El Salvador’s Bitcoin Bond is steadily growing as the new investment plan currently has a $1.5B demand. The volcano bonds are expected to run for ten years using an initial investment of $1B. Investors, therefore, receive a 6.5% interest from the $1B project.
Salvador’s Bitcoin Investment
Bond idea began in November 2021 during a cryptocurrency congress event. At the time, President Nayib Bukele stated that he intended to fund the Bitcoin City project through the issuance of bonds.
Bonds represent security investment tools that governments or large entities use to raise money. What’s more, bonds mostly have a fixed interest rate which comes after a certain timeframe.
As such, investors are fully aware of the interests they may receive once the maturity date arrives. The revenue that the government generates caters to several projects that require funding.
El Salvador is leveraging the same idea through the $1B volcano bonds. The proceeds will not only fund Bitcoin City but also provide money to acquire more BTCs. More importantly, the government is issuing these bonds through Liquid Network
, a layer-2 ecosystem that supports the distribution of digital assets. The network hosts a sidechain that offers private transaction operations.
All transacting data is only visible to the sender, receiver, and a third-party user they may opt to select.
Bitcoin City hopes to operate at the Honduran border which is home to the Conchagua volcano. The massive volcano will therefore provide geothermal energy for Bitcoin mining purposes.
MSME Reaction to Bitcoin as a Legal Currency
El Salvador became the first country to legalize BTC as a medium of exchange in September 2021. The move suggests that Salvador residents can transact with a peer-to-peer network that observes security, privacy, and transparency.
Despite the advantages, a report
from the country’s Chamber of Commerce is showing a different outcome.
According to the data, only 3% of micro, small, and medium sized enterprises agree that BTC fueled their sales revenue. Close to 13.9% of MSME’s also claim that they made BTC sales within the course of their operations.
On the other hand, 91% of the MSME participants say that they haven’t seen any change even after adopting Bitcoin
. 86% of these businesses haven’t made any sales with the dominant cryptocurrency. From the survey, micro enterprises represented 71% of the polls while 13% and 16% were medium and large-sized companies. Nonetheless, El Salvador plans to proceed with its Bitcoin Bond project despite the slow response in the business sector.
Adopting Bitcoin as a legal tender came with various external oppositions. In January 2022, the International Monetary Fund
advised Nayib Bukele to scrap Bitcoin as a legal currency. Among the issues that the IMF aired out included the asset’s volatility and the emergence of financial crimes.
Failure to reverse this policy would make it difficult for El Salvador to acquire loans from the IMF. In spite of the warning, the country’s government made it clear that Bitcoin operations will still continue.
The government explained that El Salvador works as an independent country that can implement its own policies. As such, according to the region, international entities have no control over their decisions.
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