El Salvador Plans $1B in Tokenized Bitcoin Bonds and Tax-Free ‘Bitcoin City’

Discussion in 'Crypto Assets' started by johnarb, Nov 21, 2021.

  1. johnarb


    prolly nothing...


    El Salvador Plans $1B in Tokenized Bitcoin Bonds and Tax-Free ‘Bitcoin City’
    Michael D McDonald

    November 20, 2021, 8:56 PM PST Updated on November 20, 2021, 9:21 PM PST

    • President Nayib Bukele plans to build “Bitcoin City”

    • Bukele says Bitcoin City will have no income or property taxes
    Nayib Bukele Photographer: Michael Nagle/Bloomberg
    El Salvador intends to issue the world’s first sovereign Bitcoin bonds and build Bitcoin City, which will be free of income, property and capital gains taxes, President Nayib Bukele announced in the beach town of Mizata to a crowd of cheering Bitcoin enthusiasts.

    El Salvador plans to issue $1 billion in tokenized U.S.-dollar denominated 10-year bonds to pay 6.5% via the Liquid Network, according to Samson Mow, chief strategy officer of Blockstream. Half of the funds of the so-called “volcano bond” will be converted to Bitcoin and the other half will be used for infrastructure and Bitcoin mining powered by geothermal energy, Mow said, while sharing the stage with Bukele.

    After a five-year lockup period, the government will begin to sell its Bitcoins and pay an additional dividend to investors, Mow said. He told Bloomberg News on Thursday about his proposal.

    Blockstream models show at the end of the 10th year of the bond, the annual percentage yield will be 146% due to Bitcoin’s projected appreciation, Mow said, forecasting Bitcoin will hit the $1 million mark within five years.

    Mow said the lockup period on the bonds is designed to take $500 million in Bitcoin out of the market for five years, adding to the tokens’ scarcity and value.

    buying the dip”. As of the end of October, the country owned at least 1,100 of the tokens.

    The plans will make El Salvador “the financial center of the world” and “the Singapore of Latin America,” Mow said, adding he expects other countries to follow suit. “The first countries that do this will have a massive advantage. This is the beginning of nation state Bitcoin FOMO,” Mow said, referring to the term “fear of missing out”.

    Investors will also be awarded permanent residence and be fast-tracked to citizenship, Mow said while standing next to Bukele.

    Bitcoin City will be built near the Conchagua volcano which will provide energy for mining, Bukele said, adding that Bitcoin bond issuance will begin in 2022. The only tax in Bitcoin City will be a 10% value-added tax to fund city construction and services, he said.

    In September, El Salvador became the first country to accept Bitcoin as legal tender, a move met with both enthusiasm and protests in the months since.

    (Updates with additional context and current Bitcoin price)
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  2. Nobert


    El Salvador. Token. Bonds.
  3. Oh my god this is going to end so badly.
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  4. johnarb


    I'm no bond expert, but I think this will be oversubscribed

    • $500M will be used to buy bitcoins and locked up - if bitcoin doubles within the time period, the bonds have no risk of default?
    • $500M will be used for infrastructure mining - they have free clean electricity from the volcano which they are already using for bitcoin mining and this will be an expansion of that. Bonds that have sustainable income stream, how wild is that

    Of course there are much better bonds out there for you and Nobert. I was watching a youtube video that there is no Argentina 30 yr bond that has ever matured since Argentina has defaulted 4 times. That would be perfect for your life savings since the probability of Argentina defaulting for a 5th time must be impossible :D

    Or why not invest in Japanese or German bonds with the current inflation rate, that will be perfect for you guys
  5. The idea sounds fine to me, but selling an appreciation of 146% per year reminds of dot com and housing goes up forever. Could it be a paradigm shift where we go back to a gold-like standard? Maybe. Those are usually deflationary and kill economies. Let's see.
  6. johnarb


    Like I said I'm no bond expert, but bond holders may get the 146% yield as part of a special dividend after 5 years, but not guaranteed

    It's probably a marketing ploy to show the safety of the bonds when holding $500M in bitcoins which have a CAGR of over 200% in the past 10 years

    Dotcom? People like to say that about bitcoin because bitcoin has the best performance of any asset in the history of the world

    You know on another thread you mentioned you bought bitcoins when it was in the pennies but you sold for dollars

    You could have been a billionaire but you said you don't have regrets and you're trying to look for the next type of investment. Coulda, woulda, shouda been a billionaire

    If I may make a comment, you should be trying to understand why you broke the bottle after putting the lightning you caught inside of it so you won't do it again
  7. Expected value is more important. As you said, it is the best performing asset (so far) of any in the history of the world. That's not a statistic to build anything on.

    I did not (then) believe in Bitcoin and I do not (now) believe in Bitcoin which is why I sold it. Should I have held it as a lotto? For sure.

    Edit: I do believe in crypto though. I think after the dot bomb equivalent in crypto, we'll see the AMZN and MSFT emerge.
  8. VicBee


    Housing does go up forever and anyone rehashing the 2008-09 blip can't see the forest for the trees.
    johnarb likes this.
  9. zdreg


    All housing is local but you are right in general.
    johnarb likes this.
  10. SunTrader


    So does inflation. Real not phony gubmint inflation.
    #10     Nov 22, 2021
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