El Salvador has passed a landmark law establishing the legal framework for a bitcoin-backed bond – known as the “Volcano Bond” – to be used to pay off sovereign debt and finance the construction of its proposed “Bitcoin City”..
The project was approved on January 11 with 62 votes in favor and 16 against.and it will become law after being ratified by President Bukele.
#Plenary90✍ With 62 votes in favor, we created the Digital Assets Issuance Law. pic.twitter.com/g1poXwLoH3
— Legislative Assembly (@AsambleaSV) January 11, 2023
#Plenaria90✍ With 62 votes in favor, we created the Digital Assets Issuance Law. pic.twitter.com/g1poXwLoH3
El Salvador’s National Bitcoin Office announced the approval of the bill in a Twitter thread on January 11.noting that it would start issuing the bonds soon.
3/ El Salvador is the epicenter of Bitcoin adoption, and thus, economic freedom, financial sovereignty, censorship resistance & unconfiscatable wealth.
When we issue the first of the volcano bonds, we will once again be blazing the path forward for this new monetary revolution.
— The Bitcoin Office (@bitcoinofficesv) January 11, 2023
3/ El Salvador is the epicenter of bitcoin adoption, and therefore, of economic freedom, financial sovereignty, resistance to censorship, and non-confiscatable wealth. When we issue the first of the volcano bonds, we will once again be paving the way for this new monetary revolution.
According to crypto exchange Bitfinex, which is the technology provider for the bonds, the Volcán Bond -or Volcano Tokens- would allow El Salvador to raise capital to pay off its sovereign debt, finance the construction of Bitcoin City and create bitcoin mining infrastructure.
The volcano descriptor for the bonds is derived from the location of the country’s Bitcoin City, which is set to become a center for renewable crypto mining. powered by hydrothermal energy from the nearby Conchagua volcano.
Bitfinex notes that the city would be a special economic zone similar to those seen in China, offering tax breaks, crypto-friendly regulations, and otherwise incentivizing bitcoin businesses for its residents.
The objective of the bonds is to raise USD 1 billion for the country, half of which would go towards the construction of the special economic zone..
According to the initial proposal, the tokenized bonds would be denominated in US dollars, would have a ten-year maturity and an annual interest rate of 6.5%.
Samson Mow, a bitcoin advocate who has been involved in the development of the Volcano Token, told Cointelegraph that passage of the bill could help turn the country into a “major” financial center.
“The measure of approving the new Digital Securities Law, and enabling new instruments such as Bitcoin Bonds, will help El Salvador to pay its existing debts and will be essential to transform the country into an important financial center in the world.”
The bill also includes a legal framework for all non-bitcoin digital assets, in addition to those issued in bitcoin, and creates a new regulatory agency that will be tasked with enforcing securities law and providing protection against bad actors..
5/ The new legislation also creates the National Digital Assets Commission, the regulating agency in charge of applying the securities law and protecting the rights of digital asset purchasers as well as issuers in El Salvador, and of deterring fraudsters from operating here.
— The Bitcoin Office (@bitcoinofficesv) January 11, 2023
5/ The new legislation also creates the National Digital Assets Commission, a regulatory body in charge of enforcing the securities law and protecting the rights of digital asset buyers, as well as issuers in El Salvador, and deterring fraudsters from operate here.
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