Blockstream CSO: $500M Committed to El Salvador Bitcoin Bond

Investors have committed a half-billion dollars to El Salvador’s forthcoming bitcoin bond, according to Blockstream Chief Strategy Officer Samson Mow.

Mow, who developed the novel bond, told industry news site BeInCrypto that “the bond had received more than $500 million in verbal commitments at the time he stopped counting a few weeks back.”

The 10-year, $1 billion bond issue comes with a 6.5% coupon — about half of the 13% that El Salvador’s current bonds fetch — as well as half of the profit El Salvador makes on its Bitcoin investment after it sells the first $500 million worth of Bitcoin when they come due.

The bond is being issued as a tokenized security on Blockstream’s Liquid network and, given the terms, amounts to a bet on bitcoin as well as the El Salvadoran government.

Half of the $1 billion raised will be used to buy bitcoins, with the rest funding the geothermal-powered Bitcoin City that President Nayib Bukele plans to build in the slopes of the Conchagua volcano, giving the bonds their nickname, Volcano Bonds.

Expected to launch by March 20, the bond issue comes after the controversy over Bukele’s decision to make bitcoin legal tender. The IMF is thought to be refusing a $1.3 billion loan over the issue, and both Moody’s and Fitch Ratings have slashed the county’s bond rating as a result.

See also: Weeks Before Bitcoin Bond Launch, Fitch Slashes El Salvador’s Credit Rating

On Wednesday (Feb. 16), a trio of U.S. senators including the chairman and ranking minority member of the Senate Foreign Relations Committee — Sen. Bob Menendez, D-N.J., and Sen. Jim Risch, R-Idaho, respectively — introduced the Accountability for Cryptocurrency in El Salvador (ACES) Act.

If passed, the act would instruct the U.S. State Department to “report on El Salvador’s adoption of Bitcoin, a cryptocurrency, as legal tender and a plan to mitigate potential risks to the U.S. financial system,” they said in a release. “El Salvador recognizing Bitcoin as official currency opens the door for money laundering cartels and undermines U.S. interests.”

Who’s Buying It?

Meanwhile, the 1,801 bitcoins El Salvador purchased have lost about 11% of their value, La Prensa Grafica reported on Feb. 14, estimating based on the BTC purchase dates that their value had dropped from $85.5 million to $76.1 million.

The manner in which the bitcoins are purchased remains a topic of discussion, with Bloomberg tweeting in January that “Bukele is probably the only head of state in the world who uses public funds to trade Bitcoin with his phone.”

El Salvador’s President Nayib Bukele is probably the only head of state in the world who uses public funds to trade Bitcoin with his phone. So far, it appears he’s lost money https://t.co/ofv8r2VEyh

— Bloomberg (@business) January 12, 2022

Bukele’s reply to that tweet, the Washington Post noted, was, “Naked.”

Naked. https://t.co/9iwU6MoBgG

— Nayib Bukele (@nayibbukele) January 12, 2022

That in turn led local news source ElSalvador.com to report last week that the “Government buys Bitcoins through intermediaries, not from the cell phone,” while complaining that the “expenses related to the implementation of Bitcoin as legal tender in the country continue to be shrouded in opacity.”

While Bukele’s comments were not taken too seriously, Finance Minister Alejandro Zelaya has made contradictory statements about the actual method, ElSalvador.com said, pointing to statement that said a team of “financial correspondents” from the country bought them in the U.S., while another time he said they were purchased through Chivo, S.A., the maker of the dismally unpopular digital wallet the government created for bitcoin transactions.

In another article, ElSalvador.com questioned the role of two American companies apparently working for Chivo to fix the digital wallet.

Alongside multiple reports of hacks and identity thefts since the Chivo Wallet’s rollout, the government on Feb. 12 warned of scam websites claiming to be official government portals seeking phishing information from walletholders, according to Diario El Salvador.