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On The Ground In El Salvador With Samson Mow And The Volcano Bitcoin Bond
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El Salvador Prepares Regulatory Framework To Issue Controversial Bitcoin Bonds
Will the plan work? Soon, the Bitcoin Bonds will get the legal foundation they need. In a recent TV interview Alejandro Zelaya, El Salvador’s Finance Minister, said they will send the necessary bills to Congress. Soon. Reportedly, El Salvador will initially issue $1B worth of bonds, which will have a ten-year maturity and carry a 6.5% coupon. The bitcoin that backs them will be locked for five years.
The project, announced by President Bukele at Labitconf 2021, includes plans to build Bitcoin City. More on that later. In a scheme worthy of MicroStrategy, El Salvador will spend half of the money on the construction of Bitcoin City and will buy Bitcoin with the other half. Will the plan work? Well, they have to sell the bonds first. And for those to exist, a regulatory framework is required.
BTC price chart for 01/06/2021 on OkCoin | Source: BTC/USD on TradingView.com
What Did El Salvador’s Finance Minister Say About The Bitcoin Bonds?
In an interview in the local TV show “Frente a Frente,” Zelaya announced the plan’s following steps. Reuters reports:
“El Salvador’s government will send to Congress about twenty bills covering financial markets and investment in securities to provide a legal foundation for issuing bitcoin bonds, Finance Minister Alejandro Zelaya said on Tuesday.”
The Finance Minister didn’t specify exactly when they will introduce the bills. But the will is there. According to El Salvador In English, Zelaya said, “This type of legislation is what we are going to send to the Legislative Assembly to be able to give legal scaffolding and legal certainty to all those who buy the Bitcoin bond.”
“El Salvador podría convertirse en un centro regional donde los demás países puedan emitir deuda, contamos con grandes ventajas como tener una economía dolarizada y ser de punta de lanza en materia cripto”, expresa el Ministro @AlejandroZelay9 en @Frentea_Frente. pic.twitter.com/uHbEzx4A3c
— Ministerio de Hacienda (@HaciendaSV) January 4, 2022
Through the Ministry of Finance’s Twitter, they quote Zelaya being even more daring. “El Salvador could become a regional center where other countries can issue debt, we have great advantages such as having a dollarized economy and pioneers regarding crypto.”
It’s to cover and guarantee the #Bitcoin #VolcanoBonds, but also a full re-engineering of the economy and of the way a nation state does business.
Everybody searching for freedom: this is the place to come 🇸🇻https://t.co/zupEKC3usB
— Nayib Bukele 🇸🇻 (@nayibbukele) January 5, 2022
Adding fuel to the fire, President Bukele said via Twitter, “It’s to cover and guarantee the Bitcoin Volcano Bonds, but also a full re-engineering of the economy and of the way a nation state does business.” Not satisfied with that bomb, he added, “Everybody searching for freedom: this is the place to come.”
What About Bitcoin City? Is That A Go?
The Bitcoin Bonds will finance the construction of Bitcoin City, but, what’s that exactly? When President Bukele announced El Salvador’s plans, NewsBTC timely reported:
“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.”
However, more recently, an investigative report by podcaster Anita Posch cast doubt upon the Bitcoin Bonds and the whole enterprise:
“Apparently, the seemingly advanced plan for Bitcoin City was a collage. “At least some of the Bitcoin City presentation slides were downloaded from the internet and there was no detailed plan behind the announcement.” Not only that, the structure behind the Bitcoin bonds that will finance the whole operation was also improvised. “The way the Bitcoin bonds will work was finally decided only a few minutes before Samson Mow took the stage.”
However, the plan is a go, and Blockstream’s Samson Mow is all-in on it. He recently tweeted the trailer for an upcoming documentary on El Salvador and its Bitcoin City plans. In the tweet, he threw an extremely optimistic, “Bitcoin is going to save the world and it starts here in El Salvador.”
Here’s an amazing trailer from @anna_tutova for a new documentary on everything that’s happening in El Salvador and #BitcoinCity. #Bitcoin is going to save the world and it starts here in El Salvador. 🇸🇻🌋🚀@nayibbukele @WilliamSorianoH @fulloa51 @maxkeiser pic.twitter.com/GcBUV8d9RN
— Samson Mow (@Excellion) December 29, 2021
Will the plan work? Is Bitcoin City a real project or a hastily put together mess? Do the Bitcoin Bonds offer a high enough return? Or are the Bitcoin Bonds too risky? Wouldn’t it be better for an investor just to buy bitcoin with that bonds money? Or are we missing something?
To answer all those questions and more, El Salvador needs a regulatory framework to issue the Bitcoin Bonds. And the roughly twenty bills that guarantee that are on their way to Congress.
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World Bank refuses El Salvador’s request for help on BTC transition
The World Bank has refused El Salvador’s request for help on the country’s transition to adopting Bitcoin as legal tender.
It cited issues with Bitcoin’s environmental impact and transparency as reasons why it will not support El Salvador move to adopt Bitcoin as an officially accepted currency .
“While the government did approach us for assistance on Bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings, ” a World Bank spokesperson said.
The World Bank did note however that it can help El Salvador in other ways, including “currency transparency and regulatory processes.”
Earlier on Wednesday, Salvadoran Finance Minister Alejandro Zelaya said the Central America country had sought technical assistance from Banco Mundial (the World Bank).
“I want to announce that we have requested technical assistance from @BancoMundial, so that like
@BCIE_Org, they can accompany El Salvador in the implementation and regularization of #Bitcoin as legal tender.”
Prominent Bitcoiners weren’t pleased with the World Bank’s refusal, but nor were they particularly surprised.
Bitcoin proponent Anthony Pompliano tweeted in response to the news that the “World Bank hasn’t figured out how to make money off Bitcoin.”
Samson Mow the CSO of blockchain development firm Blockstream, and creator of blockchain game Infinite Fleet, was irritated by the news — and called for The World Bank to be made obsolete.
BREAKING: WORLD BANK CANNOT HELP EL SALVADOR MAKE WORLD BANK OBSOLETE. pic.twitter.com/gLReCZXC4r
— Samson Mow (@Excellion) June 17, 2021
While President Nayib Bukele’s Bitcoin law has sparked a lot of excitement from Bitcoin proponents across the globe, it has also received a lot of criticism. Yesterday, economist Steve Hanke said that El Salvador using Bitcoin as a legal tender may “completely collapse the economy.”
The International Monetary Fund (IMF) is also not keen on El Salvador’s embrace of Bitcoin. Cointelegraph reported on June 11 that it may hamper negotiations with the IMF over a $1B loan to support the country’s economy.
IMF spokesman Gerry Rice noted the adoption of Bitcoin presents a number of financial, legal and macroeconomic concerns that require a “very careful analysis”
30 foreign business leaders coming to visit Bitcoin Beach tomorrow -to see how they can invest in El Salvador. Just this morning had 2 companies tell us they already have lawyers setting up their legal business entities. @nayibbukele has opened the jobs floodgates #Bitcoin
— Bitcoin Beach (@Bitcoinbeach) June 16, 2021
Related: Latin American telecom company accepts crypto payments through BitPay
But some companies are rushing to help. Athena Bitcoin indicated it would move quickly to provide Bitcoin ATMs across El Salvador. On Twitter today, the firm asked Bukele if “1000 ATMs ” were enough, with the President replying in jest “1,000? How about 1,500?”
Yesterday, El Salvador’s Minister of Labor and Social Welfare Rolando Castro denied claims that ministry had begun discussing the option to use Bitcoin for employee salary payments, noting that it was “too premature to talk about wages.”