El Salvador’s finance minister, Alejandro Zelaya, stated on Friday that the Central American country is looking for the ideal time to introduce a bitcoin-backed bond, which might happen between March 15 and 20, depending on the outcome of the Ukraine conflict.
El Salvador Bitcoin Bond To Fund Bitcoin City
President Nayib Bukele plans to issue his country’s first-ever $1 billion bitcoin-backed bond this month, with the proceeds going toward buying more cryptocurrencies and constructing “Bitcoin City,” a planned metropolis that would “mine” the digital coins using geothermal energy from a nearby volcano.
“We believe that between March 15 and 20 is the right timing, we have the tools almost finished. But the international context will tell us … I didn’t expect the war in Ukraine,” Zelaya told a local TV channel.
The bond has been hit by headwinds as bitcoin volatility rises, with Russia’s invasion of Ukraine adding to the worry.
Bitcoin Bond Will Be Dominated
We earlier reported that the Bitcoin-based financial instrument is expected to be worth $1 billion. The bonds will be funded by taxes and will have a 6.5 percent annual return on investment when they expire after a decade.
The financial instrument will be one of the first to be backed by Bitcoin and issued by a sovereign nation. Furthermore, they will assist El Salvador in financing their Bitcoin city project, which is estimated to cost 300,000 BTC.
BTC/USD slides to $38k. Source: TradingView
The cost of constructing Bitcoin City is projected to be over 300,000 BTC. El Salvador will issue the world’s first bitcoin bonds to help fund the project. Part of the value added tax (VAT) collected from residents would be used to support the $1 billion bonds. Bonds will be issued for a period of ten years and will yield a 6.5 percent annual return on investment.
According to Blockstream’s Chief Strategy Officer, Samson Mow, the tokenized bonds would be denominated in US dollars and issued over the Liquid Network. The bonds have been in the works for months, according to Mow, after they were first offered to the president following discussions regarding El Salvador’s plans to accept Bitcoin as a legal tender.
Despite the fact that Mow expects the $1 billion bond to sell out soon owing to whale participation, the bond is entirely democratized to eliminate access hurdles. Mow said in his introduction that the bond would accept deposits as little as $100.
Related Reading | El Salvador’s Bitcoin Journey Kicks Off With A Bummer, BTC Price Crashes
Featured image from Pixabay, chart from TradingView.com