El Salvador Bets On Bitcoin Whales Investing In Its Volcano Bond

Bitcoin Bond Could See Demand from Crypto Whales

According to the Financial Times, Paolo Ardoino, the Chief Technology Officer of cryptocurrency derivatives exchange Bitfinex, revealed that users of the exchange have indicated “half a billion dollars” of interest in the bond.

Back in November 2021, the El Salvador government partnered with Blockstream and Bitfinex’s parent company iFinex for its volcano bond issuance.

While the Bitcoin bond could be issued via Blockstream’s Liquid Network, iFinex will develop a “digital assets and securities regulatory framework” for El Salvador and will be granted its first regulatory license under the framework by the government.

The Bitcoin bond, which has a maturity of 10 years after the initial issuance, offers an interest rate of 6.5% annually. Half the proceeds from the $1 billion volcano bonds will go into investing in BTC, while the other half will be used to construct a “Bitcoin City.”

Although Paolo clarified that Bitfinex will not be involved in marketing the volcano bond, he also said, “Some of our users have proactively reached out to us to express their interest. They are definitely interested in participating in this but they are waiting for the details to be published.”

El Salvador’s government hinted that it may also allow retail investors to access the bond. However, since the initial announcement of the Bitcoin bond, details remain in short supply. Paolo said more details regarding the bond will be provided as soon as El Salvador enacts its securities legislation.

Meanwhile, anonymous sources state that major crypto entities could invest in the project, even though traditional investors seem uninterested.

El Salvador Postpones Launch of Bitcoin-Based Bond

The proposed launch date of the Bitcoin bond was postponed earlier in March 2022, with Alejandro Zelaya, El Salvador’s Finance Minister, saying that the government is waiting for favorable financial conditions. Zelaya also revealed that the Bitcoin bond will be issued through LaGeo, a state-owned geothermal company.

In a statement, Zelaya said:

“I think this is not the time. There are some moves on the planet. In May and June sometimes you can, but the market variables get different. After September, it is difficult to raise, unless you are previously funded, as in the case of Bitcoin Bond.”

President Bukele, on the other hand, pinned the delay of the Bitcoin bond launch on pension-related issues.

Since El Salvador officially implemented its Bitcoin Law in September 2021, global financial bodies have been wary about the country’s BTC adoption policies. The International Monetary Fund (IMF) has been particularly opposed to El Salvador’s move.

Analysts at the UK-based bank Barclays also expressed skepticism about El Salvador’s Bitcoin adoption, saying:

“The impact of bitcoin in El Salvador so far, in our view, has been to increase macroeconomic potential risks rather than introduce any material change in how economic transactions are conducted.”

El Salvador continues to push the boundaries of cryptocurrency adoption with various endeavors. Time will tell whether this gambit proves successful for the Central American country.

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Curious about this topic? Read more about the recent delay of El Salvador’s volcano bonds launch.

El Salvador isn’t alone in facing challenges from banking institutions when it comes to crypto adoption; read how an official from India’s Central Bank recently likened crypto to a ponzi scheme.

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