How Bitcoin Bonds are changing the bond market

With Bitcoin bonds, El Salvador is launching an entirely new financial product. Can it succeed?

The bond market is in a precarious situation. Fixed-income bonds hardly yield anything anymore; those who invest in safe government bonds such as German Bunds can even expect a negative return.

But with the new asset class that Blockstream

CSO Samson Mow introduced at the closing event of Bitcoin Week in El Salvador, where Yellow Rocket Agency was live on the scene, the investment market could change forever. We’re talking, of course, about Bitcoin Bonds.

As early as next year, the Salvadoran government plans to issue $1 billion worth of government bonds. Half is to go towards financing the Bitcoin City

megaproject. President Nayib Bukele wants to exchange the other 50 percent directly into BTC. And this is exactly where the crux lies. Because one half of the billion-dollar bond is supposed to secure the other half. The BTC with a total value of 500 US dollars thus serve as a kind of collateral for the bond.

Bitcoin dividends boost bond

The bond

‘s linkage structure is also special. Because in addition to a fixed yield of 6.5 percent, investors:inside receive a “boost” after five years, the so-called bitcoin dividend. The liquidity that is supposed to finance the bitcoin dividend comes from the sale of the originally purchased BTC holdings. Assuming digital gold is worth more in five years than it is today, El Salvador can boost its bonds plenty.

Bitcoin City

Feel the BitA

rock star’s

See also  Robinhood makes half its revenue from cryptocurrencies and Dogecoin (DOGE)

performance

.

El Salvador’s president knows how to put on an act.

NAWIDhe

NAWI Beach Club is one of the most stylish venues in the country. It was packed to capacity.

Nayib BukeleThe

president reports on the country’s progress. In the background, the pet clinic that was funded with Bitcoin.

Bitcoin CityBitcoin

City is likely to become a tax haven – but especially for foreign investors

.

Since the bonds are issued on the Liquid Sidechain, the third party risk is also excluded. Interest payments can be automated via smart contract. In the press release from <a href=”https://blog.blockstream.com/el-salvador-t

o-issue-1b-in-tokenized-bonds-on-the-liquid-network/” target=”_blank” rel=”noopener”>Blockstreamstates:

Bitcoin bonds pay special dividends annually, which are created by the staggered liquidation of Bitcoin. Through Blockstream’s Asset Management Platform (AMP), the dividends are simply paid to the bondholders.

Blockstream

With BTC bonds, El Salvador is taking another step towards integrating the world’s largest decentralized monetary network. Bitcoin City may be an ambitious, if not overambitious, project. If this is somehow fundable, it will likely be with BTC Bonds.

Disclaimer

This article previously appeared on November 24, 2021, and has been appropriately reviewed for republication.