Tether’s move to El Salvador is a win for President Nayib Bukele

“Welcome home,” crowed President Nayib Bukele on X, a social network. On January 13th Tether, the world’s leading stablecoin firm, announced that it had chosen El Salvador as the location of its first physical headquarters. (Stablecoins are cryptocurrencies whose value is supposed to track that of another asset, such as the dollar or gold.) The move is a triumph for Mr Bukele, who has been trying to turn the Central American country of 6.3m people into a crypto oasis.

In 2021 El Salvador became the first country to make bitcoin legal tender. The government started buying up the digital asset. Many Salvadoreans were not impressed: cryptocurrencies are a volatile store of value for a country where GDP per person is just under $5,400. The imf didn’t like it either. But regardless of who likes it and who does not, El Salvador’s bitcoin portfolio is currently worth some $585m. Mr Bukele has doubled his money. Nonetheless, a deal between the imf and El Salvador’s government announced in December saw Mr Bukele agree to curb his crypto embrace. Bitcoin will no longer be accepted for tax payments and businesses are no longer required to accept it as legal tender.

Bagging Tether is a real victory. Its market value is three and a half times El Salvador’s GDP. If the firm pays tax and creates jobs, it will be a boon. Despite Mr Bukele’s crackdown on crime, which has made El Salvador relatively more attractive to firms willing to overlook his authoritarian methods, economic growth remains lacklustre. The imf reckons GDP will grow by 3% this year, more slowly than neighbouring countries. If Donald Trump does deport some of the millions of people who entered the United States illegally, it will hurt. Remittances are worth a quarter of Salvadorean GDP.

There are risks, too. Basing a valuable firm in a small, poor country may give its bosses excessive influence. James Bosworth, who writes the Latin America Risk Report newsletter, worries that Mr Bukele’s relationship with Tether may become too cosy and that stablecoins may be put to uses that are less than transparent. ■

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