Cryptocurrencies, Blockchain & DeFi (2021)

All coverage published by subscription-only newswire Brightwire

El Salvador’s Bitcoin adoption won't affect talks for a USD 1.3 billion IMF loan, CenBank head says

19 Oct 2021

The Salvadoran government does not believe that its adoption of Bitcoin as legal tender will affect talks for a USD 1.3 billion loan agreement with the IMF, according to comments made by the central bank President Douglas Rodriguez.

“We’ve explained openly to the IMF: For us, Chivo and Bitcoin is simply a payment method,” Rodriguez said in an interview to Bloomberg on Monday. He expects the cryptocurrency to lose its reputation as a speculative asset and improve financial inclusion in a country where 70% of the population is unbanked.

Talks with the multilateral were announced in March by Finance Minister Alejandro Zelaya. The loan would provide the country with needed access to the international market next year after over reliance on short-term debt dried up financing options from the local market.

Although the country doesn’t have major dollar bond payments until 2023, debt remains at about 90% of GDP. The fiscal deficit reached 10% of GDP in 2020 and is projected to narrow to 7.5% in 2021.

Rodriguez has been holding several interviews with local media outlets promoting the IMF’s 9% economic growth projection for the country since its announcement on October 12 and told Bloomberg he expects Bitcoin’s price volatility to help the economy expand past the 9% projection.

Rodriguez’s comments mirror those made by Salvadoran President Nayib Bukele in June when he called Bitcoin “so perfect that I think it's gonna be the future” and criticized skepticism from economists.

"It's not only going to be good for the monetary system, remittances and for economic inclusion and banking services like lending… but also for energy and raising income for social projects,” he said.

In September, S&P Global warned in a report that El Salvador’s adoption of bitcoin could cause exchange rate risk and disruptions in cross-border financial flows, outweighing its potential benefits. Moody’s downgraded El Salvador’s bonds to “junk” status in July, stating poor policy making including the adoption of Bitcoin was partially to blame.

Bitcoin became legal tender along with USD on Sept. 7. All businesses are required to accept bitcoin unless they do not have the technology needed to process the transactions. Bank loans and taxes may be paid in bitcoin while all capital gains made from investing in the cryptocurrency will not be taxed.

El Salvador to issue USD 1 billion in Bitcoin-backed bonds, build Bitcoin City
22 Nov 2021
El Salvador plans to issue USD 1 billion in tokenized Bitcoin bonds with a 10-year term and 6.5% coupon on the sidechain network Liquid Market in 2022, a release by El Salvador's partner Blockstream shows.

The proceeds will be split equally between purchasing additional Bitcoin and building out the country's energy and Bitcoin mining infrastructure. After a 5-year lock-up, El Salvador would start selling some of the Bitcoin used to fund the bonds in order to give bondholders an additional dividend, Blockstream Chief Strategy Officer Samson Mow told Bloomberg, adding that the bond's annual percentage yield is projected to be 146% at the end of the bond's tenth year due to Bitcoin appreciation. The bond was developed by Mow and designed with Blockstream Financial Products VP Jesse Knutson.

The Salvadoran government under President Nayib Bukele is working on a securities law that would allow it to grant a license to Bitfinex Securities to process and list the bond issuance. Bukele also announced plans to build "Bitcoin City" with proceeds from the bond in the eastern region of La Union. The city would be powered through geothermal energy from a nearby volcano and would not levy any taxes except for a value added tax (VAT), Reuters reported. Bukele said half of the VAT levied in the city would be used to pay off the bonds.

Itau Corpbanca criticized by crypto exchanges for attempting to freeze the companies’ bank accounts
24 June 2021
Banco Itau was criticized by the lawyers of Buda.com and CryptoMKT.com for using cases of illicit activity with cryptocurrency to justify closing the companies’ bank accounts, Diario Financiero reported.
Buda and CryptoMKT argued that Itau Corpbanca Colombia and other financial institutions have also faced investigations and sanctions for failure to stop money laundering. "We cannot deny a legal economic activity, much less deprive it of essential inputs for its operation, by the mere existence of isolated cases of illegality," the lawyers said.
The lawsuit, as part of a legal battle between Chile's major banks and crypto exchanges before the free competition court (TDLC), is fueling claims that traditional banking institutions feel threatened by the crypto-based financial system.

BOJ, NCB to test digital wallet for central bank digital currency
23 Nov 2021
The Bank of Jamaica (BOJ) and the National Commercial Bank (NCB) will be the first to create digital wallets for the pilot of the central bank digital currency (CBDC), a government release shows.
The BOJ expects to have additional deposit-taking institutions (DTIs) with digital wallets accepting the CBDC by its expected roll-out in Q1 2022. Under the current pilot, NCB is testing its wallet with staff and their family members and plans to extend the offer to individuals and small merchants by the end of the year.
BOJ Deputy Governor Natalie Haynes said the central bank has also developed a wallet for its staff, and plans to test its collaboration with NCB's wallet in December.

Quote: Bahamas CenBank governor on the introduction of its digital currency
21 May 2021
Bahamas Central Bank Governor John Rolle

On why the Central Bank saw the need to develop the digital currency known as "sand dollar,"

"In an island geography it's very hard to provide financial services through a physical channel. Banks in some cases refused to service some of our rural "family islands." Those communities can eventually piggyback off this infrastructure to communicate and interact with traditional financial-service providers."

On the private sector's participation

"Today we have seven nonbank institutions that have accelerated product development to provide digital wallets and payment wallets. The commercial banks are now moving into that space. "

On the interest of several other countries in the Caribbean to develop their own digital currency,

"I think part of the excitement for the region is the possibility of exploring technical cooperation that will eventually lead to regional payment platforms. There are some constraints, because it depends on the level of interregional trade, and typically we trade a lot in US dollars."

Rolle made the comments in an interview with Bloomberg News.

Bancolombia forms alliance with Binance to pilot crypto assets
01 March 2021
Bancolombia formed an alliance with cryptocurrency exchange Binance to pilot crypto assets in the Colombian market regulator's sandbox, La Republica reported, citing Binance CEO Changpeng Zhao.
The pilot will allow Davivienda account users to access the cryptocurrency ecosystem through Binance, which will guarantee the movement and conversion of digital currency to COP and vice versa.
Davivienda clients will be able to "invest in COP in the crypto-asset market through Binance and, in turn, sell cryptocurrencies that return to COP in their Davivienda account," said Zhao.