Afghanistan and Tunisia in a bid to save their ailing economies from a total disaster have decided to issue bitcoin bonds. The representatives of both the countries announced their intentions at the annual spring meeting of the board of Governors of IMF and World Bank, held in Washington D.C. between 8th to 14th April.
The annual meeting that is held every Spring, brings together finance ministers, key governmental figures, economists, private sector executives and other civil services representatives to talk about economic issues that are of global concern.
Khalil Sadiq, the Governor of the Central bank of Afghanistan, told the news agency that Afghanistan government is looking to issue sovereign crypto bonds using blockchain technology to raise around $6 billion to fund the country’s growing mining, agriculture, and energy sectors. Sadiq also added that the State Banks aims to couple a metal, probably Lithium with the bitcoin bond in the future to create a more solid valuation. Afghanistan has one of the most significant reserves of Lithium in the world. The element is now gaining popularity because of its use in high voltage batteries used in electric vehicles as the mining industry in Afghanistan is worth more than 3 trillion dollars.
The governor for the central bank of Tunisia, Marouane El Abbasi, also showed interest in issuing a bitcoin bond. He said that Tunisia has created a working group for this project and multiple studies are going on over issuance of the bond. Tunisia was one of the first countries on the globe to issue an e-currency. The Tunis based startup DigitUS Tech developed a system that hosted the country’s first electronic currency the e-dinar. While talking about the advantages of the use of bitcoin for backing these bonds he said:
Bitcoin offers central banks an efficient tool to combat money-laundering, manage remittances, fight cross-border terrorism and limit grey economies
Afghanistan and Tunisia are not the only countries that talked about issuing bitcoin bonds to raise money and support economy. Uzbekistan was also interested in the topic discussed. The Uzbek government sent high-level officials from the Uzbek state bank to study bitcoin and blockchain, and how the country can launch a bitcoin bond. While showing interest in issuing a bitcoin bond, the Uzbek ambassador to the U.S. said, that the bond may be combined with cotton as the commodity is Uzbekistan’s biggest export.
Why There is a Need For Crypto Bonds?
Governments all around the world issue bonds to raise money for specific projects or day to day matters of the country. The practice has been going on for a while, countries issue a bond on the open market, that bond is a debt security which means that whoever buys the bond the government is indebted to them and has to make interest payments to them. Buying government issued bonds is considered one of the safest investments; however, bonds issued by companies with weak economies do have risk associated with it. BlockPublisher reported earlier when Tim Draper, a well-renowned American venture capitalist, advised Mauricio Macri, the president of Argentina, to replace the Argentina’s peso with bitcoin.
This is not the first time a country has floated the idea of issuing crypto-based bonds, last year in September the Austrian Central Bank issued 1.15 billion Euros in sovereign bonds using Ethereum public blockchain. The managing director of the Austrian Treasury Markus Stix, while talking about blockchain providing more security to the bond issuing process said:
This added security contributes to achieving a high level of confidence in the auction process for Austrian government bonds and strengthens Austria’s good standing in the market, which indirectly also can contribute to favorable financing costs
Tunisia and Afghanistan are riddled with the same economic problems as both the countries have a very stagnant growth rate. The economic conditions are worsening due to mounting debt and decreasing foreign direct investment. The issuance of the bitcoin bonds would be a way for the countries to raise money for development plans.