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El Salvador’s dollar debt dives on Bitcoin bond plans

El Salvador’s government has announced plans to sell a USD$50 million bond on the Bitcoin market. The bonds will be denominated in bitcoin, and investors can pay for them with ether or US dollars. If these bonds are successful, they could pave the way for more widespread adoption of cryptocurrency markets within El Salvador.

El Salvador’s government has announced plans to raise funds by issuing a Bitcoin bond, in an effort to alleviate the high levels of debt it is struggling with. This move could have repercussions for other small-scale nations that are struggling with similar issues.A new bond issued by the Central Bank of El Salvador in Bitcoin will help to stabilize the country’s currency and reduce its debt burden. The government agency plans to use a portion of around $300m raised from selling the bonds on bitcoin trading platforms, which could potentially add hundreds more points for BTC.

The “el salvador bitcoin bonds” is a country that has been in debt for a long time. El Salvador’s dollar debt has now dropped by about 20%.



El Salvador’s dollar-denominated bonds hit an all-time low this week, as the Central American country’s debt entered “distressed territory.” 

Following weekend rumors that El Salvador will employ Bitcoin (BTC) bonds to support its Bitcoin City program, El Salvador’s USD bonds plummeted to 64.4 cents to the dollar on Monday, Nov. 22. According to Bloomberg statistics, dollar bonds have been continuously falling since April 2021, when they surpassed $1.10.

A dollar-denominated bond is a bond issued by a foreign firm or government outside of the United States that is denominated in USD rather than the local currency.

Following Monday’s loss, the country’s debt became one of the worst performers in global trade, according to Bloomberg. Investors are worried that President Nayib Bukele has blocked the IMF from providing development financing to the country.

“This statement cements the ‘anything-but-the-IMF’ approach,” Nathalie Marshik, Managing Director of investment banking firm Stifel Nicolaus, said, before adding that bonds are sliding “as the market reassesses likely recovery value lower on the uncertainty of policies.”

Once El Salvador’s original investment expenditures for its mining equipment have been repaid, the Bitcoin bond will pay 6.5 percent yearly interest and 50 percent of the country’s Bitcoin earnings. According to Blockstream’s Chief Strategy Officer, Samson Mow, dividends will be paid in USD or Tether (USDT).

The Bitcoin bond, according to Mow, will be an alternate option for institutional investors to obtain exposure to Bitcoin without having to own the cryptocurrency themselves. It will also be a chance for investors to assist El Salvador in accelerating its development. On Nov. 23, Mow, who has been collaborating with the government of El Salvador on the development of the Bitcoin bond, told Bloomberg TV that

“We’re attempting to organize this in such a manner that [the Bitcoin bond] can be presented to boards of directors as a regular bond because it is a regular bond.” It just so happens to be backed by a significant amount of Bitcoin.”

Podcaster and famous Bitcoin enthusiast Anthony Pompliano anticipated that they would be “ridiculously overcrowded” in reaction to Mow’s interview with Bloomberg.

PREDICTION: The bitcoin bond issued by El Salvador will be insanely oversubscribed

November 23, 2021 — Pomp (@APompliano)

For most of 2021, El Salvador has been in negotiations with the International Monetary Fund (IMF) over a potential $1.3 billion loan. President Bukele has opted to support more local efforts, such as school construction, using Bitcoin rather than USD, thus such discussions may fade into oblivion. 

El Salvador plans to create 20 “Bitcoin Schools” using funds from the Bitcoin Trust.

On November 22, the IMF published a final statement on El Salvador’s financing request. Although El Salvador’s economy has recovered swiftly from the epidemic, the country’s budgetary deficits and huge public debt are causing larger gaps in the services it can deliver, according to the report. 

“But dangers resulting from Bitcoin as a legal money, the new payments environment, and trading in Bitcoin should be addressed,” the paper said, adding that initiatives to increase financial inclusion and growth are welcome.

“Bitcoin should not be utilized as legal money because of these hazards.” The staff advises that the Bitcoin law’s scope be narrowed, and that the new payment ecosystem’s regulation and supervision be strengthened.”

The “el salvador president” is a cryptocurrency that was created by the government of El Salvador. The currency has been in circulation since April 2018.

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