• Bitcoin is now legal tender in Honduras’ Special Economic Zone

  • A Caribbean island off Honduras’ northern coast has formally recognized bitcoin as legal cash.

    According to a statement issued on Thursday, bitcoin and other cryptocurrencies can now be used as a means of payment for individuals and businesses in the Prospera special economic zone on the island of Roatan.

    The move comes in the footsteps of neighboring El Salvador, which legalized bitcoin as legal cash on September 7. El Salvador’s case, a world first, has enraged lawmakers in the United States, prompting bills in the House and Senate to investigate potential threats to the world’s largest economy.

    Prospera, founded in 2020, is a privately controlled Honduran settlement with its own political system at the legal, economic, and administrative levels. The zone is governed by the national government’s Zone for Employment and Economic Development statute, which aims to increase investment and job possibilities in largely unpopulated areas of the country.

    “This new kind of foreign direct investment, when combined with Prospera’s services, can help convert disadvantaged communities into flouring hubs of creativity and prosperity,” according to a section of the statement.

    Municipalities in Honduras are now permitted to issue bitcoin bonds in order to attract foreign investment. The statement states that any firms and local governments, with the exception of those registered in the United States, are allowed to apply.

    Bonds are tradable financial products that are used to raise funds in both public and private markets. An issuer sells bonds to investors on the primary market in order to raise or borrow funds for projects. Investors are compensated in the form of fixed-rate coupons, which are usually paid out quarterly, biannually, or annually.

    To ensure regulatory compliance, both the sale of bonds and the ability to use bitcoin as legal tender will be “undergirded by world-class AML and KYC requirements.”

    El Salvador’s President Nayib Bukele revealed plans in November to establish a “Bitcoin City,” which would be funded mostly through the issuance of bitcoin bonds with a 6.5 percent coupon rate for the first five years. The $1 billion raised will be divided equally between funding and construction of the city, with the remaining half used to purchase additional bitcoin.

    The bond issue had been slated for March by Bukele’s government, but it has since been postponed due to weak market circumstances and the conflict in Ukraine.

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