‘Over promised and under delivered’: El Salvador’s Bitcoin bond delayed again

Although the token was scheduled to debut in early 2022, El Salvador’s finance minister pushed it to mid-March before postponing it indefinitely as the price of Bitcoin plummeted. Nathalie Marshik, the head of emerging markets for sovereign research at Stifel Financial Corp., said this was likely due to the lack of investor interest, particularly with US investors banned from trading on Bitfinex.

In May, Ardoino said Bitfinex was waiting for El Salvador’s Congress to pass a digital securities law, which would clear the way for Bitfinex to be approved as the technology provider. At the time, he predicted that the token would launch in mid-September.

With that deadline fast approaching, the necessary bill has not been finalized. In his interview with Fortune on Monday, Ardoino said government officials have told him they have a final draft, which is expected to be approved in the next couple of weeks. Bukele’s New Ideas party has an absolute majority in Congress.

“If the law is passed by September, I would expect it would reasonably take two to three months to get everything else rolled out,” Ardoino added.

A bumpy rollout

The Volcano token launch has long been linked to the success of El Salvador’s Bitcoin gambling. Apart from financing ambitious projects like Bukele’s planned “Bitcoin City”, many experts also see the Volcano token collection as a way for the government to circumvent debt problems before a possible default. Prospects for funding from the International Monetary Fund are dim, and the organization is urging the Bukele administration to reverse its decision to accept Bitcoin as legal tender.

William Snead, a Latin America-focused strategist at BBVA, said the proposed Volcano token issuance and the government’s debt servicing capacity have made El Salvador’s traditional bonds one of the clear underperformers in the region. Given the volatility in the crypto sector, Snead said he doubts the Volcano token will launch.

“A crypto bond issue has a very low probability of success and is unlikely to come to market,” he said Fortune.

Alejandro Zelaya, El Salvador’s finance minister, did not immediately respond to a request for comment.

Ardoino insisted that the Volcano token project continue. Bitfinex has taken a prominent role in El Salvador, prompting some to speculate that Bitfinex and its sister company, Tether, own government bonds. Ardoino declined to comment on the companies’ investments.

In mid-August, Ardoino met with two prominent boosters of El Salvador’s Bitcoin ambitions — former Russia Today broadcaster Max Keizer and Stacy Herbert, who now heads the crypto-focused venture fund El Salvador El Zonte Capital — to discuss Bitfinex’s ongoing role in the country.

“Everybody asks me ‘wen the volcano bond?'” Herbert, tweeted August 28. “The answer is: soon.”

Ardoino told Fortune that Bitfinex invested in El Zonte Capital in August and plans to support more crypto education in El Salvador, where Bitcoin adoption remains low. He also reiterated his expectation that there is enough investor interest to raise the full $1 billion of the volcano token.

When the Salvadoran government also announced a $560 million program to buy back some of its government bonds in July, Marshik said she is skeptical that it can manage the volcano token as well.

“Look at where Bitcoin is trading and the huge losses – it makes very little sense to me,” she said Fortune. “This is a government that has historically over-promised and under-delivered.”