El Salvador plans to release a Bitcoin-backed “Volcano Bond”. The country already uses Bitcoin as legal tender and other southern countries are expected to follow.
This says Samson Mow, CEO of JAN3. Mow, who helped design Volcano Bonds, spoke with Kitco News host and producer David Lin.
“The Volcano Bond is structured like a traditional bond, except it is backed by Bitcoin,” Mow said. “So the proposal that El Salvador is running is a $1 billion bond increase with… $500 million in bitcoin purchases… So after a five-year period or a five-year freeze, they will be part of the Bitcoin that they bought, quarter by quarter. And Bitcoin’s valuation will be shared with bondholders. The remaining $500 million, and that’s why it’s called Volcano Bond, will be invested in geothermal energy infrastructure and Bitcoin mining. the bond design is for a 6.5% coupon And of course, eventually… you get your director back.
The Volcano mark-to-market bond has not yet been launched and is currently awaiting regulatory approval. However, El Salvador’s finance minister said it was already oversubscribed by about $500 million. According to Mow, it was mainly bitcoin whales that showed interest.
In addition to El Salvador, the Central African Republic recently announced that it is adopting Bitcoin. Panama will soon adopt Bitcoin. Mow says Bitcoin’s nationwide adoption is “inevitable”.
However, Bitcoin has been criticized as legal tender, including the IMF and much of the “old financial system”.
“I think it shakes up a lot of what they’ve built,” Mow said. “The systems that are in place now… amplify the power of western countries and they certainly don’t like it when the global south starts to rise and throw off the shackles.”
Mow believes that while the United States struggles with its economy, developing countries will try to escape the US economic sphere of influence through assets such as Bitcoin.
He is not convinced that Bitcoin’s volatility makes it a problem for treasuries.
“I think the concept of Bitcoin volatility is very mainstream media… narrative,” Mow explained. “If you look at Bitcoin over a four-year horizon, if you look at the four-year moving average, it has never fallen. So the problem is that people look at bitcoin as if it were a stock… [But] Bitcoin’s value proposition is long-term.
Mow believes that developing countries are adopting Bitcoin “out of necessity” and that it will take some time for rich countries to catch up. He mentioned Canada in particular.
“I don’t think… Canadians are generally realizing that we need bitcoin,” he said. “But we actually do… We’ve sold all our gold reserves in the past two decades.”
Mow commented on the Canadian government’s financial transaction freeze during the Ottawa Freedom Convoy protests.
“It’s a lesson to people that if you hand over control of your money to the government, it’s no longer your money. But it is in a sense an advertisement for bitcoin… And I hope this advertisement will enable us to change the government of Canada in a few years. And [then] we will have a government that understands fiscal responsibility, understands money and understands bitcoin,” he said.
Watch the video above to learn more about Mow’s concerns about central bank digital currencies (CBDCs) and his long-term outlook for Bitcoin adoption.
Follow David Lin on Twitter: @davidlin_TV
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