At some point in the coming weeks, El Salvador is expected to launch its much-hyped “volcano” Bitcoin bonds, the next big thing for the Central American country after jumping on the crypto bandwagon last year by declaring Bitcoin legal tender.
The project involves issuing $1 billion in bonds to finance the construction of a “Bitcoin City” at the base of a volcano, where geothermal energy would power Bitcoin mining, and well as to invest in Bitcoin. If all goes according to plan, El Salvador would reap more and enough in gains to pay back bondholders with a promised 6.5% annual interest.
A central figure in the Bitcoin bond plan is Samson Mow, former chief strategy officer for Canadian blockchain technology firm Blockstream. Mow, who is also CEO of gaming startup Pixelmatic, describes himself on Twitter as the “architect” of the Bitcoin bonds. His profile also includes a picture of himself with El Salvador President Nayib Bukele.
Mow is one of a number of high-profile crypto gurus that Bukele has called upon for advice and help with embracing a Bitcoin-enhanced future of El Salvador. Another crypto promoter who has been brought into the fold, although his role is unclear, is American journalist Max Keiser, a broadcaster for Russian state-owned media company RT.
The moves all come after El Salvador made history as the first country to accept Bitcoin as legal tender last year, a development which was eagerly anticipated by crypto enthusiasts but has had some problems and glitches.
Mow’s first major public appearance in El Salvador in connection with Bitcoin projects happened on Nov. 20, 2021, at the Latin American Bitcoin & Blockchain Conference, the same night Bukele announced the “Bitcoin City” project — and plans for a bond offering designed to pay off $23 billion worth of foreign debt.
Since then, Mow has become a kind of unofficial "advisor" and "promoter" of what Bukele continues to call "the financial freedom that will make El Salvador a world leader." Here is more about Mow and the role he has come to play in shaping El Salvador’s Bitcoin plans.
The Business of Business contacted Mow through his social networks to learn more about his role in El Salvador and the projects related to bitcoin in this country. He did not reply.
A dream called “Bitcoin City”
After recently resigning from his position as Blockstream's chief strategy officer, Mow has said he wanted to dedicate himself to the "expansion" of bitcoin in the world, taking El Salvador as "inspiration".
But, what is Mow's inspiration in El Salvador? The answer: Bitcoin City and bitcoin bonds, two projects that come together to form a single megaproject. The Bitcoin City is a "smart city" that will be built near the Conchagua volcano, in La Unión, in eastern El Salvador. The city is expected to serve as a place to mine bitcoin and as a tourist destination.
$1 billion to save the Salvadoran economy
In an interview with Bitcoin Magazine, Mow explained that the first step of the plan is the issuance of $1 billion in bonds through something called the Liquid Network, an exchange settlement network that facilitates bitcoin transactions. These bonds will then be sold by Bitfinex, one of the world's largest cryptocurrency exchanges and, according to Mow, "one of the world's leading cryptocurrency exchanges and has a tremendous amount of liquidity."
“They are also one of the most technologically advanced exchanges. They support Liquid and Lightning and support major market movements with almost no downtime or issues. Bitfinex has been leading the digital securities charge for some time now with its Bitfinex Securities division, which houses the Blockstream Mining Note (BMN) and Exordium from Infinite Fleet (EXO),” Mow told the magazine.
The income generated by these bonds will be divided into two parts: half to purchase Bitcoin and the other half to fund energy infrastructure and cryptocurrency mining, forming the infrastructure for the Bitcoin City.
According to Mow, Liquid Network will issue the tokens that Bitfinex will make available to investors through a sale of securities from a web page, where the bonds can be purchased, either in Bitcoin or in dollars.
The Bitcoin bonds will have an annual interest rate of 6.5%, which will be paid to each investor every January for the next 10 years, the validity period of the bond issue. But, after five years, an extra coupon will be enabled to generate additional dividends. Mow explained that, at the end of that decade, the initial investment will be returned to the participating investors.
Faith in a historic rise in the price of Bitcoin
For Mow, the heart of the project lies in the projections that experts have made for the price of bitcoin, which promoters say could grow up to 10 times its current value within a decade.
Based on that assumption, El Salvador is expected to sell the $500 million in Bitcoin from the first allocation of the bonds, reaping enough in returns to pay off foreign debt and share the profits with the initial investors.
Although the value of Bitcoin surged massively over the past two years, it has continued to have wild swings — making El Salvador’s bond offering still a fairly risky endeavor.