Better market conditions needed before El Salvador issues bitcoin bond -strategist

By Diego Oré MEXICO CITY, April 27 (Reuters) - El Salvador's government should consider waiting for better market conditions to issue its much-publicized $1 billion bitcoin-backed bond, said Samson Mow, the strategist behind President Nayib Bukele's project. Two weeks ago, the Central American country rolled out legal framework needed to issue the bond, causing some to anticipate its launch in coming months despite no official announcement. The issue has been in limbo since its announcement in March 2022, just as the war between Russia and Ukraine led to sharp volatility in financial markets and in cryptocurrency, which lost more than half its value until reaching less than $15,500 in late 2022.

Recently bitcoin has recovered and is now close to $30,000 per unit. "The market is down for every sector, not just the bitcoin and cryptocurrency sectors, but stocks, bonds, banks. They're all having a difficult time right now, so maybe it would be good for them to wait (to issue the bond)," Mow told Reuters in an interview Wednesday. "But also issuing a bitcoin bond now is beneficial because you will accumulate a large warchest of bitcoin at relatively low prices," added the CEO of JAN3, a bitcoin technology company focused on accelerating adoption of the cryptoactive. Neither the Salvadoran government nor its treasury ministry responded to a request for comment.

Mow will work with El Salvador to build "Bitcoin City," a development on the Pacific coast that would provide tax breaks for investors and use geothermal energy from nearby volcanoes to mine cryptocurrency.

But since its glitzy announcement more than a year ago, the government has little progress to show.

Despite fanfare around El Salvador's announcement in September 2021 it would become the first country to adopt bitcoin as legal tender alongside the U.S. dollar. Research shows its use in the country is "almost nil." Mow, former strategy head for blockchain technology provider Blockstream, believes the change in market conditions could force the 6.5% coupon initially forecast for the bonds to be increased to spur investment attraction, taking into account other countries' rate hikes.

Bukele's government said half of the amount raised by the bond would fund bitcoin purchases and the other half would fund energy infrastructure, such as geothermal plants to mine cryptocurrency. Mow, 43, noted officials from Ecuador and Peru also have shown interest in issuing bitcoin bonds.

Neither the economy nor finance ministries of either country, nor their central banks responded to Reuters for requests for information. (Reporting by Diego Ore; Additional reporting by Nelson Renteria in San Salvador, Alexandra Valencia in Quito and Marco Aquino in Lima; Writing by Sarah Kinosian)

Reuters

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Better market conditions needed before El Salvador issues bitcoin bond -strategist

By Reuters

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