El Salvador’s Bitcoin Bond is quickly increasing in popularity, with a $1.5 billion demand for the new investment plan. The volcano bonds are anticipated to last ten years and need a one-billion-dollar initial investment. As a result, investors gain a 6.5% return on the $1 billion investment.
The Bitcoin Bond concept was born in November 2021 during a bitcoin conference event. President Nayib Bukele claimed at the time that he wanted to fund the Bitcoin City project through the sale of bonds.
Bonds are secure investment vehicles used by governments and big corporations to raise funds. Furthermore, bonds often have a fixed interest rate that is paid after a set period of time.
As a result, when the maturity date approaches, investors are well informed of the interest they may get. The cash generated by the government is used to finance a variety of programs.
El Salvador is using the same concept with its $1 billion volcanic bonds. The earnings will not only be used to support Bitcoin City, but will also be used to purchase additional BTCs. More crucially, the government is issuing these bonds via Liquid Network, a layer-2 ecosystem that facilitates the spread of digital assets. The network has a sidechain for private transaction operations.
All transactional data is available exclusively to the sender, receiver, and any third-party users they want.
Bitcoin City intends to operate near the Honduran border, near the Conchagua volcano. As a result, the gigantic volcano will produce geothermal energy for Bitcoin mining.
In September 2021, El Salvador became the first country to legalize Bitcoin as a medium of exchange. The move implies that Salvadorans will be able to transact using a peer-to-peer network that adheres to security, privacy, and transparency.
Despite the benefits, a research from the country’s Chamber of Commerce shows a different result.
According to the study, just 3% of micro, small, and medium-sized businesses believe that Bitcoin has increased their sales income. Approximately 13.9% of MSME’s claim to have made BTC sales as part of their activities.
Adoption of Bitcoin as legal tender was met with a number of external challenges. The International Monetary Fund encouraged Nayib Bukele to abandon Bitcoin as a legal tender in January 2022. Among the difficulties raised by the IMF were the asset’s volatility and the rise of financial crime.
Failure to modify this strategy will make it harder for El Salvador to get IMF funding. Despite the warning, the country’s administration consistently stated that Bitcoin activities will continue.
El Salvador, according to the administration, operates as an autonomous country capable of enacting its own policies. As a result, foreign bodies, according to the region, have no authority over their judgments.
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