El Salvador Prepares Legal Framework for Bitcoin Bonds

Facebooktwitterredditpinterestlinkedinmailby feather

It’s been more than a few months since El Salvador made Bitcoin legal tender. After the country didn’t secure a deal with the IMF and was deep in debts, it decided to experiment by throwing the US Dollar out and making Bitcoin legal tender to the dismay of monetary organizations and first-world countries. Months later, everything is going great for the country, which doesn’t miss a chance to buy the dip.

But according to its president, it’s set to go further. The El Salvador parliament is preparing 20 bills that will introduce a new legal framework for Bitcoin bonds.

Legal Structure for Everyone who Buys Volcano Bonds

President Nakib Buyele and Head of Treasury Alejandra Zelaya announced on January 4 that the country is preparing 20 new bills for the so-called Volcano bonds. The new legal and financial framework for the $1 billion Bitcoin bond issue will provide anyone who buys it with legal structure and certainty.

The $1 billion sought by the bond issuance can then be used in the Bitcoin City initiative. President Bukele announced that idea a few months ago, promising digital and technological education and innovation, along with sustainable energy and public transport as well as geothermal energy for the whole city.

The core of Bitcoin City will be a mining operation that use the geothermal power generated by a volcano in El Salvador. That energy will power the mining rigs, which brings us to the so-called Volcano bonds. The mining operation is already underway, and has mined its first small portion of Bitcoin on October 1, 2021.

El Salvador needs financial help for Bitcoin City, but the Volcano bonds may also be used to pay off an $800 million Eurobond that matures in 2 years. The money for that will come from Bitcoin bonds or investment banks instead of another Eurobond. Zelaya would prefer that to be in a bond that doesn’t come from traditional finance.

Significant Interest from Investors

So far, so good. Zelaya and president Bukele say that there’s a significant interest from investors for the Volcano bonds. It comes with exposure to BTC and a 10-year maturity with 6.5% interest. While it plans on issuing Bitcoin bonds, it doesn’t mean that El Salvador is going to abandon traditional finance for good.

According to president Bukele, Bitcoin will take a huge leap ahead in 2022. He tweeted that the price will hit $100,000 this year, and that Bitcoin City will commence construction thanks to oversubscribed Volcano bonds. So far, the country’s most notable partners in this project are iFinex and Blockstream, two companies that are closely associated with Tether. The Volcano bonds will most likely be issued on Blockstream’s Liquid network and processed by iFinex.

It’ll be exciting to see if Bitcoin City becomes the technological marvel president Bukele promised. We’re also eager to see which investors buy Volcano bonds first. Everything looks good on paper so far. If this new experiment in El Salvador works, it’ll surely turn many heads around in the world.

January 5, 2022: • No Comments

Comments are closed.