El Salvador to Raise $1B Via First-Ever Sovereign-Backed Bitcoin Bonds

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El Salvador President Nayib Bukele announced that they would raise $1 billion via the sale of tokenized U.S.-dollar-denominated bonds to build its “Bitcoin City.”

The South American nation, which became the first to make Bitcoin (BTC) a legal tender, noted that their debt would pay 6.5% yields to investors via the Liquid Network, a platform designed by Blockstream to improve the settlement process digital assets.

Meanwhile, Samson Mow, the chief strategy officer at Blockstream, confirmed during Bukele’s announcement that they would convert half of the raised capital to Bitcoin for a so-called “volcano fund” while putting rest to use for infrastructure and Bitcoin mining powered by renewable energy.

A 146% yield in 10-year

The executive further stated that the El Salvador government would begin selling its Bitcoin after a five-year lockup to pay additional dividends to investors. Citing Blockstream models, he claimed that investors would eventually earn 146% annual percentage yields by the time of the bond’s maturity, owing to expectations that the Bitcoin price would hit $1 million within the next five years.

Their strategy would make El Salvador “the financial center of the world and the Singapore of Latin America,” Mow said, adding:

“The first countries that do this will have a massive advantage. This is the beginning of nation-state Bitcoin FOMO,” Mow said, referring to the term “fear of missing out.”

Investors will also gain permanent citizenship in El Salvador, added Mow while standing next to Bukule.

The president added that they would start issuing Bitcoin bonds in 2022 for its Bitcoin City, underscoring that the only tax they would change in the special zone would be a 10% value-added tax (VAT).

Bitcoin Price

The news failed to positively impact Bitcoin spot demand as the flagship cryptocurrency remained under bearish pressure. On Monday, the BTC/USD exchange rate slipped below $57,000 after a 2%-plus decline, a day after dropping almost 10.5%. Traders eyed a retest of $60,000 in the sessions ahead.

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