The soap opera about the Bitcoin bonds that El Salvador should issue to finance the construction of Bitcoin City continues.
El Salvador: the failure to launch Bitcoin bonds.
The announcement of the plan to launch these bonds occurred in November 2021, at the height of the bubble.
In theory, they were supposed to be put on the market in March of that year, but the launch eventually skipped, despite it being stated that there were $500 million in applications.
In reality, El Salvador’s goal was to raise $1 billion, to be allocated partly to the implementation of Bitcoin City, and partly instead to the mere purchase of BTC.
Raising dollars in March 2022 and investing them in BTC would not have been a good idea, given what happened next, so it is possible that they decided to postpone the bond launch to wait for better times to buy Bitcoin.
Those times may be here now, so it is not surprising that it is precisely in February 2023 that they seem to want to finally launch them.
El Salvador’s public debt and Bitcoin bond issuance.
Moreover, there was a potentially big problem, related precisely to the country’s public debt, which was only resolved in late January.
Well, we just paid in full, 800 million dollars plus interest.
But of course, almost nobody is covering the story.
I just found one, yes ONE, in spanish, from Colombia https://t.co/PcRES3poE1
They lie and lie and lie, and when their lies are exposed, they go on silence mode.
— Nayib Bukele (@nayibbukele) January 24, 2023
The country has a public debt that while not excessively high in relation to GDP (83 percent) is still by no means easy to sustain.
Amid the 2020 crisis, due to the pandemic, it skyrocketed in a single year from 73% to 92% of GDP, partly due to the reduction in GDP itself.
It must not have been easy to cope with such a rapid and major surge in the debt-to-GDP ratio, but it already dropped to 84 percent the following year.
So it has not yet returned to pre-pandemic levels, but it has already come down quite a bit, partly because of the rebound in GDP in 2021.
Given that bonds are also for all intents and purposes government debt, and given that several international financial institutions, such as the International Monetary Fund (IMF), have expressed a negative opinion on the country’s financial strategies, the government may have had to slow down a bit so that it could first give a clear signal of the sustainability of its debt.
For it should not be forgotten that El Salvador’s creditors include the IMF, which therefore has a say in the matter.
Now that the situation seems to have softened, the chances that it can finally issue Bitcoin bonds, also known as Volcano bonds, seem to be greater.
Launching in 2023?
A few days ago Bloomberg published an article speculating that the launch of El Salvador’s Bitcoin bonds could take place later this year.
Specifically, Bloomberg writes that the crypto exchange Bitfinex expects the bond token to be launched later this year.
In fact, the bonds are expected to be launched in a tokenized format, with the tokens created by the specialized company Blockstream. The bond tokens should be listed on Bitfinex so that they can be purchased by investors.
Digital securities law will enable El Salvador to be the financial center of central and south America.