Canadian company Blockstream could help the El Slavador government create what could become the first public debt bond issued using bitcoin.
According to Samson Mow, Blockstream’s CSO, there are talks with authorities in El Salvador to create dollar-denominated bonds using the Bitcoin-based federated blockchain, Liquid Network.
Under the proposal, the government would create a securitized blockchain token. The debt would be dollarized and would likely use stablecoin Tether, which has been available from Liquid since 2019. What’s the advantage? The costs for issuing on a federated blockchain are small, transactions are 24/7 and do not close on holidays, and trading can be global.
In addition, the company created a system that allows trading limitation according to certain rules, such as addresses with KYC and other regulatory criteria. The federated blockchain based on the Bitcoin blockchain uses the BTC as the base currency, but creates a completely different system than bitcoin.
At Liquid, for example, the input and output of bitcoins is controlled by centralized entities chosen by Blockstream. Liquid, unlike the original BTC network, hides the amounts traded, but not the addresses that were used for trading and not even the timing of transactions.
This allows the monitoring of the activities of each address and gives control of the outflow and inflow of resources to the participants of the federation, which is made up of bitcoin brokers and large companies in the sector.
This would be the first time a government would issue debt using the BTC but not using blockchain technology. In April, the Investment Bank of Europe – owned by the EU states – launched government bonds on the Ethereum blockchain.