El Salvador receives a verbal commitment from Blockstream to invest USD 300 million in Bitcoin bonds

El Salvador’s Bitcoin bond will be listed in the first quarter of 2022. On December 6, Blockstream, a blockchain technology company that works closely with the government of the country, promised to spend $300 million to buy the bond, but it is still verbal. Commitment and has not officially signed any documents.

El Salvador Receives Blockstream Commitment: Investing USD 300 Million in Bitcoin Bonds

Samson Mow, Chief Strategy Officer of Blockstream, a Canadian blockchain technology company, announced on Twitter on December 6 that the company has verbally committed to invest US$300 million in the Bitcoin bond (EBB1) issued by the Central American country of El Salvador, which represents the bond. 30% has been sold before the official release.

$1 billion bitcoin bond: 30% progress

Samson Mow said in his tweet that EBB1 will receive 300 million US dollars in funding, and also attached volcanoes, the El Salvador flag, Bitcoin, etc. as Hashtags, and at the same time, please note that this is currently a verbal commitment.

As previously reported, EBB1 is a Layer 2 solution developed by Blockstream and the government of El Salvador to issue $1 billion worth of Bitcoin bonds on the Liquid Network, a Bitcoin side chain, through an agreement reached by the government of El Salvador. Liquid Network will serve as a stable foundation for tokenized bonds, and will pay investors coupons annually through Blockstream's asset management platform (AMP).

EBB1 is a ten-year long-term bond with a coupon rate of 6.5%, a total issuance of 1 billion U.S. dollars, and a single denomination of 100 U.S. dollars. Samson Mow once claimed that this small denomination can promote the democratization of bonds, just like Bitcoin. The same as the right user.

The funds raised will be divided into two, of which 500 million US dollars support subsequent bitcoin purchases, and the other 500 million US dollars support the country’s Bitcoin volcanic geothermal mining infrastructure. The bond is expected to be as early as 2022. It will be on sale in three months.

Blockstream also stated that once the initial $500 million is raised, half of the additional bond proceeds will be shared with investors as bitcoin dividends. When El Salvador’s President Nayabi Bukele announced the construction of the first Bitcoin City on November 21, he stated that the city will levy a 10% value-added tax (VAT) on residents, and half of the VAT will be used to repay EBB1.

Since Blockstream is still a verbal commitment, the Final Term Sheet representing the actual investment has not yet been signed, which means that the commitment is currently only publicity and has yet to be confirmed.

Views from all walks of life on EBB1

Despite the seemingly unprecedented grand occasion, as previously reported by the currency circle, Jared Lou, the fund manager of William Blair in New York, stated that the 6.5% interest rate of EBB1 is unlikely to bear the related risks and predicted that Salvador’s dollar-denominated bonds will fall further: this seems to be An act of despair, which means that Bougelei (President) is moving away from Western institutions.

Jared Lou was referring to the events of November 22 and 23. After falling to $0.644, El Salvador’s dollar-denominated bonds dropped to $0.636 the next day. Compared with the high of $1.1 in April this year, it was almost cut in half.

At that time, the foreign media "Bloomberg" reported that the reason for the decline was that investors worried that Bouguerei's BTC-related plan would ruin the efforts of the International Monetary Fund (IMF) and El Salvador. The IMF has repeatedly expressed opposition to El Salvador’s promotion of BTC. , It is said that the country’s fiscal deficit and high public debt will lead to a huge and ever-increasing demand for financial financing.