El Salvador Delays Volcano Bond Issue, Unveils State-owned Company Backing

The country’s so-called “volcano bonds,” named after the source of power for bitcoin mining operations, are delayed until as late as September, sources say

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key takeaways

  • El Salvador is changing its approach to the bond issuance, delaying and modifying the previously announced plan
  • The successful roll out of bitcoin mining is seen as key for President Nayib Bukele’s government as prospects for International Monetary Fund funding are slim

El Salvador has postponed the issue of its highly anticipated volcano bonds, which were originally slated to be issued by March 20, according to Finance Minister Alejandro Zelaya. 

Nayib Bukele, El Salvador’s president, introduced the bitcoin-backed bonds in November 2021. They are supposed to raise $1 billion for the Central American nation’s “bitcoin city,” a community at the foot of the Conchagua volcano, complete with mining operations and low taxes, Bukele promised.

Zelaya told bondholders earlier this month that the bitcoin bonds will now be backed by La Geo, a state-owned thermal company, according to Nathalie Marshik, head of emerging markets sovereign research at Stifel Financial.

Zelaya had previously stated that the war in Ukraine might impact timing of the bond issuance, with market appetite for risky assets dwindling.

The bonds will be issued on the Liquid Network, a Bitcoin layer-2 established by Blockstream. While Blockstream is providing the technology, it is not working directly with the El Salvador government on the bonds, a spokesperson from the company said.

Launching the bond is still essential for combating El Salvador’s slim loan prospects and mounting debt, Marshik said. The International Monetary Fund has made clear its disdain for the adoption of bitcoin as legal tender.

The postponement comes as speculation around other Latin American countries leaning into digital assets swells. Honduras or Malaysia may become the second nation after El Salvador to adopt bitcoin as legal tender, according to news reports.


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