothermal plants, a new city, community and infrastructure projects, and even a private investment bank. El Salvador cannot simply give all profits from a price rally directly to the IMF.

On the second point, IMF loans are only a small portion of El Salvador’s sovereign indebtedness. Every year, the country refinances low single-digit billions worth of short-term debt and also owes a double-digit billions of dollars worth of long-term debt.

Comparing these massive figures to its IMF loans of just $80 million reveals the country’s significant indebtedness to non-IMF creditors. Although a price rally would obviously help boost the country’s assets a bit, it would probably take much more than $100K bitcoin to repay the IMF, let alone all of El Salvador’s other lenders.

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IMF Communications Director Julie Kozack reiterated today that “addressing risks arising from Bitcoin is a key element of these discussions” in reference to negotiations between El Salvador and the IMF regarding a loan program.

El Salvador is still heavily indebted, and Bitcoin is not helping the country refinance its debts with the International Monetary Fund (IMF). According to the IMF, its member countries should not grant crypto assets official currency or legal tender status. 

El Salvador did not follow those instructions.

Read more: El Salvador Bitcoin agency reportedly made $235 this year, $7M off target

As of June 30, the country owed a relatively manageable $188 million (143.6 milion SDRs valued at $1.31534 apiece) in outstanding debt to the IMF.

Although the figure is relatively small for a sovereign nation, credibility with the IMF is critical to El Salvador for its refinancing of existing debts.

Even for non-IMF loans, the IMF is critical

Indeed, El Salvador is perennially refinancing billions of dollars in various types of debt from lenders who use IMF’s praises or admonishments as a bellwether similar to S&P sovereign creditworthiness ratings.

Earlier this year, its congress issued another $1.5 billion, for example. Like all US dollar-pegged countries, because El Salvador cannot print US currency to repay its debts, it must raise true loans and pass creditworthiness checks. In sovereign debt markets, the IMF is a critical ally for even non-IMF lenders to grant credit facilities at favorable rates.

Unfortunately, the IMF is vocally skeptical of bitcoin’s role in nation-state dealings. After all, the price of bitcoin regularly fluctuates by high single-digit percentages on an intraday basis, suffers flash crashes, and experiences drawdowns in excess of 70% every few years.

In June 2011, the price of bitcoin crashed 99% within one day. In December 2017, it crashed 80%. Even as recently as March 12, 2020, bitcoin crashed 40% in a single day.

According to the IMF, El Salvador was making progress as of August to “mitigate potential fiscal and financial stability risks from the Bitcoin project.” However, its statements today indicate that Salvadoran President Nayib Bukele has not yet satisfied the IMF’s requests at the negotiation table.

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El Salvador’s Bitcoin Fund Management Agency (AAB) only made $235 between January and July this year despite plans to rake in almost $7.4 million.

As reported by La Prensa, the yearly budget for AAB was $13 million, with $1 million planned to come from El Salvador’s general fund and $12 million from the agency’s own income.

The government agency makes its money through the fees it collects by managing and investing in public offerings of digital assets. This agency is not El Salvador’s Bitcoin office. 

The budgeted plan said the AAB should have made almost $7.4 million from digital asset offerings and should have received over $700,000 from El Salvador’s general fund, all between January and July. 

However, by July the agency’s income was only $235. On top of this, over $11 million from the general fund was sent to the agency, an increase of 1,425% over what it was budgeted to receive.

Read more: Investors can get a refund on Bitfinex’s failed El Salvador hotel offering

According to the Associate Professor of Communications at Cal State Fullerton, Dr. Ricardo J. Valencia, this shows that there is “no interest in partnering with the Salv government in issuance bitcoin products.”

Another project in El Salvador that didn’t quite hit the mark was a Hampton Hotel that attempted to raise funds through a Bitfinex securities offering. It hoped to raise $6.25 million in 30 days but only managed $342,000.

Investors of this fundraiser were then entitled to a refund. The project reportedly stated it needed a minimum of $500,000 to carry out the build. However, the token’s issuer, Inversiones Laguardia, said the firm “already has commitments for the entire raise.”

