The 10-year Bitcoin “volcano bond” has been one of President Nayib Bukele’s primary experiments. Starting this week, retail and institutional investors worldwide will be able to purchase Bitcoin bonds. Nayib Bukele, President of El Salvador, refers to these Bitcoin bonds as a “portal” to assist the country in resolving its financial problems. He remarked that he intends to generate at least $1 billion via the sale of Bitcoin bonds in order to pay off the country’s increasing debt. The $1 billion in revenues from the sale of these bonds would be used to fund the construction of a new “Bitcoin city” powered by the geothermal energy of a volcano near the Honduran border.
However, there is still a lot at stake because not enough institutional players from international markets have expressed interest in it. Several institutional players have stated that they will sit and observe, noting that the purchases are more likely to come from individual investors.
The funds will also be used to purchase Bitcoin (BTC) and add it to the country’s reserves. According to experts, the increased funds will assist the government in restructuring its sovereign debt. However, six months after becoming Bitcoin’s legal tender, the corporation is still struggling to promote its usage. Previously, the government of El Salvador stated that Bitcoin would be a handy method for the country’s massive migrant labour population to transfer money home. According to central bank data, just 2% of remittances in January were sent using Bitcoin digital wallets.
According to a top bank official, Bitcoin was used for less than 0.01 percent of debt payments (BTC). The quantity of Bitcoin transactions is “irrelevant.” According to a Central American University poll conducted in December, 70% of El Salvadorians have little faith in Bitcoin and believe it primarily benefits foreigners.
El Salvador’s former president, Carlos Acevedo, stated that if this plan fails, many doors will be closed for El Salvador. He emphasised that Bukele must provide some public explanation of how he is purchasing Bitcoin and what his economic strategy is for getting the country out of debt. Since Bukele adopted Bitcoin as legal money in September, its sovereign bond has been downgraded to junk status. The IMF has also pushed El Salvador to withdraw its Bitcoin status.