IMF Deal ‘Dead’ and So Is Bitcoin Bond Issuance
The former Governor of the Salvadoran central bank, the Central Reserve Bank, claims that negotiations with the International Monetary Fund (IMF) are “practically dead” – and says investors are “not interested” in the delayed bitcoin (BTC) bonds issuance by President Nayib Bukele who intends to use it to pay for his Bitcoin City project.
In an interview with Bloomberg on Tuesday, El Salvador’s former central bank chief, Rodrigo A. Bolaños, said that the much-anticipated bitcoin bond issuance by President Nayib Bukele is now “practically dead” as a result of the collapsed talks with the IMF.
President Bukele himself has had a troubled relationship with organizations such as the IMF and the World Bank. He has instead sided with bitcoiners who reject the relevance of traditional financial organizations.
The news will likely come as a disappointment to bitcoiners who were hoping that the tiny nation would lead the way in terms of issuing debt denominated in cryptocurrencies.
It also casts more doubt on Bukele’s ambitious plans to build a Bitcoin City in El Salvador, which he has said will be “powered by clean geothermal energy.”
This new path is the opposite of the economic policy in El Salvador pre-Bukele. The previous regime relied heavily on support from the IMF and World Bank. , El Salvador had been looking to secure a USD 1.3bn loan from the IMF before the nation adopted BTC as legal tender in September last year.
As for the bitcoin bond issuance, Bukele said that his government is still considering it and that he has been in talks with “several interested parties.”
Bukele first floated the idea of issuing a bitcoin bond in February of this year. At the time, he said that the proceeds would be used to finance “green energy” projects in the country.
President Bukele, meanwhile, appears to have been preoccupied with the “security” issue plaguing El Salvador – a wide-ranging crackdown on the pandillas, the crime gangs waging war on Salvadoran streets.
In a recent interview, Bukele said that the “absolute priority” for his government was to “make our streets safe again.”
The International Monetary Fund (IMF) has confirmed that its staff have been withdrawn from El Salvador following the nation’s decision to adopt bitcoin as legal tender. The IMF has insisted that its decision to pull out of El Salvador is unrelated to the bitcoin bond issue.
“IMF staff members have been withdrawn from El Salvador following the announcement that the country would adopt bitcoin as legal tender,” an IMF spokesperson told Reuters.
IMF head Christine Lagarde had previously warned that cryptocurrencies could pose a threat to global financial stability.
The decision by El Salvador to issue a bond denominated in bitcoin is also likely to face criticism from financial regulators. The U.S. Securities and Exchange Commission has already warned that digital assets such as bitcoin are “high-risk investments.”
It is not clear what will happen to the bitcoin bond issue now that the IMF has pulled out of El Salvador.
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