El Salvador Postpones Planned Bitcoin Bond, City Tied to Digital Coin in Peril

Written by :

Jagajeet Chiba

Published on :

23 March, 2022

War in Ukraine playing role in decision to postpone Bitcoin bond
Proposed Bitcoin City a pipe dream one journalist predicted all along

Pictured above: El Salvador President Nayib Bukele gets Hollywood treatment while proposed Bitcoin City would lack sewage treatment plan

Our friends over at CoinGeek called a proposed Bitcoin City "just a mirage" and the war in Ukraine appears to be proving them right.

On Tuesday it was revealed that El Salvador would be postponing its Bitcoin bond issue.

Ricardo J. Valencia Ph.D, contributor to the Washington Post, explains why the invasion of Ukraine by Russia has played a part in this decision.

Why did El Salvadot call off the launch of Bitcoin (Volcano) bonds? Three reasons: 1) Bitfinex's inability to raise money from Us citizens, 2) the war on Ukraine constrained the ability to find alternatives and 3) the high concentration of the Bitcoin market
— Ricardo J. Valencia Ph.D (@ricardovalp) March 23, 2022

The Central American government had scheduled the launch of the $1 billion bond between 15-20 March, but the war between Russia and Ukraine and volatility of the cryptocurrency prompted authorities to change the date. September is likely the earliest we could see a move.

Now is not the time to issue the bond, said El Salvador Finance Minister Alejandro Zelaya during an interview with a local television channel.

"In May or June the market variants are a little different. At the latest in September. After September, if you go out to the international market, it is difficult (to raise capital)," he added.

El Salvador became the first country in the world to adopt bitcoin as legal tender last year, generating criticism from the International Monetary Fund (IMF), which worries the measure could hurt the country's finances.

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It was tied to a proposed Bitcoin City that CoinGeek contributor Steven Stradbrooke noted lacked a sewage treatment plan. And there were more concerns over El Salvador President Nayib Bukele's plan at the time.

Anyone who was already casting a skeptical eye at Bukele’s urban planning aspirations—the man clearly never got over Zynga scrapping its CityVille game—felt their eyes roll when Bukele said the city’s development would ultimately cost around 300k BTC (roughly US$16.5 billion). But those eyes fairly popped when Bukele announced plans to finance Bitcoin City’s launch with a $1 billion BTC-denominated bond.

Even better, the bonds—which will be made available next year—will be handled by the tawdry tandem of Blockstream and iFinex. Blockstream are part of the developer cabal that robbed Bitcoin of nearly all its functionality, while iFinex is behind both the sketchy cryptocurrency exchange Bitfinex and the unbacked-by-verifiable-reserves Tether stablecoin. Bitfinex will act as the bond’s official ‘book-runner’ while Blockstream’s ‘I Can’t Believe It’s Not Bitcoin (But It Isn’t)’ Liquid Network will facilitate funds moving in and out of the bond.