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Early on, Bukele championed the adoption of bitcoin. He argued that it will help millions of Salvadorans living abroad send remittances back home. He has also said it will bring financial inclusion, investment, tourism, and development. Thus, El Salvador raised green flag to accept BTC for all transactions. Those who like to spend in BTC can spend here.
Thus, El Salvador became the first country to use Bitcoin as a legal tender. This eventually led to large scale protests in the country as people feared that cryptocurrency will bring instability and inflation to the impoverished Latin American Country.
Overall, El Salvador’s treasury holds 1,120 Bitcoin, according to official data, worth nearly $66 million.
Officially, the move to formally adopt bitcoin is a strategic approach for Salvadorans to gain access to more payment methods. Being a nation where more than three-quarters of the population are unbanked, this is considered to be a very crucial turning point for many people.
Apart from the Bitcoin bonds, the government of El Salvador has stated that Bitcoin bonds will fund the creation of the proposed Bitcoin City.
What are Bitcoin Bonds? Bitcoin Bonds also known as cryptocurrency bonds. The $1 billion bond issuance in El Salvador, where significant proceeds will be allocated to purchasing Bitcoin. The Bitcoin Bond is going to pay a coupon interest rate of 6.5% the sooner the bond is issued and this seems to be appealing considering the currency interest rate levels. However, while this interest rate appears to be interesting when given a closer look, the rising inflation rate across the globe will probably eat in to the coupon payments.
When debts get issued collateralized to crypto-assets this is a very important factor to consider. It is important to work out the math to understand if it is possible to have the interest rate payment to be able to be adjusted considering the business environment.
Thus, before the bond Issuance, several factors are to be considered. Considering the currency interest and inflation environment it is very important to place a very close attention to the interest rates provided on the instrument.
How this bond will be collateralized is a question that still remains to be answered? How will this Bitcoin bond be supported? How will it be collateralized? With El Salvador, the Bitcoin bond about 50% of the proceeds will be used to purchase additional Bitcoin. The remaining 50% is set to finance the much-discussed Bitcoin City – thus fixed assets would be constructed using the proceeds.
However, Nouriel Roubini shared: “Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin. That President is a clown with no clue about money or currency issues!”
Community Response: The jury is still out. Some of these countries have “nothing to lose” so why not try. Has to be frustrating being at the mercy of currencies being printed into oblivion while they struggle.
Nothing to lose for El Salvador with BTC? How come? Reportedly, El Salvador is the fifth-poorest country in North America with a per capita GDP of $4,131. El Salvador has a small elite population, which became wealthy through the country’s coffee and sugar production. On the other hand, nearly 40% of the population falls below the poverty line. That’s our taxpayers’ money, money that should go towards education and Healthcare system, instead of building a fantasy word for a president who just wants to be perceived as a “cool millennial”. El Salvador didn’t buy anywhere near $30 pal. Their average price is probably closer to 50,000 dollars.
What do you think is going to happen here if the price does not increase? Bukele believed that the value of Bitcoin would continue to rise robustly. When the adoption rate is at an all-time high and faith in the current system that has the world economy on the brink of collapse is wavering at best.
Do you think Bitcoin just stops here? No, it keeps going, every day, relentlessly. Sometimes up and sometimes down.
However, the more the value of BTC goes down, the better for El Salvador as they can buy more as they are in the very early stages of adoption as their businesses accept BTC. If the price goes high, they benefit from their reserves. Either way El Salvador is going to benefit.
