Wed. Apr 17th, 2024

The Salvadoran law that establishes a legal framework for the issuance of digital assets was approved last Wednesday (11).

Nayib Bukele, the president of El Salvador, announced that the country planned to issue public bonds that would remunerate its investors with bitcoin, “even extracted from the energy of volcanoes!” in November 2021. Under a shower of fireworks, the Salvadoran ruler informed the public at a conference that his government would build Bitcoin City funded by the bold bonds, which became known as “Bitcoin Volcano Bonds”. The Volcano Bonds they would raise a total of 1,000 million dollars. Half of the amount would go towards buying bitcoin, and the other half would finance the construction of the city’s infrastructure, including the construction of a geothermal power generating plant from a local volcano, which would also be used to power a bitcoin mining project Government bonds would remunerate investors based on a fixed dollar rate. After 5 years, the country would start selling the acquired bitcoins to pay bonuses to investors for the eventual gain in appreciation of the cryptocurrency. This would allow institutional investors who are not authorized to invest directly in cryptocurrencies to be exposed to bitcoin through a fixed income instrument. The expectation was that the titles would start trading at the beginning of 2022, but several problems frustrated Bukele’s plans. the escalation of tensions in Ukraine towards an invasion of Russia the risk aversion of global investors increased, which was accentuated by the constant rises in interest rates by the FED (the US central bank). The bill that has just been approved was presented last November by El Salvador’s Economy Minister, María Luisa Hayem Brevé, and was a necessary step to allow the issuance of the bonds. This is because they will be tokens issued on the Liquid Network, a Bitcoin sidechain developed by Blockstream. The law creates the National Digital Assets Commission, which will be the body in charge of supervising the sector.

Maximalism and hyperbitcoinization

El Salvador is playing the maximalist game. The National Bitcoin Office, an official agency of the Salvadoran government, started a thread in which it broke the news saying that only bitcoin would be money, while everything else would be values ​​or “security tokens“. She also refers to the cryptocurrency market like this, in quotes. This is in line with the strategy of Nayib Bukele, who chose to pray the maximalist card to gain acceptance in the community. Bitcoiner maximalism is the belief that bitcoin is the only worthwhile currency, while everything else is “shitcoins”, yes, even the dollar. However, despite the objections that may be raised about the true interests of Bukele, Blockstream and company, it is undeniable that the move is a bold geopolitical move. According to a extensive study published by Alex Gladstein, the IMF and the World Bank use the loans they offer to developing countries not necessarily to help them, but to enrich rich countries at their expense. The same conditions that these institutions demand to provide “financial aid” are not always determined taking into account the development of the country that receives the aid, but rather the advantages for other more powerful countries. The IMF itself requested that El Salvador strip bitcoin of official currency status as a condition for a loan sought by the Central American country. An eventual success of the El Salvador initiative could represent a turning point in world geopolitics. Developing countries, but rich in energy potential, could find in bitcoin mining a form of financing that does not require submitting to the excesses of international financial institutions. The financing would be obtained directly from international investors and the debt could be paid with the bitcoins extracted and their eventual appreciation. If bitcoin underperformed, the bonus simply wouldn’t exist, putting the risk on the investor’s side. The success of this effort could pave the way for so-called hyperbitcoinization, a hypothetical world in which bitcoin would become the world’s monetary standard. We should soon know if this is nothing more than a maximalist dream or if it will come to fruition.

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By Farwa Raza

Farwa Raza is a writer who specializes in news articles. She has been writing on for over one years, and during that time she has written over 100+ articles on various topics ranging from politics to entertainment. Her goal as an author is to provide readers with the latest news stories while also providing her own opinion on them.