What Could Go Wrong?
The President of El Salvador is, to say the least, a big fan of cryptocurrency, and has staked out the country as being the first to declare Bitcoin as the country’s legal currency. As we noted last July, Naib Bukele, the country’s president, began a program of purchasing Bitcoin for the country’s treasury back in September of 2021 and to date has invested $109.058m of the country’s capital in his program. Unfortunately the price of Bitcoin has not gone his way and the current value of the country’s Bitcoin holdings has declined by 56.7% to $47.724m, including a purchase he made last November, which, to his credit, is up 13.65%, although even with that purchase, the total portfolio is only up 1.02% from where it was last July.
It seems that both the president and the parliament remain unfazed by the drop in the value of their Bitcoin holdings and just passed an amendment to the country’s Digital Securities Act (62 for 22 against) that will allow the country to issue $1bil in “Volcano Bonds”, the fulfillment of the President’s plan announced last November. The plan entails using half of the bond sale proceeds to by more Bitcoin and the rest to go toward developing the country’s geothermal power infrastructure, which would be intended for low-cost Bitcoin mining. The development project, known as “Bitcoin City”, will be created at the base of Conchagua, a volcano near the Honduran border, that will provide geothermal power for the city’s infrastructure and crypto mining, along with being a tax haven.
While no date has been set for the bond issuance, the parliament has set in motion the legal framework for such a financing, which will take place on Victoria, BC’s Blockstream’s (pvt) Liquid Network in the future, while most immediate would be creating and passing government securities laws and licenses to maintain some level of legal control over the process. Rumors that verbal commitments for over half of the potential issue have not been verified, but the bonds are said to carry a 6.5% coupon and a call on 50% of the profits that the government makes on its Bitcoin investment after it recovers $500m, and while the government expects institutional investors will take most of the offering, they will set aside a portion to be sold to the general public for $100/bond.
It seems that both the president and the parliament remain unfazed by the drop in the value of their Bitcoin holdings and just passed an amendment to the country’s Digital Securities Act (62 for 22 against) that will allow the country to issue $1bil in “Volcano Bonds”, the fulfillment of the President’s plan announced last November. The plan entails using half of the bond sale proceeds to by more Bitcoin and the rest to go toward developing the country’s geothermal power infrastructure, which would be intended for low-cost Bitcoin mining. The development project, known as “Bitcoin City”, will be created at the base of Conchagua, a volcano near the Honduran border, that will provide geothermal power for the city’s infrastructure and crypto mining, along with being a tax haven.
While no date has been set for the bond issuance, the parliament has set in motion the legal framework for such a financing, which will take place on Victoria, BC’s Blockstream’s (pvt) Liquid Network in the future, while most immediate would be creating and passing government securities laws and licenses to maintain some level of legal control over the process. Rumors that verbal commitments for over half of the potential issue have not been verified, but the bonds are said to carry a 6.5% coupon and a call on 50% of the profits that the government makes on its Bitcoin investment after it recovers $500m, and while the government expects institutional investors will take most of the offering, they will set aside a portion to be sold to the general public for $100/bond.
Conchagua Volcano - Source: Wikimedia Commons
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