Resounding Bonds – On September 7, 2021, El Salvador successfully made Bitcoin (BTC) its national currency. Since then, the king of cryptocurrencies has been steadily growing in President Nayib Bukele’s nation. The latter had announced the use of Bitcoin as collateral for the issuance of sovereign debt. The first of these bonds will likely be available by mid-March 2022.
Volcanic bonds thanks to Bitcoin
In November 2021, Salvadoran President Nayib Bukele caused another stir by announcing a futuristic city project – Bitcoin City – on the one hand, but more importantly, that the financing of the latter would be done in part through the issuance of “Volcano bonds”. In all, this creation of sovereign debt would involve 1 billion dollars of bonds based on Bitcoin.
According to a publication of the local media Diario El Salvador, the Central American country would now be ready to issue its Volcano bonds. It was the Minister of Finance, Alejandro Zelaya, who announced that the preparation phase of this bond issue through Bitcoin would end between March 15 and 20 of this year 2022.
“The advantage of this Bitcoin bond is that it accepts payments in cryptocurrency and bitcoins. This gives greater access to the capital market. By bringing all these financial flows and receiving this kind of [digital] money, it makes it more likely to be sold and subscribed to, that is, a larger supply, because it democratizes access [to sovereign debt].”Alejandro Zelaya, Minister of Finance of El Salvador
IMF pushed to the brink of a nervous breakdown
These crypto-bonds are being aided by Blockstream, which is helping the authorities in El Salvador with the issuance of Volcano Bonds on the Liquid Network. These bonds will also be listed on the stock exchange, in accordance with the regulations, and accessible from 100 dollars of investment.
“(…) it is a normal bond, similar to any other, but it will have the characteristic of innovating in terms of payment. (…) It will comply with all financial market regulations. The difference is that it will be done through the Liquid Network, so there will be opportunities for anyone willing to invest [a minimum of] $100 in these bonds.”Alejandro Zelaya, Minister of Finance of El Salvador
By becoming the first country to issue debt through a cryptocurrency, El Salvador will further enrage the International Monetary Fund (IMF). It must be said that seeing Bitcoin become a legal tender had already angered the supranational body (immediately).
The IMF had blackmailed El Salvador, offering the small country a $1 billion loan if it backed out of Bitcoin. Now it’s easy to imagine the reaction of the IMF when it discovers that Nayib Bukele’s nation could potentially do without the services of the IMF to obtain this sum, thanks to Bitcoin!
Without even mentioning a possible “snowball effect”, we can better understand why – by this sudden fear of competition – the Monetary Fund is among the organizations to push the most for an international cooperation of monitoring and strict supervision of crypto-assets. See you next March, to see if the small Salvadorian David will bring the sprawling IMF Goliath to its knees with his Bitcoin slingshot.