Bukele Takes Advantage Of The Kazakhstan Crisis To Prop Up His Pharaonic Bitcoin Project | International

Every cloud has a silver lining. That seems to be the motto that these days moves the president of El Salvador, Nayib Bukele, who wants to take advantage of the collapse in the price of bitcoin due to the protests in Kazakhstan, a distant central Asian country that since 2021 is the second largest issuing center. [’minado’, en la jerga del negocio] of cryptocurrencies in the world. The government of the authoritarian Kassym-Jomart Tokayev last week ordered the total cut off of the Internet to prevent the protesters from transmitting the violent repression unleashed from the State, but its decision ended up becoming a hard setback for the opaque business of virtual currencies: the blackout strongly affected cryptocurrencies, mainly the value of bitcoin. Thousands of kilometers across the Pacific, a small country then attracted the attention of investors in the sector, who believe that the stability guaranteed by Bukele – and the pharaonic dreams of the young president – could be fertile ground for creating a large mining center.

The popular president had already announced in November his grand plans to turn his country into a global cryptocurrency laboratory. In a huge staging later that month he announced the creation of a Bitcoin City, at a cost of billions of dollars. In front of hundreds of followers, with a scenario very similar to those set up by big technology when they announce their new launches, Bukele was enthusiastic about the project and promised that it would bring economic development to his country. From his Government, it has been affirmed that this initiative aims to turn El Salvador into the Singapore of Latin America. And only the misfortune of others was missing for the dream to start to get back on track.

This story begins in Almaty, the most important city in Kazakhstan. Violent riots broke out in the country’s great industrial and commercial center at the beginning of January due to the increase in the price of liquefied gas and energy at a time when the Central Asian country suffers from very low winter temperatures. Citizen discontent increased, set on fire by the corruption of economic and political elites and great social inequalities. Cornered by the demonstrations, Tokayev appealed to Russia for help, which sent military personnel to the country, and launched a brutal crackdown that has left at least 164 dead, 1,000 injured and nearly 10,000 detained. But what do the Almaty protests have to do with bitcoin? The answer lies in the energy use required by so-called mining farms. These are huge and powerful computers that work non-stop, which requires a lot of energy. The low prices of this resource attracted investors and the Kazakh government welcomed them, but as energy demand soared, the population began to suffer blackouts, several plants suffered overloads and the price of energy soared. Then came the Internet shutdown and the currency’s value plummeted, which last week fell almost 8%, from $ 42,951 to $ 37,000.

The downturn made investors nervous, who believed that Kazakhstan was their promised land for being a country stabilized by force of authoritarianism, with enormous energy resources, obscene corruption and little regulation for this type of business. And this is where this story jumps into the tropics. At the beginning of last June, the Salvadoran Legislative Assembly adopted a law that makes bitcoin a currency for legal use. An event that President Bukele celebrated with enthusiasm. “In every restaurant, hotel, bank, personal transaction, if you want to sell a car, everything can be paid for with bitcoins or dollars. Bitcoin will be treated as a national currency, everyone will have to accept it ”, he predicted. Then, his plans began to grow and Bukele launched his idea of ​​turning the Central American country into a large mining center for virtual currency. For this, he promised to offer “very cheap, 100% clean, 100% renewable energy, with zero emissions, from our volcanoes.” On June 10, Bukele went public on Twitter a geothermal project which will serve as the mining site.

On January 5, the digital newspaper El Faro posted an interview with one of the first entrepreneurs interested in giving wings to the dreams of the Salvadoran president. This is Paolo Ardoino, from Bitfinex Securities, a cryptocurrency company that works in Kazakhstan and that has partnered with the Bukele Executive to issue 1,000 million dollars in bonds. Half of that money will be used to build the so-called Bitcoin City and the rest for the purchase of bitcoins. This is how the Salvadoran newspaper explains it: “The bitcoin bonds are a debt that the Government is going to subscribe for 10 years, with an interest rate of 6.5%. In total, over 10 years, the Government must pay $ 1.65 billion to cryptocurrency investors for this $ 1 billion loan. To make this idea a reality, the Government looked for allies that would allow it to sell these bonds – known as tokenized securities – to cryptocurrency investors and Ardoino’s company was chosen. ” The businessman said at the time that his was the only cryptocurrency platform in the world licensed to trade and issue tokenized securities.

President Bukele does not hide his enormous enthusiasm and every day he posts comments on his project on Twitter. He even argues with his detractors, as happened on January 7, when economist Steve Hanke of Johns Hopkins University questioned plans to create enough energy to guarantee a cryptocurrency mining zone in El Salvador. “How much energy can be extracted from the inactive Conchagua volcano? Where is the feasibility study? El Salvador already has a huge energy deficit and imports 22% of its electricity use. Without a feasibility study, no one knows how Bitcoin City will affect this deficit, ”argued Hanke. Bukele snapped at him, with emoticons and in a mocking tone: “This guy! Of course it’s a dormant volcano, you idiot! Most of the geothermal energy is extracted from wells near INACTIVE VOLCANOES! Why would you build a city under an ACTIVE VOLCANO? ”. And, as expected, the reaction generated tens of thousands of retweets that, it is certain, feed the president’s dreams of turning his country into Latin American Singapore.

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