By: Staff Writer
March 19, 2024
The President of El Salvador, Nayib Bukele, said on X (formerly known as Twitter) that he stores a “big chunk” of the country’s bitcoin valued at $415m in a cold wallet.
Bukele said: “”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,”
Further calling the cold wallet the “country’s first piggy bank.”
A cold wallet is a crypto wallet that does not connect to the internet or interact with any smart contract. Since cold wallets don’t connect to the internet, they are immune to online threats like malware or spyware. Plus, isolating these accounts from smart contracts also protects them from malicious approvals. In short, they are simply for sending and receiving assets.
Many use the terms ‘cold wallet’ and ‘hardware wallet’ interchangeably, but it’s important to note this is not entirely accurate. Cold wallets can come in a variety of forms, and not all hardware wallets are cold wallets. To understand why, let’s first dive into what a cold wallet is for.
El Salvador became the first country in the world to legally circulate Bitcoin as legal tender on par with the US dollar in September 2021.
“It’s not much, but it’s honest work,” Bukele said about the cold wallet initiative.
Bitcoin surpassed $73,000 this week — before shedding some of its gains — in a rampant rise after US authorities eased mainstream investor access to the cryptocurrency.
Other cryptocurrencies such as ether or ethereum have also registered increases in their price.
With 5,689 Bitcoins—valued at $415,297,00 USD as of this writing—El Salvador has secured its digital wealth and aptly navigated the treacherous waters of international politics. The decision to shift its Bitcoin holdings from Bitgo, an American custodian, to a vault within its sovereign borders wasn’t just a public relations masterstroke; it was a strategic imperative. Given the strained relations between the American government and El Salvador over the Bitcoin Law, the mounting holdings under Bitgo’s custody risked becoming entangled in potential sanctions and regulatory quagmires. This decisive action safeguards El Salvador’s financial autonomy and showcases a shrewd understanding of the intricacies of the American regulatory landscape.
While the disclosure of the reserves has garnered widespread approval, there may have been compelling and strategic reasons behind the nation’s initial reluctance to divulge its complete holdings. Nayib Bukele’s affirmation that only a “big chunk” of the total Bitcoin reserves has been transferred to cold storage underscores a nuanced understanding of the country’s strategic financial management. In the complex realm of nation-states navigating the uncharted waters of a Bitcoin Standard, maintaining a degree of opacity can be a prudent strategy. El Salvador, in its quest to carve a distinct path in the world, has tactically kept some cards close to its chest, waiting for the opportune moment to unveil its Bitcoin wealth in a calculated move. This wise approach reflects a careful balancing act between transparency and strategic advantage in the dynamic landscape of geopolitics.