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Investors in Bitfinex’s Hampton Hotel securities offering are reportedly entitled to a refund after its fundraiser failed to meet its $500,000 goal to build a hotel near El Salvador’s airport. 

Local news outlet El Salvador.com reported that the ‘Relevant Information Document’ on the HILSV token used in the public offering has a clause that allows investors to refund their investment should the fundraiser fail to hit its target. 

The document, published on May 13, says a refund is available if either, “the minimum amount (minimum amount necessary to carry out the project), which for this issue will be five hundred thousand US dollars ($500,000.00), is not reached at the end of the public offering or (ii) if the issuance of the digital assets is canceled.” 

The token has only reached $342,000 since its launch on May 13. That’s $158,000 shy of the minimum sum required by the June 11 deadline. It had hoped to reach a total of $6.25 million.

Read more: El Salvador leans on Bitfinex for daily bitcoin buy

However, the hotel might not be done for. The token’s issuer, Inversiones Laguardia, told Protos that the firm “already has commitments for the entire raise” and that its “goal with tokenization is to reach the largest number of retail investors possible.”

This is despite the HILSV document claiming $500,000 was the “minimum amount necessary to carry out the project” during this issuance.

The public securities offering was to help build the five-storey hotel which it was claimed would have 80 rooms, a pool, and a garden, among other amenities. It also offered investors free nights and even unlimited stays over a five-year bond term if at least $1 million was invested. 

The token was reported to be tradable with US dollars and USDT but the latter cannot be found on Bitfinex’s site or ‘Relevant Information Document.’

El Salvador.com wanted a comment from Inversiones Laguardia and visited its listed headquarters address only to find another company called Inglés Corporativo. Someone answering Inversiones Laguardia’s listed phone number also claimed it belonged to another company. 

According to the HILSV document, investors can get their refunds via the same channels through which they made their initial investment. 

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It’s a very simple question: Are central banks buying bitcoin? The answer, it turns out, is far more difficult than the question.

Certainly, the US Federal Reserve hasn’t been buying bitcoin. Nor is it on the balance sheet of any G7 central bank. Nevertheless, David Bailey of Bitcoin Magazine claimed that smaller central banks were buying the currency. Others also think central bankers are buying, including Michael Arrington.

When thinking about whether central bankers are buying bitcoin, El Salvador might be top-of-mind. Smartly, however, Bailey didn’t claim that El Salvador’s central bank had been buying bitcoin. Although it’s true that Salvadoran President Nayib Bukele has bought the currency using public funds, he’s not a central banker.

As Bailey knows, El Salvador’s 5,782 bitcoins aren’t on the balance sheet to back its US dollar-pegged fiat, but rather in its more discretionary, fiscal treasury.

Instead, Bailey cited an article claiming that Iran’s central bank was buying bitcoin. This is a curious claim, not only because of its tiny size — Iran’s central bank has less than 2% of the assets of the US — but because the US and other major countries have sanctioned the entire country since 1979.

Moreover, Iranian central bankers have warned that buying bitcoin is illegal in the country — with an exception provided to domestically-mined bitcoin.

Read more: El Salvador leans on Bitfinex for daily bitcoin buy

Protos was unable to verify Bailey’s claim that the Iranian central bank owns bitcoin. Iran certainly has miners operating in its country, but only a single Decrypt article claims that its central bankers have ever purchased the asset itself. Iran has limited independent media, and its central bank doesn’t list bitcoin on its public filings. Bailey also apparently backpedaled on his claim shortly after making it in a live social audio space.

Another commentator with a dubious track record said Bhutan’s central bank was buying bitcoin and “confirmed this to me on Tuesday.” Indeed, Bhutan has operated a state-owned bitcoin mine that’s connected to Jihan Wu of Bitdeer.

However, it is unclear whether Bhutanese central bankers have ever purchased bitcoin.

Government possession versus central bank purchase

The question of whether central banks are buying bitcoin is far more specific than whether governments possess bitcoin. Even the US government possesses bitcoin with US Marshalls holding thousands of coins confiscated from the Silk Road and other criminal legal proceedings.

