El Salvador to do a token raise to fund hotel construction
[TL; DR]
El Salvador has a plan to tokenize debt to raise capital to construct a hotel at El Salvador International Airport.
The tokenization of the debt issue will lead to economic growth and development.
Circle has developed a smart contract that will enable BUIDL investors to redeem their tokens against the United States dollar and USDC.
Introduction
El Salvador continues to hog the limelight for its proactive approach aimed at propping up its economy through adopting cutting edge blockchain technology. We all know that El Salvador was the first country to legalize the use of Bitcoin. Later it introduced its citizenship program and volcano bond, two programs that utilize bitcoin.
Today, we discuss how the country has launched a program to tokenize debt to raise funds for constructing a hotel. We will also explore ways in which this initiative will contribute to national development.
El Salvador’s Digital Asset Securities Law: The Country Tokenizes Debt to Fund the Construction of a Hotel
El Salvador has integrated blockchain technology into the traditional financial sector through tokenized debt issues to fund the construction of a hotel at El Salvador International Airport. The Hampton Hilton hotel complex will have 80 rooms, 5 commercial spaces, restaurants, a pool, gardens, a gym, several multipurpose rooms, and various amenities occupying a space of about 4,484 square meters.
Basically, the hotel will be financed by tokens valued at $6.25 million issued by Inversiones Laguardia S.A. de C.V. (HILSV), a developer. Each investor should invest a minimum of $1,000 in the tokens (HILSV), with a 10% coupon for a five-year period. In addition to owning shares in the hotel project the investors will have the right to free accommodations whose terms will depend on their investment amount.
Source: x.com
Moreover, the Investors will be able to trade the HILSV tokens against the United States dollar and Tether’s USDT that exist on the Liquid Network, a Bitcoin sidechain. Also, it is important to understand that Inversiones Laguardia (HILSV), a legal El Salvadoran firm, has partnered with Bitfinex Securities, the leading securities token platform operating in El Salvador, to launch the tokenized debt issuance program.
However, it is Ditobanx, which will handle the tokenization and structuring of the transaction on the Liquid blockchain, a layer-2 solution for the bitcoin blockchain. The HILSV tokens will be the first such issuance to be traded on Bitfinex Securities El Salvador S.A. de C.V., the first entity to get a license under El Salvador’s Digital Asset Securities Law.
Through a press release, Paolo Ardoino, CTO of Bitfinex Securities, said, “The HILSV token marks the first digital asset tokenization from El Salvador and represents an important step forward in developing its nascent capital market as well as introducing a major new asset class into the market.”
He continued, “For the first time, investors who do not usually have the opportunity to invest in such assets have the opportunity to do so, while issuers in markets with less access to capital are able to tap into a new asset class to raise finance.”
El Salvador Debt Tokenization: Investment Opportunities and Benefits
The tokenization of real-world assets such as debts will likely promote El Salvador’s economic growth and open new capital markets. More interesting, this project is clear evidence of the transformative power of blockchain technology. In this case the tokenization of RWA has led to the emergence of Bitcoin-based capital markets and a new asset class which have created innovative investment opportunities.
Concerning this, one notable analyst said, “This capital raise not only marks our first venture in El Salvador but also stands as a testament to the transformative power of Bitcoin-based capital markets. We are proud to contribute to El Salvador’s growth and look forward to creating significant employment opportunities through this endeavor.”
On the other hand, Roberto Laguardia, president of Inversiones Laguardia, said, “The recently implemented digital asset laws will grant us access to capital markets that were previously unavailable to us. This access will allow us to develop crucial tourism-related infrastructure, thereby unlocking the potential for growth in the tourism sector. This expansion will ultimately result in economic benefits for every Salvadoran citizen.”
One of the most important economic benefits of the tokenization of debt issues will be employment. For instance, Bitfinex estimates that during the construction phase the hotel and related firms will employ over 1,000 people. Further to this, when the hotel becomes operational the sector will directly or indirectly employ more than 5,000 people.
Read also: Tokenization Of RWAs: Beyond The Hype
This is not the first time that Bitfinex has been involved in tokenization of real world assets. Bitfinex Securities AIFC in Kazakhstan was responsible for the tokenization of $5.2 million worth of bond offering for Alternative. The firm now anticipates that there will be many real world asset tokenization projects during this year.
The construction of Hilton hotel complex will also promote domestic and international tourism since accommodation facilities are essential for the growth of the sector. In addition, the tokenization of debts may lead to the construction of similar facilities in the country.
Read also: El Salvador Purchases an Additional 80 BTC
To this effect Laguardia said, “The recently implemented digital asset laws will grant us access to capital markets that were previously unavailable to us. This access will allow us to develop crucial tourism-related infrastructure, thereby unlocking the potential for growth in the tourism sector. This expansion will ultimately result in economic benefits for every Salvadoran citizen.”
Also, the tokenization of debt issues for hotel construction will also open many investment opportunities. For example, many investors will have an opportunity to acquire shares in the hotel which will likely generate returns for them. Concerning this, Cryptorank quoted Ardoino as saying, “For the first time, investors who do not usually have the opportunity to invest in such assets have the opportunity to do so, while issuers in markets that have less access to capital are able to tap into a new asset class to raise finance.”
Circle’s smart contract for the BlackRock USD Institutional Digital Liquidity Fund (BUIDL)
There is no doubt that the tokenization of real world assets is gaining much traction. Another good example of tokenization of financial instruments is that of the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). As a fact, Circle, the issuer of USDC, a United States dollar-pegged stablecoin, introduced a smart contract for BUIDL fund.
With the Circle technology, the BUIDL investors will be able to redeem their tokens with USDC on secondary capital markets via a new smart contract functionality. This increases the BUIDL liquidity as well as minimizes transaction costs. As a fact, BlackRock launched its Institutional Digital Liquidity Fund on 19 March this year.
Primarily, qualified investors will earn US dollar yields through investing in the fund via Securitize Markets. The fund is digitized in the form of ERC-20 tokens that exist on the Ethereum blockchain. Jeremy Allaire, Circle co-founder and CEO, said that there is growth in the real-world asset tokenization sector.
In a press release Allaire said, “Tokenization of real-world assets is a rapidly emerging product category. Tokenizing assets is but one important dimension of solving investor pain points. USDC enables investors to move out of tokenized assets at speed, lowering costs and removing friction.We’re thrilled to provide this functionality to BUIDL investors and deliver the core benefits of blockchain transactions via USDC availability to investors.”
BlackRock’s BUIDL fund initiative marks a shift in the investment sphere. The tokenization of financial markets provides a secure, transparent, compliant and efficient way for both retail and institutional investors to access digital assets.
Conclusion
El Salvador has initiated a debt tokenization program to raise funds to construct a luxurious hotel at El Salvador International Airport. The tokenization of real world assets like debts will lead to economic growth and development. For example, in El Salvador the program will create employment for more than 6,000 people. Similarly, Circle has launched a smart contract that enables investors to redeem BUIDL tokens for USDC.
