El Salvador Still not Ready to Launch Bitcoin Bond Says Finance Minister

Key Takeaways

  • The government of El Salvador is postponing the issuance of the much-awaited bitcoin bonds due to falling prices.
  • Although no specific date has been set, the bonds are expected to be issued before the end of 2022 to cover external debts and make preparations for the building projects of Bitcoin City.
  • Analysts have questioned El Salvador’s approach of continuing to buy Bitcoin regardless of the current price drop.

El Salvador, the very first country to embrace cryptocurrency, is still not ready to deploy its Bitcoin bond, as per the country’s Finance Minister.

El Salvador’s Finance Minister, Alejandro Zelaya, has announced that the country will postpone the launch of its planned billion-dollar Bitcoin (BTC) bond due to price fluctuation and unforeseen market conditions caused by the ongoing Russian-Ukrainian conflict.

The government has postponed the bond’s launch date for the second time, with the Finance Minister revealing in an interview that “Still… it’s not the time.” Mr. Zelaya did not mention a tentative issuance date this time, unlike in previous interviews.

Zelaya was questioned if the scenario with the $1 billion Bitcoin bond issuance from a “few months ago” had shifted in a Wednesday interview on the local “Frente a Frente” (Face-to-Face) news program.

The $1 billion bond was initially scheduled to go on sale between March 15 and March 20. At the time, the federal government needed to finalise laws establishing a set of regulations on digital property.

El Salvador’s president, Nayib Bukele, first announced the bond plan in November of 2021. Half of the $1 billion expected will be used to build a Bitcoin City near a volcano, with the hope of using the volcano’s geothermal energy to power Bitcoin miners. The remaining half of the funds will be invested in Bitcoin.

Bitcoin City would be developed with the active participation of influential crypto companies such as cryptocurrency exchange Bitfinex and Adam Back’s Blockstream. The exchange would then endorse El Salvador’s Bitcoin City venture by initiating a securities platform to hold the Bitcoin bonds,  Bitfinex CTO Paolo Ardoino explained.

All whilst, economists have expressed concerns about the country’s ability to raise funds to meet its upcoming financial commitments, which include a $800 million bond due in January.

“And right now, the country isn’t guaranteed to get that money,” Ricardo Castaneda, an economist at the Central American Institute for Fiscal Research (ICEFI), told a source.  

As a result, Bukele needs to raise as much money as conceivable through these bonds while staying out of extreme debt.  For the time being, the government expects to issue a total of one billion dollars in Bitcoin bonds.

On May 4, rating agency Moody’s downgraded El Salvador’s credit rating, citing a “lack of a credible financing plan” as the reason for the devaluation. 

Despite the steep drop in bitcoin’s value since reaching $69,000, President Nayid Bukele and his advisers continue to use it. El Salvador now has over 2,301 bitcoins, and Bukele is sticking to his “buying the dip” tactic since september 2021.

El Salvador has no intention of selling the cryptocurrencies it has purchased, according to Zelaya, despite selling “a surplus” of about $4 million in Bitcoin.

In addition, Zelaya stated that El Salvador and the International Monetary Fund (IMF) are currently in negotiations and that an upgrade could be forthcoming in the following weeks. The IMF has recently begun aiding El Salvador in compiling Bitcoin usage statistics.

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Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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