El Salvador Bets on Bitcoin Mania

El Salvador Bets on Bitcoin Mania

Is bitcoin buzz all it takes to stir the animal spirits of hipster investors? Or does a project with the name of the cryptocurrency attached to it also have to make financial and economic sense? El Salvador’s “volcano bond” may one day provide the answer—if it ever comes to market.

Last fall President Nayib Bukele and his team of cryptocurrency experts announced that El Salvador would soon offer a 10-year, $1 billion bitcoin-linked bond. According to the pitch, half the proceeds would be used to build the infrastructure of “Bitcoin City,” powered by low-cost geothermal electricity that could be used to mine bitcoin from a location near the Conchagua volcano. The other half of the money would be used to buy bitcoin. Investors would receive a 6.5% coupon and, after five years, they would participate in the appreciation of bitcoin via a dividend. The proposed bond is supposed to trade on Bitfinex, an exchange not accessible to Americans.