El Salvador intends to launch the world’s first bitcoin bond next month
El Salvador’s finance minister Alejandro Zelaya said on February 8 that the country would issue its first “bitcoin bond” next month.
Zelaya said during an interview with a local television show that the administration intends to have the bond “completely ready” for issue between March 15 and March 20.
“If we really want to create our nation, we must invest in it in this manner,” Zelaya said. Zelaya indicated that the administration remains committed to issuing the first bond for $1 billion, as previously stated during a November 20 event. Zelaya, however, said during the broadcast that he now anticipates the bond to be oversubscribed by at least $500 million.
According to Zelaya, this new sort of bond will be more accessible to the public than regular bonds, since it will demand a minimum purchase of $100 and will not require the use of a stockbroker. The bond will be issued on the Liquid Network sidechain of Blockstream. Zelaya said that the bitcoin bonds “would adhere to all financial market standards,” including know-your-customer (KYC) and due diligence processes.
The bitcoin bond concept was introduced to the public at a spectacular ceremony on November 20 in which El Salvador’s President Nayib Bukele shared the stage alongside Blockstream Chief Strategy Officer Samson Mow. Mow detailed the bond’s terms, while Bukele revealed intentions to establish a new cryptocurrency-friendly town named Bitcoin City.
While crypto fans are delighted about the bonds and will likely purchase them in order to make their imprint on history, some financial professionals have expressed doubts about their suitability as an investment and their ability to attract a significant number of investors.
The International Monetary Fund (IMF), which has been in discussions with El Salvador over a $1.3 billion loan, recently said that many of its directors “expressed worry about the dangers connected with issuing Bitcoin-backed bonds.” Meanwhile, Reuters claimed that the nation had an $800 million bond expiring in January 2023.
El Salvador’s first bitcoin bond, according to that November presentation, would bear a 6.5 per cent yield and maturity in 2032. During the interview, Zelaya also referenced the voucher. The nation intends to utilise half of the issuance to acquire bitcoin, while the remainder would be used for other purposes such as energy infrastructure and mining.
When Bukele and Mow introduced the bonds, Bitfinex Securities was identified as the bookrunner. Its parent company, iFinex Inc., announced on November 19 that it had reached an agreement with the government of El Salvador that “outlines a collaboration on the creation of digital assets and a securities regulatory framework for regulating, issuing, and operating digitised financial instruments in El Salvador.”