El Salvador’s Bitcoin Bond Plan Fails To Impress Wall Street

El Salvador’s Bitcoin Bond Plan Fails To Impress Wall Street
Andrew Rummer

over 2 years ago1 min

El Salvador’s plan to borrow $1 billion and use half the proceeds to buy bitcoin is not going down well with Wall Street. 

As the chart shows, the price of El Salvador’s dollar-denominated bonds – an indication of international investors’ confidence in the nation’s ability to honor its debts – has been sliding since it announced plans in June to adopt bitcoin as legal tender. The bonds took another leg lower this week after El Salvador announced it would issue a $1 billion “bitcoin bond”, with half the funds used to construct energy and bitcoin mining infrastructure and half to purchase bitcoin.

The bitcoin-linked bonds could pay off for investors if the bitcoin price keeps surging, as El Salvador says it will pay out 50% of any gains to holders of the debt. And they may well attract crypto fans who wouldn’t normally dabble in boring old government bonds. But – so far at least – it’s clear that mainstream financiers are unimpressed. 

The investment banks at the center of the international bond markets would rather El Salvador adopt policies acceptable to the International Monetary Fund (IMF) and move to refinance its debt.

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