Bitcoin Bond: El Salvador, land of milk and honey?

The Bitcoin Bond divides opinions: Rating agencies are punishing the announcement with a downgrade, which is celebrated by the community.

Most of the BTC-ECHO readers will have noticed: Our editor David Scheider was in El Salvador with social media officer Stefan Lanser. While drafting a beer, the two got their first taste of how the number 1 crypto currency will be used in the future Bitcoin City (you can see what that looks like in the tweet below). Of course, the expansion of a Bitcoin City also has to be financed. That is why President Bukele worked with Blockstream to develop the so-called Bitcoin Bonds, which are to be issued from 2022.


The idea behind these bonds is for the Salvadoran government to issue such a tokenized bond. This is to be issued in the amount of one billion US dollars. Half of this, i.e. 500 million US dollars, goes into building the infrastructure of the planned Bitcoin City and mining. The other half is said to be used to buy more Bitcoin in the future. In addition, the concept should generate a return of 6.5 percent for investors. At this point the cat bites its tail: Because the concept only works if it proves that BTC rates will rise in the future.

What does the Bitcoin community say about it?

“El Salvador becomes the center of the financial world”

The Twitter user Excellion is apparently certain: With the new law and the associated Bitcoin bond, El Salvador will become the “new center of the financial world”.


In a somewhat weaker form, user Paolo Ardoino is also convinced. He comes to the conclusion that the Bitcoin Bond is an interesting investment opportunity and at the same time an option to ensure that Bitcoin becomes the world reserve currency. Like others, however, he is not only interested in “profitability”, but especially in the fact that Bitcoin is “the key to a better, more inclusive and freer world”.

Credit risk increased due to Bitcoin investments

Meanwhile, rating agencies seem to see it differently. After it became known in September that some rating agencies like Standard and Poor (S&P) Global to planMoody’s has already made serious about downgrading the country’s current creditworthiness: The agency graded downgraded El Salvador’s long-term foreign currency issuer and senior unsecured ratings from B3 to Caa1. Now it is a “junk grade” rating – or very high credit risk.

If you want to know what else El Salvador is planning with BTC and how David and Stefan assess the chances of Bitcoin City, take a look at our next issue of Cryptokompass, which will be published on December 1st. You can also read the opinion of our editor-in-chief Sven Wagenknecht in the Friday comment linked above or on YouTube look up.



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