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El Salvador: Bitcoin bonds are a long time coming

 


El Salvador's finance minister believes Bitcoin's continued price volatility means Bitcoin bonds aren't coming anytime soon. Meanwhile, the country faces a human rights crisis.


El Salvador Finance Minister Alejandro Zelaya said the country will further delay the launch of its expected billion-USD bitcoin bond, citing price volatility and uncertain market conditions resulting from the ongoing Russo-Ukrainian war.


The news comes at a time when Amnesty International is accusing the Salvadoran authorities of flagrant human rights abuses and criminalizing those living in poverty.


In an interview on local news show Frente a Frente, Zelaya was asked if the situation had changed with the planned bitcoin bond.


“No, not yet, the [Bitcoin] price continues to be disrupted by the war in Ukraine,”


He added that fluctuations are constant in the short term, but always appreciate in value over the long term.


“There is a future and an economic innovation [in bitcoin] that we must bet on.”


The bonds were originally announced by El Salvador's President Nayib Bukele in November 2021. Half of the expected $1 billion will go towards building a Bitcoin City, which will be built near a volcano. The idea behind this is that the geothermal energy could be used for bitcoin miners. The other half of the funds are to be invested in Bitcoin.


The $1 billion bond was originally scheduled to launch in mid-March 2022. In an interview in March, Zelaya delayed launch citing price volatility and gave a possible launch date around June 2022 with a timeframe of September 2022.


Fears are mounting that the country could default on an $800 million bond due in January 2023. This prompted Moody's rating agency to downgrade El Salvador's credit rating on May 4 due to the lack of a credible financing plan.


The El Salvador government has been buying bitcoin since September 2021, with Bukele announcing that the country bought another 500 BTC on May 9. The country is estimated to hold more than $35.6 million in BTC.


Meanwhile, Amnesty International accused the government of El Salvador of committing massive human rights abuses through the arbitrary detention, ill-treatment and torture of detainees.


A state of emergency was declared by President Bukele on March 27 due to a rising murder rate the government attributes to gangs and organized crime. The state of emergency was extended twice.


The human rights group said the state of emergency has changed laws and court procedures that undermine the right to a defense, the presumption of innocence, effective remedies and access to an independent judge.

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