Rodrigo Campos and Sarah Kinosian

SAN SALVADOR, (Reuters) – President Nayib Bukele of El Salvador took to the stage at the conclusion of Week to cheers from fans who were delighted that his Central American nation had adopted crypto currency alongside the U.S. dollars.

Bukele, aged 40, was wearing his iconic backwards baseball hat as he announced plans for “Bitcoin City”, a new project to create a city called “Bitcoin City” located at the Conchagua volcano that overlooks the Pacific.

It will be funded with bitcoin-backed bonds and run by geothermal power. He told the crowd, “Invest here, and you can make all the money that you like,”

Bukele supporters have welcomed Bukele’s plans, including the legalization of bitcoin in September. They claim that they will bring employment, financial inclusion, and foreign investment to one Western Hemisphere country’s most impoverished countries.

Before Bukele (who is known as “CEO El Salvador” via Twitter (NYSE:), read the huge screen, “Feel the Bit”, he appeared on the stage.

Some in El Salvador, and elsewhere expressed disgust at the extravagant event that took place in a nation plagued by poverty, inequality and violence.

Marce (@_lamismadeayer) said, “This video makes my sick, angry, and sad all at once.”

According to the government, $1 billion worth of Volcano bonds in partnership with Blockstream, a company that provides digital infrastructure and assets, would be used for development funding. According to Fitch, credit rating agency Fitch estimates that El Salvador will have a budget deficit of $500 million next year.

However, the Bitcoin Bond is not intended to close that gap.

The bond money will be used for infrastructure projects, such as building Bitcoin City. Half the remaining amount would be used for bitcoin purchases and the rest would remain locked up for five year. The bitcoin will then be able to be sold. This capital return would be divided 50-50 between investors and the government, after initial investments of $500 million have been recouped.

A 10-year Bitcoin bond has a 6.5% coupon that can be paid annually. However, a Salvadoran bond maturing in 2032 yields close to 13.9%.

Markets have been cautious. Since late April, the spread of Salvadoran yields has increased sharply to safer-haven U.S. Treasuries. It grew by 79 basis points this week and is now at 1,200 bps. This makes it its largest ever.

In May, El Salvador’s bonds were sold by investors after five Supreme Court judges and the attorney general of the Bukele government fired them. They were then replaced by loyalists.

According to data from Refinitiv, the 2025 bond yields over 18%. The country cannot borrow on the international market because of its high costs.

Graham (NYSE.) Stock is a senior sovereign analyst with Blue Bat Asset Management. He said that government funding via bitcoin might discourage El Salvador’s adoption of sustainable spending practices. Additionally, he added that the country will likely need to continue receiving support from the International Monetary Fund.

Bukele said “Building the crypto economy and attracting crypto companies is an untested tactic to put it mildly” and that Bukele didn’t appear to have any plans for tax revenue growth. IMF TALKS STALLED

Discussions with IMF over a $1 Billion loan remain stalled due to concerns regarding transparency and price volatility. There are also fears about democratic backsliding, given Bukele’s power. However, many within the cryptocurrency community remain optimistic and believe that the bond will stimulate strong retail demand.

“Bitcoin bonds are a game-changer in fixed income markets,” said Moritz Wietersheim, founder of Specter Solutions, a bitcoin security and product company.

Bitcoin has dropped 16% since its record high at $68,990.90 in October, but it is still up more than 90% for the year.

International crypto-evangelists stressed the cryptocurrency experiment for the first time during “Bitcoin Week”.

Panel discussions were held as Vendors sold “Jesus Loves Bitcoin shirts” and included Salvadoran ministers and crypto currency leaders. Excitement was widespread at having a ‘petri dish’, as many attendees called El Salvador’s experiment.

Many people expressed concerns about Chivo, the Chivo wallet that allows Salvadorans to send and receive Bitcoin. This highlighted tensions around a tool used by the state for currency creation as an alternative financial system.

Chivo is preloaded with $30 per user and supported by a fund of $150 million. It allows you to transfer money to Chivo users for free. Salvadorans must register to access their personal data and ID numbers.

Chivo was described by some attendees as an access point to private bitcoin wallets such as BlueWallet or Muun.

“When I make a payment, in the notes section, I write ‘use Muun, don’t use Chivo,’” said Wietersheim, using the hashtag #FixChivo on Twitter.

Chivo’s rollout has come under fire for the thousands of fraudulent transactions and disappearances of cash from wallets.

Many programmers stated that these technical issues were not unusual for speeding up implementation, which took less than four months from the time Bukele had announced at a June conference.

Bukele blames high demand. Chivo and a spokesperson from the President’s Office could not be reached to comment.