Bukele denies Binance chief is in El Salvador to discuss Bitcoin bond delay
El Salvador will hold off issuing its $1 billion Bitcoin-backed bond until more favorable conditions emerge in both financial and crypto markets, according to Finance Minister Alejandro Zelaya.
As reported by Reuters, the country had hoped to launch the bond this month with the help of both Bitfinex and Tether. But it could now be delayed until September.
The move is apparently down to uncertainty posed by Russia’s invasion of Ukraine alongside Bitcoin’s recent volatility. The world’s top crypto has retraced about 35% since its record $64,000 high last November.
In a local television interview, Zelaya reportedly noted he’d prefer the Bitcoin bond be issued in the first half of the year. “In May or June, the market variants are a little different,” he said (via Reuters).
“At the latest in September. After September, if you go out to the international market, it is difficult [to raise capital].”
- Governments and companies sell bonds to raise money.
- Bond buyers effectively lend their money to the bond issuer in return for IOUs.
- The IOUs promise to repay the loan alongside periodic interest payments.
El Salvadoran President Nayib Bukele initially announced the bond last November. Credit rating agency Moody’s had downgraded El Salvador months prior over the country’s plight to adopt Bitcoin as legal tender.
The International Monetary Fund (IMF) also warned it would become more difficult and expensive for El Salvador to borrow money.
Hence, the exotic bond offering in exchange for crypto, which some analysts have noted might not be such a good deal for buyers (especially if Bitcoin performs well while they mature).
Bukele plans to build a “Bitcoin City” with funds raised from the bond. It’s now known colloquially as the “volcano bond” due to Bukele’s intention to harness El Salvador’s volcanoes to generate geo-thermal energy and mine Bitcoin.
Crypto entrepreneurs are enticed to move to Bitcoin City by charging local residents no income, capital gains, and property taxes.
Bitcoin bond delays follow rocky adoption rates
Despite Salvador’s government pushing hard for locals to adopt Bitcoin, things haven’t quite worked out that way.
The Central American nation started using Bitcoin as legal tender in September 2021. President Nayib Bukele’s administration scrambled to install ATMs and supporting infrastructure by the September 7 deadline.
But a raft of technical snafus has led to slow uptake across the general population. El Salvador later hired Blockstream employee Samson Mow as a consultant to fix some issues.
- A recent survey from the country’s chamber of commerce polled 337 business owners, 71% of whom own micro or small businesses.
- Only 14% of merchants in El Salvador have ever generated revenue in Bitcoin.
- 91.7% said the implementation of Bitcoin in El Salvador has been indifferent for their business.
Still, El Zonte has bucked the trend and readily adopted Bitcoin. It’s a coastal town near the capital, San Salvador.
The area has enjoyed substantial media coverage and heavy subsidies by an innominate Bitcoin whale. This has led the surf town to nearly complete Bitcoin acceptance by merchants.
“Bitcoin Beach” evangelist Jack Mallers described how he saw an opportunity for Bitcoin in El Salvador after visiting the town. At the time, it lacked even a brick-and-mortar bank.
In his announcement of Salvadoran adoption of Bitcoin as legal tender at Miami’s Bitcoin 2021 conference, Mallers described how he spent three months in El Zonte and San Salvador promoting Bitcoin.
At this point, Bitcoin Beach is a success story in the middle of El Salvador’s de minimis merchant adoption of BTC so far.
For what it’s worth, Bukele downplayed the delay on Twitter in response to Reuters’ report, which detailed Zelaya’s reasoning for delaying the Bitcoin bonds.
Video footage had emerged of Binance chief exec Changpeng Zhao arriving in El Salvador on Wednesday.
Read more: [Read this before criticizing El Salvador’s adoption of Bitcoin as legal tender]
El Salvador ambassador to the US, Milena Mayorga, told reporters that Zhao was visiting and would advise the government on Bitcoin adoption, including in relation to its Bitcoin-backed bonds.
“I’m meeting with [Zhao] tomorrow to discuss OTHER issues, not the Volcano Bonds [sic],” tweeted Bukele late Wednesday. “Unless he wants to buy some, of course.”
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