El Salvador prepares 20 bills to give a legal framework to Bitcoin bonds

El Salvador prepares 20 bills to give a legal framework to Bitcoin bonds

The government of El Salvador, led by President Nayib Bukele, has advanced its plans to issue Bitcoin bonds by preparing 20 bills. designed to provide a legal framework for them.

The head of the Treasury, Alejanudra Zelaya, told Salvadoran media El Mundo on January 4 that The bills will cover regulations on the issuance of securities as a cryptocurrency to ensure the viability of the Bitcoin bonds that were proposed in November 2021. He said:

“[Esto es] to give a legal structure and legal security to all who buy the Bitcoin bond. “

But nevertheless, did not propose a timetable for the legislation to be presented to lawmakers.

The USD 1 billion sought from the bond issuance would be used to finance the Bitcoin City initiative, which President Bukele has promised will provide “digital and technology education, city-wide geothermal energy, and efficient and sustainable public transportation.”

One of the features of Bitcoin City is a Bitcoin (BTC) mining operation that takes advantage of geothermal energy generated by a volcano to power mining equipment., which has led to the bonds being dubbed “Volcano Bonds”. The mining operation mined its first 0.00599179 Bitcoin on October 1, 2021.

Proceeds from the bond issue could also be used to pay for a USD 800 million Eurobond issue due in January 2023. Zelaya told El Mundo that the country would need to find funders to help meet its obligation to pay the Eurobonds, which could come from Bitcoin bonds or from “institutional offerings from various investment banks”, rather than another Eurobond issuance.

“We can simply make payments without creating another Eurobond in the traditional market, and we can find a bond that is denominated in dollars and receives payment in Bitcoin.”

A Eurobond is a borrowing tool for countries to obtain funds in a denomination other than their own currency.

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Zelaya also indicated that there is significant interest in the Bitcoin bond from investors as it offers exposure to BTC and a 10-year maturity at 6.5% interest.

But nevertheless, the issuance of Bitcoin bonds would not prevent the Central American nation from participating in traditional finance. Zelaya said: “We are not going to abandon the traditional market.”

Among the most prominent partners of El Salvador in the creation of the Volcán Bonds are the blockchain developer Blockstream and iFinex, which is closely related to the stablecoin Tether (USDT). The bonds are expected to be issued on the Blockstream Liquid Network and processed by iFinex.

President Bukele tweeted his predictions for 2022 on January 2, according to which “Bitcoin City will begin to be built” and “Volcano bonds will be oversubscribed”.

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