El Salvador Now Begins Offering Bitcoin-Backed Loans
Bitcoin is finding a lot of accommodative policy environments in El Salvador. Recently, Nayob Bukele, the self-proclaimed CEO of El Salvador, has been pushing and making real-world implementations of the digital currency. El Salvador is now exploring more ways to leverage the use of digital currency to support its growth, including BTC-backed loans.
According to Monica Taher, the head of technological and international economic affairs, El Salvador is set to begin offering Bitcoin-backed loans to its residents. She adds that the implementations of those loans will be done through El Chivo wallet, which is the official BTC and dollar wallet for the government of El Salvador. The wallet has seen an enormous rate of adoption following this announcement by El Salvador.
El Chivo, Government Backed Bitcoin Wallet Growing Fast
In just less than four months since its start, El Chivo has managed to amass about 62% of the entire nation’s population. About 4 million out of the 6.5 million total population, including the under 18, are already using the EL Chivo wallet.
Monica adds that developing Bitcoin-backed loans will help strengthen the country’s efforts at establishing a bitcoin-based economy. ElSalvador is also making plans to build a Bitcoin-powered city using the geothermal energy from the volcano. The project will be funded through Bitcoin bonds.
The city taxes will be zero percent across income and capital and property gains. These plans are a foundation for Bitcoin to become the future of money in El Salvador. In 2021 the government of El Salvador made Bitcoin the legal tender.
Why Bitcoin-Based Loans?
According to the project manager, Andrea Gomez, BTC-backed loans will attract an annual interest rate of about six to seven percent but with a possibility of reaching up to 10%. El Salvador plans to give these loans to the informal business. Small and medium-sized businesses( SMEs) form about 86% of businesses in the country with no access to financial services.
Therefore the government is in talks with other crypto lending platforms to make available loans to El Salvador SMEs. Simultaneously the government is also negotiating with the business fraternity, encouraging them to take up loans to improve their businesses and stop borrowing from loan sharks. If the deals go through with the crypto firms, they might reach the tune of $200 million.
How To Access The Loans
The owners of businesses will have to convert their cryptocurrencies to stable coins- specifically USDC or Tether. The transaction will have to be done through Conamype, which will distribute the dollars to the Salvadorian SMEs and business people through the state bank Banco Hipotecario.
El Salvador single business people will also pay capital and interest in US dollars. The discussions are still in progress between the government of El Salvador and the interested parties, which have about 15000 subscribers. However, the product will be made available within the first quarter of 2022.
* We hope this information will help you in your investment process, but this is not investment advice. Every investment carries risk, especially in this industry, so DYOR before making a decision.