However, neither the Federal Reserve or any major central bank has purchased or holds bitcoin.

Other sovereign names surface when speculating about central bank bitcoin holdings. Suriname, Central African Republic, Venezuela, Kazakhstan, St. Kitts and Nevis, Belarus, and Estonia are common speculations.

In the end, however, there’s little evidence that any central bank — independent of other government agencies like fiscal authorities — actually owns bitcoin itself.

Maybe not bitcoin, but plenty of altcoins

Away from bitcoin, there are many central banks that own stablecoins and other crypto assets. Instead of purchasing the world’s leading crypto asset, several sovereigns have leap-frogged right into altcoins, using various blockchains to issue tokens like the Chinese e-CNY, Nigerian e-Naira, Zimbabwan ZiG, Jamaican JAM-DEX, or Bahamian Sand Dollar.

Because many central bank digital currencies (CBDC) are direct liabilities of the central bank, a percentage of the total supply of these digital assets is truly on the balance sheet of these central banks.

However, these assets aren’t bitcoin.

So yes, in summary, central banks certainly own crypto assets. There are government agencies that have bought or mined bitcoin. However, it’s not clear that any central banker has ever purchased bitcoin to hold on their balance sheet.

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A proponent of Bitcoin Cash (BCH) has shared a deepfake video intended to criticize El Salvador’s adoption of Bitcoin (BTC). The clip claims to show US expat Corbin Keegan describing his decision to move from Chicago to the Gulf of Fonseca in El Salvador.

According to writer and researcher David Shares’ post on X (formerly Twitter), Keegan hoped to become the first citizen of Bitcoin City, a planned municipality that will draw geothermal power from the Conchagua volcano.

The video, which is styled like a local interest segment that might air on a local TV station, purports to show Keegan waiting despondently near the planned construction sites and sitting idly around various parts of a nondescript beach town. Text overlays cast a narrative of events that never occurred. 

Corbin Keegan reponds to deepfake about El Salvador’s Bitcoin City

The video’s promoter claimed that “Keegan decided he had enough, and has now left El Salvador to come back to the US, giving up on the idea of the Bitcoin City for the time being.” The video earned thousands of views and attracted dozens of comments from viewers who believed the tall tale.

In reality, Keegan did move to El Salvador and plans to continue waiting. He believes in Bitcoin City, despite its lengthy delays, and is optimistic about becoming one of its first residents. He admitted to visiting Chicago recently, but only to attend to brief matters before returning to El Salvador as a continuing, long-term resident.

Keegan commented directly on the video, saying, “Fake news. I’m still here.” He continued, “I’m 100 percent committed all-in Bitcoin City and El Salvador like I am Bitcoin. Nice try fake news FUD.”

Read more: Explained: El Salvador’s contentious bitcoin-backed Volcano Bonds

Shares placed a clue in the first line of the post. Although disingenuous, he at least clued readers to an obvious mendacity — that Keegan was “the first citizen of the Bitcoin City.” Countries, not cities, have citizens.

In the end, despite El Salvador’s various problems and delays in building its bitcoin and USDT-funded metropolis, this week’s deepfake is an embarrassing attempt at anti-Bitcoin City propaganda. Corbin Keegan didn’t give up on El Salvador and decide to move back to Chicago. In fact, he’s been in El Salvador for three years and is still committed to residing in the country.

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A couple of weeks ago, a new securities offering was added to Bitfinex Securities, intended to raise money to build a Hampton hotel near an airport in El Salvador.

The offering hoped to raise $6.25 million in 30 days, however, over halfway through, only $342,000 has been raised, according to the Bitfinex Securities website.

This hotel offered unusual ‘benefits’ to investors, including offering free nights if you invested enough, and up to unlimited stays over the five-year bond term if you invested at least $1 million. 

Furthermore, the ‘Market Study Update’ issued by Horwath HTL and distributed alongside this offering submission suggests that the hotel is projected to make $2.7 million in total revenues. This is somewhat surprising as construction is yet to be completed, and the fundraising documents on Bitfinex Securities state that construction will take “less than 12 months,” leaving little time to hit that target.

