El Salvador Delays the Issuance of Bitcoin Bonds

El Salvador will delay the issuance of bitcoin bonds initially scheduled for March 15-20, possibly until September, according to Reuters.

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Due to the recent war between Russia and Ukraine, the cryptocurrency has experienced wild volatility.

El Salvador’s Finance Minister Alejandro Zelaya said Tuesday that authorities had changed the date to wait for favourable conditions for better financial markets.

In November last year, El Salvador President Nayib Bukele disclosed that the bond would be valued at $1 billion with a 6.5% coupon. 

The launch may be delayed until September. Alejandro Zelaya added that:

“In May or June the market variants are a little different. At the latest in September. After September, if you go out to the international market, it is difficult (to raise capital),”

El Salvador’s administration plans to send approximately twenty bills to Congress to cover investment in securities and financial markets to provide a legal framework for the issuance of Bitcoin bonds on January 5.

The bitcoin bond was not issued directly by the government but by the state-owned thermal energy company La Geo, but the state of El Salvador sovereignly guaranteed it.

Image source: Shutterstock


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El Salvador prepares 20 bills to provide legal framework for Bitcoin bonds

El Salvador’s government, led by President Nayib Bukele, has moved ahead with plans to issue Bitcoin bonds by preparing 20 bills designed to provide a legal framework for them.

Head of the Treasury Alejandra Zelaya told El Salvadoran media El Mundo on Jan. 4 that the bills will cover regulations about issuing securities as cryptocurrency to ensure the viability of the Bitcoin bonds that were proposed in Nov. 2021. He said:

“[This is] to provide a legal structure and legal certainty to everyone who buys the Bitcoin bond.”

However he did not propose a timeframe for the legislation to be submitted to lawmakers.

The $1 billion sought by the bond issuance would be used to fund the Bitcoin City initiative which President Bukele has promised will provide “digital and technological education, geothermal energy for the entire city, and efficient and sustainable public transport.”

One of the features of the Bitcoin City is a Bitcoin (BTC) mining operation that harnesses the geothermal power generated by a volcano to power the mining rigs — leading to the bonds being dubbed “Volcano Bonds.” The mining operation mined its first 0.00599179 Bitcoin on Oct. 1 2021.

Funds from the bond issue could also be used to pay down an $800 million Eurobond issue which will mature in Jan. 2023. Zelaya told El Mundo that the country would need to find financiers to help fill their obligation to pay off the Eurobonds which could come from Bitcoin bonds or from “institutional offers from various investment banks,” rather than another Eurobond issue.

“We can simply make payments without creating another Eurobond in the traditional market, and we can find a bond that is denominated in dollars and receives payment in Bitcoin.”

A Eurobond is a debt tool for countries to raise funds in a denomination other than its own currency.

Zelaya also indicated that there is significant interest in the Bitcoin bond from investors as it offers exposure to BTC and a 10-year maturity of 6.5% interest.

Related: President Bukele predicts Bitcoin rally to $100K, further legal adoption and more

The issuance of Bitcoin bonds would not, however, preclude the Central American nation from participating in traditional finance. Zelaya said “We are not going to abandon the traditional market.”

Notable partners with El Salvador in the creation of the Volcano Bonds include blockchain developer Blockstream and iFinex, which is closely related to stablecoin Tether (USDT). The bonds are expected to be issued on Blockstream’s Liquid Network and processed by iFinex.

President Bukele tweeted his 2022 predictions on Jan. 2 that “Bitcoin City will commence construction,” and “Volcano bonds will be oversubscribed.”


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El Salvador Announces World’s First Bitcoin City, Backed By $1B Bitcoin Bonds

El Salvador is currently the only country in which Bitcoin (BTC) is legal tender. This move has witnessed many developments, as well as some pushback. Amid protests, technical glitches, and inevitable market volatility, El Salvador continues to drive BTC adoption.

Related Reading | There Are More People Using Bitcoin Wallets Than Bank Accounts, Says El Salvador President

In its latest Bitcoin adoption move, the Central American country plans to build a city based on the world’s largest cryptocurrency. President Nayib Bukele announced the Bitcoin City initiative at El Salvador’s Bitcoin Week conference on Saturday night. This conference is a celebration of Bitcoin’s mainstream adoption in the country.

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In partnership with crypto firms Blockstream and BitFinex, Bukele plans to issue $1 billion in tokenized USD-denominated 10-year bonds to fund this project.

The Proposed Bitcoin City

Paolo Ardoino, Bitfinex CTO, says the exchange will support the initiative by launching a securities platform to hold the bonds.

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Blockstream Chief Security Officer Samson Mow also clarified the feasibility of sourcing the $1 billion Bitcoin bonds.

“With Bitfinex, they have a lot of whales. I don’t see a problem filling up a $1 billion bond.”

In an announcement by Blockstream, Mow also said that the $1 billion will be split into two parts. $500 million will go towards building energy and Bitcoin mining infrastructure in the region. The other $500 million worth of BTC will be locked up for five years. Mow further stated that after the five-year lock-up period, El Salvador would start selling some of the bitcoin used to fund the bond to give investors an “additional coupon,”

“This is going to make El Salvador the financial center of the world,” he said.

BTCUSD chart on TradingView.com

BTC trading at $58.866K | Source: BTCUSD on TradingView.com

The Salvadoran president additionally said that the bonds will be available in 2022. He plans on locating the proposed Bitcoin City near a volcano. The idea, he said, is to provide energy for both the city and bitcoin mining.

According to Bukele, Bitcoin City will be a full-fledged metropolis with residential and commercial areas. It would also have shopping centers, restaurants, a port, an airport, and railway services. There would be no income, property, capital gains, or payroll taxes. Residents would, however, be subject to just value-added tax (VAT). This tax will go towards paying for the municipality’s bonds, public infrastructure, and city maintenance.

“In #BitcoinCity, we will have digital and technological education. Geothermal energy for the entire city and efficient and sustainable public transport” said Bukele.

El Salvador’s Infrastructure Development Projects

After El Salvador adopted Bitcoin as legal tender, the government started reinvesting unrealized profits into several projects.

Earlier this month, the government announced its plans to use some of the profits from its Bitcoin Trust to build 20 new schools. One of the purposes of these new facilities will be to educate locals about how cryptocurrencies work.

Related Reading | New York Mayor Says Cryptocurrencies Should Be Taught In Schools

In October, President Nayib Bukele had announced plans to use the profits for a new veterinary hospital. However, some criticized this move, arguing that investment in medical facilities for humans was more urgent.

Featured image by Shutterstock, Chart from TradingView.com


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