Nayib Bukele, president of El Salvador’s has announced his ambition to build a Bitcoin City, which will be financed by issuance of Bitcoin Bond worth approx. $1 billion USD. Bonds will be tokenized and issued on the liquid network of Blockstream.
Liquid network is a type of decentralised settlement network, facilitating faster and confidential Bitcoin transactions. The network also facilitates issuance of digital assets. According to Blockstream, it has been deliberating the issue with El Salvador Government for many months and coining the technological brain for architecting the process of bond offering. Tokenisation of bonds will result in the development of new financial system built on top of the bitcoin and will accelerate the adoption of bitcoin. A lot of investors will invest in the tokenised bond and the token will be held by cryptocurrency investors as well as ordinary people.
Proceed of $1 billion USD will be split towards Bitcoin and building of related infrastructure. Half of the amount i.e., $500M will be allocated towards bitcoin (BTC) and other half will be used for building energy as well as mining infrastructure in the region. Bitcoin city will be located closer to the Gulf of Fonseca and is expected to spur the economic growth of El Salvadore by attracting foreign investment. Residents of city will be exempted from taxes. The financial model is built around the premises that value of bitcoin will continue to go up for ever. City will levy a small percentage of VAT on goods and service and that money will be used to service the debt. Further with the rise in price, the bitcoin can be sold in subsequent years to repay the debt.
Earlier in June 2021, President Nayib Bukele, proposed bitcoin as a legal currency and congress approved the draft bill. Later Guidelines for the authorization of the operation of the digital wallet platform for Bitcoin and US dollars were published, providing the regulatory framework for governing the financial intermediary, providing decentralised services to the Nationals. In line with the earlier framework, New Government securities laws will be created in El Salvador for assigning the rights in favour of select plyers for managing and operationalising the bond issuance program. According to Blockstream, Bitfinex securities have been selected for managing the tokenised bond issuance program of the El Salvadore Government. Since the bond tokens will issued on the liquid network of Blockstream, new Liquid tokens will be listed on the El Salvadorian securities exchange.
Decentralised applications are set to revolutionise the World. Financial products are set to become inclusive and will lead to global participation. El Salvador’s bond issuance is all set to further accelerate the reform process. Bitcoin bond will be built on the bitcoin and layer-3 technologies and will be capable of attracting investment from around the World. Bonds will be listed on the El Salvador’s regulated exchange and will be linked to stable currency. It can be traded 24/7 and dividend will be instantly distributed to the token owner as and when it becomes due.
Bureau Galactik Views