Read more: Bitfinex Securities hasn’t seen a single trade in two months

Bitfinex Securities has struggled to convince anyone to regularly use the exchange. The blockstream mining note offered on the exchange hasn’t had a trade occur since November 13 last year. The Mikro Kapital offering sees slightly more activity, with sometimes up to eight trades occurring in a single day, though more typically it sees between zero and two trades.

Protos has reached out to Inversiones Laguardia to determine if it will be able to proceed with construction if this fundraise fails; after the publication of this piece Roberto from Inversiones Laguardia responded to claim that it “already have commitments for the entire raise” and claimed its “goal with tokenization is to reach the largest number of retail investors possible.”

Update 2024-06-03 13:40 UTC: Added comment from Inversiones Laguardia.

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A hacker has published the source code, including .exe, .txt, .bat, and .reg files, for the software used within El Salvador’s government-maintained Chivo bitcoin ATMs. President Nayib Bukele’s administration paid third-party contractors from various countries to build and maintain its infrastructure.

Chivo has ties to Athena Bitcoin Global, a pink sheet stock that trades on the US OTC stock market. Athena rallied from $0.20 to $46.50 during Bukele’s Chivo announcements in 2021, however, today it trades for less than $0.10.

Other third-party contractors include ROI Developers (a.k.a. Accruvia) which sued Athena over an alleged failure to pay. Athena eventually stopped working on Chivo, and AlphaPoint, which has ties to various failed crypto exchanges, took over.

Read more: Bitcoin ATM startup sues former exec over botched El Salvador launch

Long history of Chivo wallet and ATM hacker leaks

It’s not the first, second, or even third time that El Salvador’s Chivo and ID systems have experienced a major breach. During Chivo’s debut in 2021, many Salvadorans stole other residents’ credentials to open multiple accounts and claim multiple $30 signup bonuses.

Earlier this month, a hacker published over 5 million high-resolution face photos of nearly every adult in El Salvador, including detailed contact information. 

A major newspaper in El Salvador also reported this month that the same hacking group, CiberInteligenciaSV, has been releasing a series of data dumps on Salvadorans for weeks. Recent breaches include 800,000 license plates and associated vehicle/owner info, 96,000 pregnancy records, 6,500 government customer records, and other catastrophic breaches.

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Personally identifiable information for more than 5 million Salvadorans has been available for free download since Saturday. According to the hacker responsible, this is the largest breach in the country’s history.

Disturbingly detailed information, including full names, birthdays, phone numbers, residential addresses, email addresses, and social security number-equivalent DUI numbers, has been stolen and made accessible via dark web torrents.

What’s even more worrying is the fact that the breach also includes millions of high-definition, unwatermarked, and DUI-numbered headshot photos of Salvadorans.

In fact, the breach affects the vast majority of Salvadoran adults. There are approximately 6.6 million Salvadorans, including children, including one-fifth who live abroad as diaspora.

The massive, 144GB data leak has been available to download for a $250 fee since August, but the threat actor who possessed the information claimed that the victims failed to pay his ransom demand. As punishment, the hacker released the data for free.

La Prensa Gráfica, a Spanish-language newspaper headquartered in El Salvador, confirmed the breach.

Read more: Ransomware gang wants 15 bitcoins from ‘world’s largest’ yacht dealer

New risks replace traditional violence in El Salvador

El Salvador is a dictatorship run by President Nayib Bukele who installed judges to modify the country’s constitution to allow himself to exceed the previously-unconstitutional presidential term limits. He has used various tactics to reduce once-rampant gang violence, including the extrajudicial imprisonment of 2% of the adult males residing in the country.

Bukele also approved the country’s adoption of bitcoin as legal tender to an English-speaking audience in Miami prior to even informing his Salvadoran constituency.

The country is also home to expansive operations by iFinex and its subsidiaries like Bitfinex and Tether. iFinex subsidiary personnel have been instrumental in crafting legislation, bond issuances, and financial schemes. Various bond issuances and governmental programs in El Salvador accept both bitcoin and tether from institutional investors.

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