Georgetown Law
Technology Review

This project was inspired by El Salvador’s announcement of the first sovereign “bitcoin bond.” At the inception of this research, the bond was intended to be issued on March 20^th of 2022. That timeline would have enabled this Note to analyze the success or failure of the first bond of its kind. The bond was delayed, and as such, this Note is a risk analysis for cryptocurrency borrowing that discusses (1) why a sovereign would issue a cryptocurrency bond, (2) whether cryptocurrency mitigates any traditional risks of borrowing in a fiat foreign currency, and (3) whether there are old risks that persist and new risks that emerge.

This Note analyzes cryptocurrency bonds through the armature of the “original sin” literature which explains why countries are unable to borrow abroad in their own local currency. It then discusses the case study of El Salvador and its prospective bond offering. Based on that case and the research, I opine that cryptocurrency has slight potential to mitigate certain original sin issues, but cryptocurrency also produces bountiful risks that call its utility in the debt space into question. This Note analyzes tradeoffs through comparisons with traditional financial instruments used to address the original sin problems. Lastly, the Note concludes that a cryptocurrency bond is not worth pursuing over alternatives that have been suggested as ways of overcoming original sin.

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