El Salvador government plans to launch a national digital currency

According to its creators, the Salvadoran Crypto Initiative (SCI) is a token, the profits of which will go to five government institutions.

El Salvador has already completed a year since the Bitcoin law was approved without discussion in the Legislative Assembly and at the request of President Neb Bokel, and in these 12 months, which include 9 since it came into force, crypto has not been tangible The benefit to Salvadorans is, mainly, to Cryptocurrency market fluctuations.

Even with this difficult digital asset scenario, the government and a Canadian company called Astro Babies, which opened a virtual casino in the country last week, are planning to run a Salvadoran cryptocurrency, which will consist of a token they offer. Earnings for Bukele Management.

This was confirmed by the founders of the aforementioned company, Mark Al-Radan and the Canadian Wes Carnegie, as well as the director of technological and economic affairs at the Ministry of Trade and Investment, Monica Taher, who confirmed that the project will be called the Salvadoran Cryptographic Initiative (SCI). , for its acronym in English).

The SCI token will be a different crypto asset than Bitcoin and was created by Astro Babies, according to Al Radan.

You can read: Despite the collapse of Bitcoin, Bukele asks if he should buy more

“SCI is a reflection token that has already been built, the smart contract has already been implemented, the site has already been completed and we are talking with the ministers involved in the five pillars,” says the tech entrepreneur.

The five pillars mentioned by the Astro Babies founder are five government portfolios to which the purported benefits of the Salvadoran symbol will go which, according to Taher, are: the Ministry of Education, the Ministry of Health, the Ministry of Culture, and the Ministry of Culture. Housing and the National Sports Institute (INDES).

To understand how and why these institutions will receive funds of crypto-origin, it will first be necessary to understand the type of token.

According to various websites specializing in cryptocurrency, the reversal token is a digital asset that generates a profit for its main owners, in this case Astro Babies, in commissions for each of the transactions made, which was confirmed by Al Radan and Wes Carnegie.

In this sense, businessmen assure that 30% of the profits generated from the purchase and sale of these tokens will go to state funds because the company will “donate” these funds to various projects implemented in the field of work. From different ministries and institute.

According to Taher, as of last June 9, talks between the government and Astro Babies had already taken about three weeks since they began, and the only thing that remained pending was for the Ministry of Finance to meet with the company and make an offer. . From the decree establishing the trust fund to which the funds obtained by the SCI committees will go.

Taher explained that “the funds will be classified as non-refundable cooperation (donations) and will be distributed equally among the five initiatives,” explaining that the total amount that the government will receive is unknown because it will depend on the number of people. Get tokens.

How will it work?

Although Mark Al Radan prefers to call the Salvadoran token a “tool”, the truth is that it will function like any other cryptocurrency, with the only difference being that it will not be tied to any specific blockchain, as it is. , for example.

Although Canadian Karniej explains it as a product that works differently from NFT (non-fungible token), which will work completely decentralized and people will be able to buy and sell it among themselves, through the Astro Babies platform.

Astro Babies is a Canada-based company focused on trading Non-Foldable Tokens (NFTs). Photo: HRE

However, Al Radan added that it will be backed by another token called Wrapped Bitcoin, which has a value tied to regular Bitcoin but acts as a bridge between different blockchains of different cryptocurrencies, meaning that a person with an SCI token can Exchange it for bitcoin.

The businessmen pointed out that the alleged profits that go into state coffers will go into bitcoin, not dollars.

On a technical level, how the tokens work will be something more complex for the population than the Bitcoin application itself.

As Computer Scientist and President of the Transparency, Social and Data Monitor Association (Tracoda) Carlos Palomo explained, “People who use tokens may have problems trying to change them and face situations where companies cannot provide enough liquidity to give them money,” as recently happened with tokens like Luna. and UST, two crypto businesses that collapsed and caused losses of more than 99% of the funds to their investors.

For this reason, the expert considered that in the Salvadoran context, a token backed by another token associated with Bitcoin would be somewhat more complicated to implement than Bitcoin “because it is not known how it can be backed,” which raises even more doubts after the collapse of that cryptocurrency in The last days, which caused millions of losses to El Salvador.

The Bukele government has allocated about $375 million to boost Bitcoin, which includes more than $105 million to purchase up to 2,301 Bitcoin.

You can also see: El Salvador Loses About $50 Million in Public Funds Due to Bitcoin Drop

These crypto assets, as of Friday, June 17, have already lost more than 51% of their value, which is equivalent to losses of more than $ 54 million for the country, because Bitcoin has been losing value since the beginning of the year, and it is moving farther and farther from the almost $ 69,000 that it reached to it in November 2021 and from the $100,000 that enthusiasts and Bukele himself had predicted.

In fact, between November last year and Friday, Bitcoin lost 70% of its value, trading at $20,500.

Because of these losses, Salvadoran economist Luis Membrinho noted that “it’s a bad time to create a Salvadoran token, even to think about it, because they haven’t even been able to issue bitcoin bonds due to a lack of appetite in the market.”

In this sense, he added that the token could be designed to work in Chivo Wallet, but noted that Salvadorans have lost confidence in using that platform, due to the persistent failures it has presented since its inception.

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