Today, the president of El Salvador Nayib Bukele announced that the country will be issuing a $1 billion US “Bitcoin Bond”.
El Salvador will buy Bitcoin worth $500 million with the ammount raised from $1 billion bond offering. And, the remaining $500 million will be allocated for building out energy and Bitcoin mining infrastructure in the region.
The digital U.S. dollar-denominated bond will be issued on Liquid Network. Created by the Canada-based blockchain technology company Blockstream Corp, the Liquid Network is a sidechain-based settlement network that enables faster, more confidential Bitcoin transactions and the issuance of digital assets.
In September, El Salvador became the first country in the world to adopt Bitcoin as a legal tender. Even before the Bitcoin Law was announced by El Salvador, Blockstream proposed the issuance of a Bitcoin Bond to El Salvador’s government. As per Blockstream, the officials then expressed interest but hadn’t made a final decision. Blockstream is providing El Salvador technologies like Liquid and satellite infrastructure to make El Salvador a model for the world.
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Blockstream in a related announcement today mentioned that they had been in talks with El Salvador for months designing and modeling the bonds.
According to Blockstream, this bond offering will be attractive to a wide range of investors ranging from cryptocurrency investors, investors seeking yield, HODLers, and ordinary people.
Blockstream believes that this bond has the potential to accelerate hyperbitcoinization and bring about a new financial system built on top of Bitcoin.
El Salvador has also planned to create a government securities law and grant a license to Bitfinex Securities to process the bond issuance. This could pave the way for other Liquid security tokens like the Blockstream Mining Note (BMN) or Exordium (EXO) token to be listed on a regulated El Salvadorian securities exchange.
Samson Mow, Chief Strategy Officer Blockstream, said:
“The future of financial products belongs on Bitcoin, and the Bitcoin Bond is the first step in achieving global inclusivity for finance; much like how Bitcoin created global inclusivity for money.”
Special Dividends
The Bitcoin Bond will have special dividends dispersed on an annual basis generated by the staggered liquidation of bitcoin. Using Blockstream’s Asset Management Platform (AMP), dividends are easily paid out to bond holders.
As the digital bond will be issued on the Liquid Network and Blockstream AMP, El Salvador will be able to accept investments as small as $100.
Looking Forward
“The Bitcoin Bond represents the start of a reformation of capital markets, built on Bitcoin and layer-2 technologies like the Liquid Network,” states Samson. “Now, investment capital can flow in from around the globe without friction. Dividends can be distributed to investors instantly, with built-in cryptography to maintain confidentiality. Bonds can be traded 24/7 with other assets like stablecoins, using protocols that help eliminate the need for trust.”
